If you want to succeed in the trading industry you should be prepared to conduct extensive research. Some of the most crucial things you should understand as a beginner include planning your trade, limiting your losses, and trading your plan. Here are some tips to help you become a successful trader.
Know how to Read a Price Chart
When many beginners venture into the forex trading world, they look forward to making easy money immediately. Sometimes they will use a particular strategy without doing proper research or even knowing its impact. However, the forex trading world does not work like that. It is worth mentioning that some strategies do not work in live forex markets as they would in demo accounts.
The strategy you use could make or break your trade. Again, the fact that a strategy worked for someone else does not mean it will work for you. If you invest in a simple trading strategy blindly and apply it on every trade, you may end up losing instead of winning. Remember, if trading was easy, then everybody would be successful and rich.
While any trader can learn the numerous strategies available today, it is crucial to understand that different strategies work for varying trades. To reduce losses, beginners in the trading world should learn how to read the chart before venturing into live trading.
Once you are conversant with reading a price chart, you will be able to figure out why the price is moving sideways, down, or up. You will also be able to determine the direction the price is likely to take next. For example, let us assume your chart indicates a top double set-up encouraging you to sell. However, from reading the chart you can see the price is trying to move upwards. In this case, you should be looking for buying opportunities instead of selling.
Once you master how to read the chart, then you will cut down your losses by half. This is because you will have learned how to identify the right buying opportunity, even if the pattern encourages you to sell. What this means is that you will be in a position to apply a suitable and profitable strategy.
The trading industry is overly competitive. To stay on top of your game, you need to leverage modern technology and use it to your advantage. Charting platforms like Metatrader 4 offer traders different methods of viewing and evaluating the markets. Backtesting an approach with historical figures prevents pricey missteps.
Receiving market updates through your smartphone enables you to observe trades from anywhere. Technology that some traders overlook can influence trading performance. Leveraging technology and keeping a tab on new products is not only fun, but it is also fulfilling in reading.
Only Risk what you are Comfortable Losing
Before you can start trading real cash, ensure that the money available in your trading account is disposable. If you cannot afford to lose it, then you may want to reconsider your decision to risk it in a trade. Do not allocate the money you have in your trading account to paying the mortgage or your children’s college fees. Never attempt to withdraw your savings to invest in a trading account. Remember, forex trading is risky, and nearly every trader loses money at some point. Losing money can be painful if you lose cash meant for critical projects.
A Stop Loss is a Must-have Tool
A stop loss is a preset amount of risk that forex trade is ready to accept for each trade. While the stop loss can be a percentage or dollar amount, it restricts the trader’s vulnerability during a trade. Using a stop loss will minimize stress from your trading activity because you will be sure of the amount you will lose.
Trading is similar to a business. When you think you have an excellent service or product, you quickly realize that you need to market the product. However, the moment you master trading, you will know the right time to trade, exit, and avoid losses.