Trading in forex means you as an investor will be facing a highly competitive environment with plenty of risks accustomed to it. But that does not dim the demand for forex trading among millions of traders around the world due to the scope of leveraging in this market. While according to the stats only a small percentage of the traders make consistent profit in the market, as a beginner you need to have proper knowledge of how things work in forex. This means apart from keeping an eye on trending investing news, having basic knowledge of the market, and getting familiar with various tools, you need also to look out for some tips to accelerate your trading journey. Below we have discussed the 5 most crucial tips that can give you an edge in forex trading as a beginner.
Determine your goals to match your trading style
It is important to have a clear picture in mind before starting anything and trading in forex is no exception. Every trader follows a certain unique trading style that impacts their risk appetite, time horizons, and profitability as well. Determining your trading style will ensure you reach your goals faster and more successfully. For instance, if you don’t prefer to take the risk of leaving an open position overnight then going for day trading might be ideal for you. Most beginners tend to overlook this factor of matching their style with the approach of trading which eventually leads to uncalled stress.
Practice with the strategy to understand your expectancy
The success rate in the forex market majorly depends on having proper control of your risk appetite while having a clear notion of the probabilities. A professional trader always looks for setups that are of high probability and executes them without the intervention of any emotional factor. To understand the probabilities of a certain strategy, you need to conduct backtesting by going through the historical data with the help of technology. This will also assist you in evaluating certain patterns in trades which in turn will make you understand your expectancy. The basic formula of determining the expectancy is E= [1+ (W/L)] x P-1, where E refers to expectancy, W is the avg. winning trade, L denotes the avg. losing trade and P is the percentage win ratio.
Maintain a trading journal to review your trades
Although this tip may seem obvious and basic, many novice traders tend to overlook this practice which leads them to make repetitive mistakes. Apart from sticking to a particular trading plan, as a beginner, it is recommended to maintain a trading journal as well. This trading journal can consist of everything from the reason you took a certain decision while trading to things like your entry and exit points. This will be helpful to evaluate your attitude and trading style along with the effectiveness of your strategy in the future.
Try to avoid relying on extra indicators
Indicators are a crucial part of forex trading but using too many indicators may often make the whole scenario over-complicated. Where the price indicator is the most vital one to consider during a trade, simply having a clear idea about the price movements and understanding the price action can give you an edge. If you are persistent about following different indicators it is advisable to stick to narrow them down to make things simpler and less distracting.
Opting for a reliable FX broker to start with
While the majority of these tips depend on how you behave and take action to ensure a successful trading career, some of them also depend on external factors. Selecting the right broker to open a trading account is possibly the most crucial part of your trading journey. Not only it will handle your deposits and withdrawals but also with choosing the right broker you can access their features seamlessly. Make sure to thoroughly research and verify their regulations before opening an account with a broker.
Traders who are most likely to get success in the FX market are skilled professionals with utmost discipline. Apart from following these tips as a beginner you also need to eliminate the emotional factors and perform self-analysis to achieve higher returns.