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How to trade on Forex: tips for beginners

Table Of Contents

  1. Typical mistakes of the beginning trader
  2. How to trade on Forex: three simple rules
  3. Tips for beginners

Every Internet user often faces advertising about earning money on Forex. What is more, major part of the target audience makes a shot at this currency exchange. Most beginning traders lose their money on Forex trading as they make mistakes typical of the new comers. These very mistakes can result in serious financial losses. At the same time we know about the examples of rather successful investors who work on currency exchange and obtain sustainable profit of hundreds percent annually. So, in this situation one always raises a question how to trade on Forex. Moreover, only the very few can find the correct answer.

Typical mistakes of the beginning trader

What is the main incentive to start playing on currency exchange? The answer is quite simple as people come to trade currency pairs with the only goal: to earn money. If someone tells you that he trades on Forex due to some other reasons this investor does not deserve trust. The major problem the newcomers face is that close possibility to earn big money deprives them of the ability to think rationally and to organize their working process in a proper way. Most people still consider Forex to be something like casino where profit or loss depends entirely upon luck.

That is why while answering the question how to earn on Forex you should try to avoid the following typical mistakes:

  1. Trading with the whole deposit. New coming traders often open the order for the whole available amount of money in the effort to gain high profit. As a result, sooner or later they clear out their own trade account.
  2. Holding of losing positions. It’s a common mistake that means that the trader does not close losing transactions hoping for changes of currency exchange rates or return of lost funds.
  3. Absence of own trading system helping answer all the questions that occur in the course of trading on Forex.

How to trade on Forex: three simple rules

It is not enough just to avoid typical mistakes of beginners who start trading on Forex. To achieve stable results you should follow the set of strict rules:

  1. To work out your own trading strategy that will contain elements of technical and fundamental analysis;
  2. To open and close transactions in case trading system sends you signals to make the corresponding action;
  3. To apply risk management system which will help you defend your trading capital and will not allow throwing you out of the market even in case you concluded several losing transactions in succession.

Tips for beginners

As we have defined above there are three basic rules every beginner should take into account when entering currency exchange market. However apart from these rules you can also make use of the recommendations experienced market participants share with beginners in order to help them feel confident in a variety of trading strategies, tools and prospective:

  1. Don’t put large amount on your account. It is better to practice on the demo-account and then on the cent account. It can help you understand what you will have to face.
  2. Don’t do “scalping”. Intraday trading is attractive for beginners because of the possibility to earn money fast. However it is not so predictable, as weekly, daily or even 4-hour charts are.
  3. Don’t change strategy without finding out the reasons why it doesn’t work. Great number of available strategies allows applying a new one nearly every day. However it is a wrong way as there is no ideal strategy at all. What you should do is to find the reason of mistake and eliminate the risk of it in future.
  4. Don’t open positions without stop-loss. It is one of the most important rules because your incapability to see evident things can lead to very bad consequences. Besides, everything can be even more trivial: for example, lost Internet connection at the moment when the price turns to the opposite direction.
  5. Take a rest. Trading on Forex is very exhausting for your mind and nerves. So you should make a stop otherwise you risk to spend all your hard-earned money just for therapy.

These are just basic rules without following which you can stop dreaming of earning on Forex. There are also other important things connected with technical questions of trading on Forex. They include trade platforms and basic fundamental factors influencing the dynamics of currency exchange rates. All these issues should be studied at the stage your trade strategy is worked out and tested. Besides, you should also remember that your attempts to trade on Forex unsystematically will just move you away from your goal to achieve stable long-term profit.