Learning to Trade
The Internet has led to Forex trading becoming one of the most popular forms of retail trading in the world. For this reason, there are plenty of Forex guides all over the internet that take novices by the hand and explain the mechanics of trading from the most basic concepts to highly advanced and complex trading strategies.
However, not all Forex guides are created equally and as you will soon find out, there are as many trading strategies and approaches as there are traders. While those that deal with the basic concepts are largely similar, once you get into more advanced concepts, especially regarding technical analysis, they begin to differ significantly.
This is largely because Forex guides are usually the reflection of the trading style of the person who wrote the guide. In other words, if a trader prefers to trade using Fibonacci retracements and the Elliot wave theory, then the guide will most likely focus on those aspects more than other indicators.
Choosing the Right Forex Guides: The Basics
You can find Forex guides to trading practically all over the Internet, but you will also find that most online Forex brokers provide their customers with educational materials as well. Your best option is to initially go through the materials they provide and once you feel you have mastered the basics, you can delve into more advanced concepts.
Choosing the Right Forex Guides: Trading Styles
By time you are familiar with the basic concepts, you should have already been able to decide what style of trading is suitable for you. Day traders use different trading strategies to swing traders, for example, which means that you need to decide beforehand what type of trading will be suitable for you.
Most retail traders prefer day trading, which is basically a style of trading where you enter and exit the market quickly, closing all your trades at the end of the day. Higher volume traders tend to combine the two, because swing trading is closer to investing than it is to actual speculative trading.
Swing traders keep their trades open for weeks or even months, banking on long-term trends. However, as a swing trader you need to have a substantial balance in your account to be able to ride the waves that take place during the trend so you can avoid a margin call.
Choosing the Right Forex Guides: Fundamentals vs Technical Analysis
Not only is your trading style important to the Forex guides you should choose, but also your trading strategy. For example, there are traders who prefer to focus more on fundamental analysis and only use technical analysis sparingly to confirm their trades. This means that you will need to look to Forex guides that cover fundamental analysis more than they do technical analysis.
It’s true that many Forex guides focus mainly on technical analysis because the majority of retail traders are day traders. The latter mainly focus on technical analysis, but they still keep their finger on the pulse of the fundamentals to make sure that the market won’t make any unexpected moves that will catch them on the losing side of a trade.
The Forex market exhibits some of the most significant short-term market movements in response to economic news releases. This is why Forex traders need to at least be aware of the times of these releases because the market tends to become extremely volatile at these times. In fact, many traders avoid trading during those times to limit the risk of incurring losses, especially since an account can be wiped out in the blink of an eye.
If these concepts seem alien to you right now, you shouldn’t worry because once you have gone through some Forex guides covering the basics you will find them easier to understand. However, do remember that simply reading a guide won’t turn you into a master trader. Therefore, be prepared to start practicing what you are learning from your Forex guides on a practice account.
Once you have ventured into the world of Forex marketing it doesn’t take long to realise you need a good Forex trading system. However, this can prove to be costly if you don’t make the right choice. Unfortunately, there are many to choose from so it helps to have a few insider tips and guides on how to select a good Forex trading system for you.
Don’t get caught up in the hype, the majority will promise you huge profits, after all they want you to buy, they are not going to tell you that you could equally lose money. The Forex market can be volatile, you will hear of fortunes being won and lost within minutes, many of the systems offered will promise thousands of pips to be gained in the short term. But you need to be able to identify the real deal from the scams. There are good systems to be had, but it comes down to knowing how to find them.
Points to look for in a good Forex trading system
Start off by doing your research online, there are many websites and blogs that will provide you with good information. When you come across a website where the system looks promising, read through the website thoroughly. Read the small print in their terms, conditions and policies. Contact other traders in forums or blogs; ask if anyone has any experience with the system you are interested in. Get their views and opinions, you don’t necessarily have to agree with them but it is a good idea to get someone else’s perspective who has already tried the system out.
There are a lot of websites that provide reviews on various Forex systems, check these out see what they have to say. Contact the seller, if you have any questions. Check what the system is capable of. Only when you are satisfied should you make the purchase.
Another good pointer when looking to buy a Forex trading system is to check whether there is a money back guarantee. This is important and will give you some reassurance as to the fact that the merchant believes in his product. If no guarantee is offered be very wary.
The last important pointer is, to open up a demo account first before making any purchase. Most online brokers and many traders’ training sites have”dummy” systems you can set up and practice within. In fact it’s not uncommon for new traders some to practice for several months before making a decision to move into the real trading world. It’s good way to make sure your money stays in your pocket until you are confident about what you are doing with it.
Having a good system can make all the difference as to how you manage your online Forex trading portfolio. Once you have a good system and a broker you feel confident with you are just about set to go.
Some people initially start as Forex traders just a few hours a week in their spare time to make a bit of extra cash, whilst others are planning to make it a full time occupation. This is the advantage of trading in a market that is online 24hrs a day 5 days a week. There is always somewhere for you to trade. Whatever number of hours you are planning to commit, there will be a few commonalities. You will need a good computer and a fast internet connection.
Most new traders are recommended to start off with long term trading but that doesn’t appeal to everyone, there is a certain mindset when getting into this as to what type of trader you are going to be. Are you going to be slow and steady or you like the appeal of making instant decisions’ and judgement calls? Forex trading systems are not for everybody, and if you can’t make split second choices, unhampered by emotions you are better to look elsewhere for your investments.
The Most Common Forex Mistakes and How To Avoid Them
As with all kinds of trading, a lot can be learnt from avoiding other people’s mistakes in order to improve. One of the most common errors of traders is to make a guess at the direction of a currency. As an important rule of thumb, looking at the trend beforehand and following it, then opening a trade accordingly, will prevent costly guessing mistakes. The idea behind following a trend is simple; determine the change in the currency market and cash in on it. By examining and estimating the movement of a rate, a good trader will know when to open a trade and be aware that it may need to be closed if the trend has a sudden reversal. It is not wonder that “the trend is your friend” is the Forex trader’s mantra.
A trader setting their leverage too high is also a very common mistake. Those who are hesitant of putting a substantial amount of money into the market will often lay small amounts which require leverages of up to x400. While it may be true that the higher the leverage the more profit you can make, it’s also a fact that you can lose a trade more quickly with this method.
A currency trend only has to experience a minor fall before your trade cuts out. This tends to be the most common outcome for traders making the mistake of only trading with one currency. While doing this may put a trader at ease, it is often the most difficult way to make a profit. I suggest, after doing some research, make some demo trades in order to feel more confident.
Lastly, a major mistake made by traders is failing to hedge their risk. Using a Stop Loss is one of the most useful trading tools because it allows you to set a limit so you will always know the maximum amount you can lose. An example would be if a player buys EUR/USD at 1.5700, with the belief that it will go up, but for some reason the price drops to 1.5200, they will have saved themself because they set their Stop Loss at 1.5500.