When you are starting on Forex, every tip seems to be helpful. The challenges are numerous, such as choice of the broker, money management, tech analysis etc. When it comes to the choice of a broker, start by reading Trade Horizon Review and see what might be the conditions and terms. But besides the brokerage service, there are other things to have in mind. Here they are.
1. Analyze the past trades
One of the fundamental components of the technical approach is to assess the past – Dow Theory is that “history repeats itself.” Analyzing the historical price movements of a given asset can give you a clue as to how the prices will move in the future, based on experience. Human behaviour can be predictable up to a certain level and under certain circumstances, which is why the technical approach can work.
Market forces impact prices, and prices are driven by people all succumbing to the same level of emotion, greed and fear. Identifying previous highs and lows and how the market behaved in touching those levels can give you a hint of what might happen next, allowing traders to put together many scenario-based strategies of type “what if”.
2. Manage your money
Money management is a fundamental element determining the level of profitability of any trader. The urge to make a profit as soon as you see the possibility can lead to losing money. This may be because many traders tend to hold their Stop Loss orders until the time they are executed but do not do the same when it comes to making a profit. If you assume that you have the potential to make a profit on 50% of executed trades then it is highly unlikely that you will make an overall profit.
Before placing a trade, think about the maximum loss allowed on the trade. If it’s 100, then you should at least aim for a profit of $ 300. Based on a 50/50 success rate, you will make an overall profit. For every potentially achievable loss, you should aim for at least double the potential profit. Discipline and rigour are essential when things are going well and even more so when things are going badly.
Another common mistake is setting unrealistic Stop Loss and Take Profit levels in unsuitable markets. For example, a 100 point Stop Loss order on EUR / USD looks realistic but might not be on stocks. Use the price channel over the last days or even the last months to use it as a basis for setting up your Stop Loss orders.
3. Analyze your statistics
Analyze when you made profits and losses by keeping track of all your trades. Tracking the historical performance of your trading allows you to identify patterns in which your failures and successes occur so that you can avoid losing trades as much as possible and place more trades that settled at a profit.
4. If you’re losing trades, take a break
When you start to lose money all the time, and nothing seems to be working out for you, take a break. A monthly maximum amount allowed for your trading is a good idea because when that amount is exceeded, you should stop all activity for the current month. Most importantly, resist the temptation to try again and try to recoup any losses incurred by being on the lookout for the market.
5. Stay on top of all fees associated with trading
Always be aware of funding costs when holding overnight or multi-day positions. Selling a currency with a high policy rate involves higher fees than for a currency with a lower policy rate.