Forex or Foreign Exchange is an over the counter marketplace for exchanging currency. It’s a marketplace that is decentralized around the globe. This is the largest global market worth 5 trillion dollars. This is where you can exchange currency and make a sizable profit. However, working this exchange in real time is not an easy task.. In fact, most people find it difficult to earn a profit from trading forex.
Most experts in the business of foreign exchange say that at least 90% of traders lack the knowledge and insight about forex trading and end up with their efforts all going in vain.. The good news is, with some knowledge of the basics of Forex trading and a little bit of patience, you can find yourself in that 10 % success.
To learn more about forex trading you can read blogs, watch videos, take forex trading course, or listen to expert podcasts to learn everything you need to know about trading. Rob Booker reviews are one of those popular podcasts where thousands of beginners have found the right track in forex trading. To know more about Rob booker you can connect with him on social media platforms like Facebook, Twitter, LinkedIn, etc. Follow Rob Booker on twitter for the latest updates.
Almost all successful forex traders follow some basics. As a beginner, you must know these baseline rules before you embark on forex trading.
1. Choose the Right Broker
A forex broker is a company that facilitates buying and selling foreign currencies. They offer 24 hours of trade access to their client and get compensated through bid-ask spreads of currency pairs. Beware, not all brokers are trustworthy. You have to find a broker who has a license and a good reputation in the market.
There are some criteria that makes a broker a quality forex broker. They are:
1.Variety of trading accounts.
2.Range of trading instruments.
5. Comfortable trading platform.
6. Order execution quality and slippage.
7. Allows scalping.
8. Fund security.
9. Customer service and many more.
2. Make Your Own strategy
Now, why is it that forex trading is not profitable for all? That is because most traders have no plan of action before trading. Most people are so quick to jump in to make a profit, that they don’t bother learning about the trade well enough to start making a profit. Trading discipline is key to making a profit.
Trading discipline is very simple. You need to make a strategy, modify it when needed and execute it. To create a good strategy you must account for some elements. They are-
1. Trading instruments.
2. The maximum and minimum duration of the trade.
3. The number of trades per day, weeks or months.
4. Suitable hours for your trade.
3. Know The Trading Risk Profile
Before you start, understand all primary aspects of the market. Make sure you did some research on your interested currency pairs and go through some trader’s testimonials. You must diversify your investments. Most experts recommend not to invest more than 20% of your total capital in one market. Always diversify to mitigate risk.
Other than that, know you need to learn about your risk profile. There are three main categories of trading risk- moderate, aggressive and conservative based on the level of risk you can tolerate. It also helps to build a nerve of steel so you can withstand shocks of losses and have patience. . If you have had a few bad trades and are still sticking to the market, then forex is your business.
4. Track Market Trends
No matter what strategy you are following, you must take a close look at the market trend. Forex market trends can vary in length- short, medium and long term. Being able to identify the correct trend, your trading is very important. But, misjudging the trend can also create disaster. You have to also learn what influences certain currencies – what economic markers affect them. For example, you will need to know a currency is a petro currency to know how to forecast against oil futures in the market.
If you see the downtrend in the graph, then it is depreciating the value while an upper trend means appreciation of the currency. You will also see a sideways trend where the currencies are in a stable condition. If you follow market trends, you will soon be able to forecast and modify your strategy.
5. Take a Look On Charts
Charts can be time-efficient to calculate your trades in different markets. You will find the most important numerical data with a simple visual presentation. Free charting software like TrendSpider can make your life easier to track all records and charts.
All trading charts have two main axes- time in x-axis and price on the y-axis. You will also find three different chart types-bar and line to compare the currencies. One benefit of the charts is that they help you track pips( percentage in points) and measure the exchange rate pricing.
6. Capital Management
How much capital do I need to start trading? This is a common question from beginners. Well, you can start it with 10 dollars or more. Besides, you have to understand the importance of capital and its risk factors.
If you start trading with 50 dollars and get a bad trade on 20 dollars that means you have potentially lost 40% of your capital. On the other hand, if the capital is 500 dollars and you still lose 20 dollars in a bad trade, that means you lost only 4% of the capital.
As a beginner, you should not invest a lot. There is a learning curve in the early days of forex trading. But, how much should someone risk his capital in forex trading? Most experts believe it should be more than 2% of the total capital. Also, even if you make a good profit, you must not invest more than 15% in one market. Yes, variation is the key to sustain and skim profit in forex trading.
7. Analyze your Trade
Keep a record of your daily trading activity. If you research your past tradings, you will find the weak points in your trading. These mistakes will help you restrategize and come up with a more effective plan to start making better returns.
8. Experimenting is the Key
There is no single strategy in the world that will get you the best trading profit. You need to experiment with different strategies, and reshape your strategy according to the market. Forex Trading is the biggest marketplace in the world and is constantly evolving. So, you cannot stick to one plan forever. Keep doing some experiments with a portion of your capital. You will start to tweak your current strategy eventually to make a better return..
9. Check Your Emotions
To become successful you must have the patience to execute your plan. As a forex trader you must also check your emotions to earn profits. Most investors make the mistake of acting on anxieties of a drop or panic from a market trend. You need to build nerves of steel to overcome the emotional push to make a trading move. Often these moves will end up in big losses.
If necessary, take a break completely from trading and come back to it with a calmer head. You have to engage in the market and track records to find success. If the plan is not working, modify and execute for better opportunities. Only those with nerves of steel can make a successful trader.
Forex trading can be your money machine once you know the art of trading. There is no limit to earning. If you plan, strategize, and can stick with the market, then success is only a matter of time.