There’s no doubt that forex trading remains one of the most accessible investment vehicles for beginners, thanks to its highly leveraged nature and the fact that individuals can control large trading positions with a small deposit. However, this $6.6-trillion marketplace is highly volatile and changeable, creating significant challenges for new traders who have little or no experience of the industry.
With this in mind, here are a few forex trading tips that have come straight from the pros, so that you start out right and optimise your chances of achieving a long-term profit.
Set attainable goals
Let’s start with the basics; as the creation of attainable goals is crucial if you’re to successfully manage your expectations and utilise your capital wisely.
Make no mistake; your goals should be directly linked to your capital holdings and appetite for risk, as this ensures that you don’t invest beyond your means or cultivate a trading strategy that’s too dependent on market volatility (such as scalping).
This is why it’s also crucial that you develop your chosen strategy as a matter of priority, as this will help you set manageable and realistic goals in relation to profit and loss over an extended period of time.
You should also set clear goals and rules in relation to the amount of leverage that you take on, as while it’s possible to open up positions that are 100-times larger than your deposit, this isn’t something you should consider without the requisite experience.
Plan your trades
Another key element of your strategy is the analysis and planning of trades, as you’ll need to determine precisely how many you place (and their value) within a predetermined period of time.
This is not only central to effective capital management, but it also enables you to utilise a select few technical indicators and maintain a genuine sense of clarity during the hustle and bustle of trading.
Of course, the extent of your planning will depend on your strategy, as while scalpers generate incremental profits by executing a large number of trades over a matter of minutes, position traders will maintain open positions over a period of months and even years.
Understand the concepts of resistance and support
Whether you solely invest in currencies or also engage in indices trading online, it’s important that you understand the core concepts of resistance and support.
Resistance often occurs during periods of increased volume and volatility, when buyers and sellers trade a considerable amount of a particular asset. This can ultimately force prices down, which may be advantageous or damaging to traders depending on their strategy and underlying appetite for risk. Long-term analysis can help to identify such trends ahead of time, as you look to pinpoint potential resistance and profit from this accordingly.
Support occurs when falling prices suddenly stop, change direction and begin to rise, and you can also use detailed analysis to pre-empt such movements and inform your strategy going forward.