The forex market is one of the biggest financial markets in the world. It gives global traders the opportunity of trading round the clock in order to enjoy maximum returns. Plus, you don’t need to have huge sums of money in order to start trading currency pairs, especially with brokers like GigaFX. Yes, there are risks, but it is essential to understand that trading forex is all about statistics. There is no secret formula or magic trick that makes some traders better than others. The only reason they are able to book higher returns through forex trading is because they are aware of the things they need to do and those they should avoid.
Knowing the dos and don’ts of trading in the forex market can save you a lot of hassle in the long run because it enables you to polish your skills, avoid common mistakes and get the desired experience and profits. But, what exactly are they? Read on to find out:
Don’t choose an overcomplicated strategy
When it comes to trading, there is absolutely no one-size fits-all strategy that you can use for maximizing your profits. Bear in mind that it is perfectly normal for new traders to experience a couple of busts before they are able to find a system that suits their trading style and works for them. Instead of copying the strategy of other traders, it is better for you to try out a few different ones to find out what works best for you.
Once you do find a suitable system, you need to stick to it. Why hop from one strategy to the next just because it appears too simple to you? Instead, you need to think of it as a friend and should nurture it because it has the power to make you a great deal of money. If you ignore its potential and replace it with a different one, your plan may just backfire. You can practice the strategy you pick on a demo account first and then try it in real time when you are sure about it.
Do have realistic expectations
Have you decided to start trading to save up for your hospital bills? Education? A new home? Vacation or retirement? Perhaps, you are just interested in getting rich. Regardless of why you want to trade, you have to be realistic about your expectations. No matter what goals you have, it is vital to remember that going slow is the best way for you to earn money. Just because you have a few successful trades in the beginning doesn’t mean that you can be a millionaire in a couple of months.
Don’t be too greedy
This is in perfect alignment with the previous suggestion. The number one goal of forex trading should be to achieve break even. Sure, you can be aggressive, but only until you have reached a specific point. You have to learn to trade forex in a safe way and should never commit to trades that are too risky and not in accordance with your risk tolerance. Bear in mind that it is better to have smaller profits that have a negative account balance.
Don’t pay attention to rumors
Another important part of trading forex is to not pay too much attention to the rumors. Since it is difficult to know everything that’s happening in a country, predicting the movement of their currency is not always a simple task. If you are overwhelmed by the information around you, it is easy to get tempted by the rumors flying around, particularly if you think the market has gotten stagnant. While there are credible sources, but you cannot consider then as the be-all and end-all of trading. These are also based on assumptions because there is no certainty in forex trading, which means listening to rumors can be a costly mistake.
Do use your own money
Yes, this seems as the most obvious thing to do, but the fact is that it is not. There are numerous forex traders out there who have borrowed money for their capital. This is a huge mistake because the basic rules of forex dictate that only money that a trader can afford to lose should be invested. Like with any other form of investment, once you have put your money into forex trading, you should consider it gone. Using borrowed money for trading in the forex market is not very different from gambling so it can be a very risky move.
Do choose a broker carefully
There are too many forex traders out there that sign up with the wrong broker in their haste to get started. Eventually, they end up regretting their decision after they have suffered from setbacks and losses. The key to avoid this from happening is to be thorough in your research. A look at GigaFX review can tell you what that broker can offer you when you wish to trade foreign currency. Likewise, you can also find information about other brokers. Don’t fall for the low costs because there will be compromises somewhere. Be wise and smart when you are selecting a broker.
Don’t indulge in ‘revenge trading’
You should not be the kind of forex trader who chooses to conduct a trade according to their emotions. If you have just suffered from a huge loss, it is natural for you to feel greedy and angry. Therefore, you will start trading again to get your money back. There is a good chance that when you are letting your emotions influence your decision of entering into a trade, your impulses will cloud your judgment and this will lead to a loss. Walk away from the market after a loss and cool down. Return when you feel stable and reflect on where you went wrong to avoid it in the future.
Stick to these dos and don’ts when you are trading currency pairs in the forex market and you will also tap into its potential.