Getting involved with forex trading can be a great way to increase your wealth while diversifying your portfolio from traditional stocks, bonds and other investments. However, if you’re new to trading currency pairs, there are quite a few things that you’ll need to know in order to avoid pitfalls and maximize your returns. Let’s cover some of the more important tips for those new to the world of forex trading.
Trade in Currencies You’re Comfortable With
While forex trading gives you access to a very wide range of different currencies, there’s a lot to be gained by trading in pairs with which you’re familiar. For instance, if you’re in the US, you might consider a pairing of the US dollar and the Japanese yen, or the British pound, or even the euro. Because you’re familiar with the economies of these countries, you’ll be better able to make informed trades.
Take Care When Choosing Your Broker
Individuals are not allowed in forex trading, so you’ll need to go through a broker. Obviously, your choice here makes a great deal of difference. The first tip is that the broker needs to be legitimate – there are unscrupulous people out there masquerading as brokers, and they’ll do nothing more than separate you from your money. However, you’ll also need to ensure that you are working with the right broker for your needs. What does the broker’s client list look like? Does the broker offer software that’s easy to use, and can be scaled up or down as you become more and more familiar with forex trading? What’s the customer service like? Are there long wait times? Is the rep knowledgeable and courteous?
Work with Just One Pair
As mentioned, it’s best to start out with currency pairs with which you’re familiar, but you might also consider working with just one pair in the beginning. This allows you to test the water so to speak and learn the ropes as you go. It’s tough to master all the minutia involved with forex trading. It takes time, and the only way to build the familiarity that you need without losing your shirt is to trade on a limited basis. By trading just a single pair, you’re able to make investments, track trends, and learn what you need to know while still potentially making a profit on your trades.
Don’t Get Emotionally Invested
It’s crucial that forex traders are able to remain emotionally distant from their trades. When you trade with a cool, level head, you’re able to make dispassionate decisions based on real information. However, when emotion or sentiment clouds your judgment, you’ll find that your decisions are less accurate. Financial choices must be made without any artificial coloring from sentiment, anxiety, or any other emotion.
Learn from Your Mistakes
Face it – you’re going to make at least a few mistakes in the beginning. If you follow the preceding tips, those will be learning experiences, not catastrophes. Learn from your mistakes. Pinpoint what you did wrong, and when things started to go south. Then, apply those lessons to your future trades.
Following these tips will help anyone new to the world of forex trading get started on the right foot, and avoid pitfalls that could derail their investing and cost them.
For more information: