First Steps in FOREX Trading

To be successful traders, people dealing with exchange markets should have a clear strategy that is something more than complying with a set of rules.

First Steps in FOREX Trading

The creation of such a strategy goes through six steps:

1. Explore ways of thinking.

When one trades on the FOREX market, their priority is to look to themselves and to explore their ways of thinking, strengths and weaknesses.

Observe how you react in times of high tension, what mistakes you allow. Make a SWOT analysis – determine what your strengths and weaknesses, opportunities and threats are. Adjust your personality to the kind of trade. If you are a beginner, too nervous and insecure, do not trade large volumes, at least for a while, unless you prove to yourself that you can handle it. If you cannot sleep peacefully with open positions, place stops to limit losses, or focus on daytrading.

Be prepared. The psychological preparation is essential for a successful strategy. It gives you confidence in your actions and allows proper timing of transactions.

Be objective. Do not let emotions take over, as often happens, not only to beginners, but also to traders with considerable experience. Emotions are the worst adviser and the main reason for the huge amount of losses for many traders. Do not fall in love with currency.

2. Identify your mission and set goals.

As with everything in life, one does not know where the trade on the FOREX market would lead them if they do not know where they are and what path to take. This means that one must use a calculator and set realistic expectations according to the risk they take. The interrelation “risk-income” is the key one.

Then, one should specify what return they are expecting from a deal so the desired profits could be achieved and how often one should trade.

3. Make sure you have enough capital.

Available resources are a basic requirement to start FOREX trading. Without sufficient in size available capital you risk using a bigger leverage than normal or to realize little income that is not worth the risk and the invested time and nerves.

Do not allocate funds for trade from sources that are needed to cover daily or running costs.

4. Choose a harmonious market.

Select a currency pair and test how it is traded in different time horizons. Start with a weekly chart and gradually proceed to a daily, four-hour, two-hour, one-hour, thirty-minute, 10 minutes- and last-minute chart.

Determine levels of support and resistance at the different time charts and see if there is a match of the levels between the different types of charts. This way the certain level becomes more reliable to trust. Repeat with other pairs until you find the currency pair which seems most suitable for trading at any time.

Once you find a similar pair, inform about the current news and upcoming events that could affect her movement. Try to confirm whether the fundamental data confirm the expected direction.

5. Test your trading strategy.

Before you get to the actual FOREX trade, test your strategy “on paper”. You can trade for some time while you strictly record your actions and track your results. And do not forget that the real trade is significantly different from demo trading, as many psychological factors act quite different.

Once you have tested the demo, you should try the real FOREX trade, but the volumes should be number of times less than those you plan to trade. This way you can calculate your real results. Read some good Forex blog in the search for useful information.

Remember that one of the key factors for successful trade is the risk management.

6. Measure your risk profits and set limits.

The first thing you should do is to determine where to draw the line if the market goes against you. Secondly you should calculate not only the percentage of the winning trades, but also the profit-loss ratio.

Do not get into a situation that is contrary to logic. Even if the amount of your winning trades is 50%, you will still profit if the profitability of a transaction exceeds the amount of losses. Finding the balance is the key to currency trading.

First Steps in FOREX Trading

First Steps in FOREX Trading