Forex or foreign exchange trading is very lucrative, but also very tricky. If you are new to the game of trading currencies, here are some tried-and-tested tips to get you started on the right foot.
1. Employ a stop-loss strategy every time you trade. A stop loss allows you to set a price point at which your trade will automatically close so that you don't lose more than you had planned.
2. Do not overtrade. While some traders say that the more trades they make, the more money they will eventually earn, it is actually quite possible to over-trade and ends up losing money quicker than you'd expected. Set a trading time limit for yourself and stick to it, even if you are on a winning streak.
3. Keep the size of your trading account in check: The amount that you put into your trading account should be an accurate reflection of how much risk you can afford to take with your capital. Also remember that just because you have $1000 in your account now, doesn't mean that you have to use it all up.
4. Follow a trading plan: You should have a trade strategy that will help you determine where, why and how much you are going to trade with your capital at any point in time. Make sure you know exactly what is happening with the market as well as the value of the currency you are trading in, before you place a trade.
5. Never fall for the hype: There is no room for emotions when you are trading currencies. So don't be carried away by sensationalist news reports or get-rich-quick advertisements that might convince you to invest your money in something that's not necessarily right for you.
6. Research, research and research some more: Before you put your money on the line, do as much homework as you can about the currency pair that you are trading in, the time of day that you are trading in, along with all other relevant factors that might affect how a trade will turn out.
7. Use the right forex trading platform tool: Not all trading platforms are created equal, and those that might be suitable for advanced traders may not necessarily be the right choice for rookies. The good news is that there are several reliable tools out there that can help you to do your research as well as maximize your returns. Try Meta Trader 5 - a widely used platform that supports multiple types of trading accounts and offers a variety of charting tools.
8. Learn from your mistakes: The best way to learn how to trade currencies is by studying your mistakes as well as those made by other traders. For example, if you notice that people tend to lose 50% of the time when trading against the euro, it's best not to make the same mistake yourself.
If you stick to the tips outlined above, it is highly unlikely that you will lose money when trading currency.
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