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Forex Trading Tips for Beginners

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Looking to start trading forex as a beginner? This post will help give you the basic five forex trading tips for beginners. Insight from major trading statistics indicates that most amateur traders lose money because they do not follow the highlighted principles below. So let’s get started in order to help you as a newbie trader to the world of forex!x trading tips for beginners

Tip 1: Money Management.

Surviving should be a priority for every forex trader according to forexmentoronline.com. It is normal for every trader to lose once in awhile, but if you run out of money, then you will be in a position where it becomes hard to come by winning trades. Therefore, keep in mind that you should always stay in the game no matter what.

Most of the amateurs and continually losing traders focus on coming up with a winning trade strategy. While such a profitable trading strategy is fundamental, utilizing strict money management principles and having a reasonable and strict training mentality will reap more rewards for you eventually.

The two common rules to follow for proper management of money are not to invest more than 3% of your entire capital for a single trade and ensuring that you have enough money to run you through at least forty trades for beginners.

Tip 2: Make Use of a Stop Loss at all times.

The stop loss is arguably the most critical asset for any forex trader, such as the most powerful one for a professional poker gambler is the fold(if you understand what it is). The stop-loss gives you the chance to predict your risk down to the pip, therefore utilize it every time.

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It is all about benefits when it comes to using a stop loss. It coerces you to ponder about the trade you want to invest in and when it would be considered as a failure. After opening up a position, you may want to assess your situation and see whether you should stay in a trade heading South, using all kinds of unreasonable excuses. But if you use a stop loss before launching the trade, when you were reasoning correctly, you will always have that striking light, reminding you that you would be an emotional fool if you kept yourself in the trade after triggering the stop loss.

Using a stop loss makes you consider the ratio between your winning and losing trades. Taking an example where you want to risk 50 pips for 100, that implies that you will require a winning trade at least 1/3 of the time for you to be in business. Does your strategy give you profits 33% of the time?

The other benefit of the stop loss is that you do not have to be scared that a single erroneous trade will derail your entire account if it goes wrong and you are not able to close it down for some reason. Ensure that you always use a stop loss and do not keep it far away from you after opening the trade.

Related:
An Introduction To Forex Trading: Forex Guide
Cryptocurrency 101: The Ultimate Beginner’s Guide to Cryptocurrencies
Ten Investing Lessons To Help You Achieve Financial Independence

Tip 3: Be Realistic. 

Unless a lucky charm has stricken you, do not expect to get an 80% profit on all your trades or boost a $500 trading capital into a $9000 in just over five months. Heading into forex trading with such unrealistic expectations will only result in disappointment and failure. (unless you are fortunate)

Try and be realistic right from the beginning. Come up with an achievable percentage of winning strategy, keeping in mind your experience and approach. Look at the amount of time you can channel on learning and trading. With a clear picture of the tools at your disposal and surrounding conditions, you will be able to work towards a rewarding trading strategy efficiently.

For instance, imagine you are a day trader with a strategy where you risk around 15 pips for 30. After completing about 200 trades, you find out that half of your trades attained the targeted profit and the others went sour and activated your stop loss. So you have essentially gained 100 by 30 pips=3,000 pips and lost 100 by 15 pips= 1,500 pips, giving you a gross revenue of about 1,500 pips. The income is labeled gross since you have to pay for the transaction cost to your broker. Let us put the spread at two pips per transaction, implying that the 200 trades you engaged in cost you 400 pips. Thus your net revenue stands at 1,1000 pips for the 200 trades which is 5.5 pips for every trade.

Evidently, working on the data obtained from 200 pips is not very reliable, but that will give you something to work on: every trade gives you an average of 5.5 pips.

Tip 4: Engage Other Traders.

Most new traders often overlook the information they could obtain from the other traders. It is undeniable that reading content about forex is crucial. Books can give you a great starting point within a short period, giving you a good stepping stone.

Practicing is the other vital factor to get to terms with how things operate fast, but you will be shocked to find out how regularly other traders can give you useful information concerning your strategy, or concerning different ways of going about particular trades. You should join an online forex community or come up with a trading blog where people can react to your strategy.

Do not be put off by the fact that you are an amateur, keep in mind that we all started out as beginners and most of the traders you meet there are probably starting out as well.

Tip 5: Avoid Being Emotional.

This final trading tip is probably the most fundamental one. As it has been stated, trading on the forex market is an enjoyable experience, but it is vital not to get overexcited because of this. Seasoned traders approach it as a source of income and not a hobby.

The primary purpose of your trading capital should be to make business moves; some of them will be profitable, and others will cost you money, it’s that straightforward. But the moment you throw your rationality into the air, I guarantee that the losses will start accumulating very fast. forex trading for beginners. forex trading reddit

I am referring to those situations that do not shift your stop loss since you just cannot get yourself to take the hit. Or those cases that you venture even though your plan advises you to be patient since you are afraid to miss the trade or you have nothing important to do. Those situations that you become angry because you lost fifteen trades consecutively that you start investing with triple your normal amount, and taking positions in trades you never participate in.

The Forex market is the largest worldwide market with over 5 trillion dollars traded each day. With these forex trading tips for beginners in mind, you can have a piece of the pie. forex trading tips for beginners

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John Meeks
John is a freelance writer specializing in finance and entrepreneurship. He also consults clients about financial management and small business solutions.

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