10 Tips for a Great Kick-Off
The first step to becoming a successful trader is developing good trading practices. These lifelong trading habits lead to better trading and bigger profits.
Before you open your next trade, read our tried and tested tips guaranteed to help you get the most out of the trading opportunities that lie ahead.
1. Build a Forex Trading Plan, and Stick to it
Every good trader needs a trading plan. A trading plan outlines the type of trading you’re looking to do. Traders with more time might adopt a day trading strategy, while others might prefer longer-term positions.
The first step is to outline your goals. Do you want to trade full-time or just trade to generate a second income? It is very important to include your risk management strategy in your trading plan. Outline how big you want your trading account to be and how much you’re prepared to risk on each trade.
The most important part of trading is sticking to your trading plan. A trader who constantly changes his approach doesn’t have the chance to see which strategy works best. The best traders are able to keep their focus on their long-term goals.
2. Start Small and Build Gradually
New traders often get caught up in the excitement of placing trades in the vast forex market and can often get lost. The best way to start is by focusing on one forex pair or instrument and building up your trading portfolio. Choose a pair that you’re interested in and get to know how it behaves.
What are the economic events that impact it the most? When is it most volatile? Does it follow the lead of any other markets? How big should the take profit and stop loss levels be?
If you are trading too many instruments, you risk losing track of your trades. Start small and once you’ve gotten a handle on it, build it up from there. We recommend choosing a major currency pair or high volume instrument that trades in your timezone and has a large trading range. Learn all you can about it, get to know it well. This will make you a stronger trader.
3. Manage your Risk
You’ve probably heard the analogy, “cut your losses short and let your winners run”. Winning trades are attractive, but the sign of a good trader is not letting your losing trades get out of control. That way you live to fight another day. Your next winning trade might be just around the corner and you need to have capital to invest in order to trade. Learn how to manage your risk.
When building a trading plan, outline the amount of money you are willing to allocate to your trading account. According to that figure, set your stop loss levels so they equal a certain percentage of your total account. A good rule of thumb is setting your stop losses around 5%. This will, theoretically, allow you to have 20 consecutive losing trades before depleting your capital, which is very unlikely.
The fact that you can leverage your forex trades does not mean you should. Never put your account at risk by trading too much at one time.
4. Set a Stop Loss and Stick to it
In forex trading, our goal is to find more winning trades than losing trades and to make sure we have bigger wins on average than losses. To do that you need to set your stop loss levels and stick to them in order to mitigate your risk.
There’s an ever present temptation to let your losing trades run a little more than you planned, with the hope that they will turn around and will become winning trades. Don’t let yourself get caught in this cycle. If your trade hits your stop loss level, exit your position and move on. There will always be more trade opportunities.
5. Manage your Open Positions
Many traders have a hard time taking a loss. They get caught up in the emotion of failure because they’ve had one trade that didn’t go their way. What they fail to realize is that trading is a game of percentages.
When you’re in a winning position, you can consider moving your stop loss to breakeven. You can also use what is known as a trailing stop (moving the stop loss in the direction of the trade). That way you allow your winners to run and your losses are cut short.
This is an important strategy for new traders. It eliminates trading based on emotions and allows you to make the correct trading decisions.
6. Doubt yourself? Follow an Expert
When starting out in any new field, the best way to learn is by following someone who is already succeeding.
The FX Leaders team of analysts and traders spot market opportunities on a daily basis and share them with you. Follow FX Leaders free forex signals, and learn how our expert analyst decide when to open trades and how to manage them properly.
Another great option is to join eToro, the largest online Social Trading network. Connecting with eToro’s Social Trading community lets you follow the trade activity of top traders in the community and allows you to copy the trades of any trader with a single click of the mouse.
When starting out, you don’t need to do it all by yourself. Use the knowledge of the leading experts for ideas and to gain a better understanding of how the markets work. This is an excellent way to get your trading career started on the right foot.
7. Manage your Emotions
One of the biggest challenges traders face is managing their emotions. We’re taught from an early age that we shouldn’t make mistakes, that’s the way our education system works.
In the trading world, mistakes are a part of everyday life. If a trade doesn’t go your way it doesn’t mean you should feel bad or get upset. You don’t need to be right 100% of the time to be a successful trader. Focus on placing trades that fit your trading plan and trading personality. Let the results take care of themselves. Forex trading is about good analysis and probability, not about being right or wrong. By changing your thinking and not letting your emotions get the better of you, you’ll be giving yourself every chance at success.
8. Stay Informed
There are two elements that move the markets, fundamentals and technicals. Fundamentals trading strategies are based on economic data releases, political news, central banks, economic calendar events, and many other aspects. As a trader, it’s your job to know what’s happening in the world and how it might impact your trading.
Most trading platforms incorporate live news feeds and economic calendars that outline the important economic events of the week. FX Leaders Economic Calendar is unique in that it only presents the highest impact economic events with real-time event commentary. The FX Leaders expert analysts manage these events as they happen with live-tweets on any new development and trade recommendations, ensuring you remain up to date.
While the result of any trade is out of your control, being prepared is in your hands. The best traders are always ready for anything.
9. Don’t get Caugt up in Losing Trades
When trading, it is always important to keep looking for that one good trade. Forget about your last trade, even if it was a winner. You’re only job as a trader is to look for the next opportunity. One trade at a time.
Your next trade needs to fit the entry criteria you outlined in your trading plan. When you’re in a trade, manage it accordingly. Regardless of whether you win or lose, move on to the next trade. Remember, there’s no place in trading for ego or emotion. Every losing trade is one trade closer to your next winning trade.
10. Choose your Broker Carefully
Arguably the biggest barrier for traders in their journey to becoming profitable is using the wrong broker. Your broker must be able to facilitate your trading style, and give you the lowest commissions and tightest spreads. FX Leaders has reviewed and tested a number of brokers and their platforms, see our forex broker reviews.
Only use regulated brokers and find a trading platform you are comfortable using. Finding the right broker can be complicated, which is why FX Leaders put together the definitive guide to forex brokers. This will teach you everything you need to know to find a broker that will suit your needs and will give you the best chance at success.
Join a Winning Team
Forex trading is one of the most interesting, challenging, and ultimately lucrative endeavours. The good news is that you are now equipped with all the tools you need to get started. Get the basics right and you will be ahead of most traders.
Good luck on your trading journey!