Trading currencies can be rewarding if you know what you are doing. If you're thinking of becoming a Forex trader soon or have started trading weeks or months ago, here are ways to help you achieve success in this endeavor.
Plan how you will trade
Without a solid plan, you are not going to make the most out of your trades and may even find yourself losing a considerably amount of money. Step one in planning a sound strategy is to select a currency pair. There are just a few currency pairs to pick from, some are more volatile than others. Select a currency pair depending on your risk parameters. When you have determined which pair to trade, work out how long you'll hold your positions. After this, you have to establish your goals for the position.
Observe the Forex market
Forex investors and traders use two basic forms of analysis, specifically, fundamental and technical analysis. Some forex traders pigeon-hole themselves into a single analysis method, but in many cases, using both can offer more profit. It is because using both will help you draw the whole trading picture. More specifically, fundamentals allow you to recognize targets, while technical data can be helpful in making trading decisions.
Record which strategies work and which ones don't
A reason why a lot of traders don't succeed is because they keep doing the same mistakes. Keeping track of your trading activity, like with the use of a diary, will help you spot successful trading patterns and the ones that will only result in losses.
Manage your risk
Trading in the Forex market is risky. One thing you can do to control your risk is to not trade money you simply can't afford to lose. You need to pick the suitable lot size for your account balance and utilize leverage sensibly. Successful traders are unemotional about gains and losses and they understand when to cash out and when to cut their losses. You can keep yourself from trading emotionally by making use of limit and stop/loss orders.
Choose the right broker
You cannot start trading currencies if you don't have a brokerage account. You'll have a much better chance of earning money as a Forex trader if you put the proper amount of time and research into picking a broker. The best Forex brokers are those that offer narrow spreads, rapid and high quality execution, advanced trading tools, and exceptional customer service.
Five Characteristics of Good Forex Trading Platforms
It's difficult to get a handle on the best Forex trading platforms because of numerous companies offering software for currency trading. For a beginner, they all look the same. Offering similar "features" wrapped in various jargon and financial terminologies that they might as well be speaking in an alien tongue. But when you get down to the Nitty-gritty, these trading platforms are as different as night and day.
The platform should be user-friendly
This is the first thing you should look for. The very essence of do-it-yourself trading platforms is for you to understand the concept on your own so you will not have to rely on anybody else. The interface should be simple enough for a beginner to understand and should be extensive enough to cover nearly all base account currencies. The graphics are categorized and organized so you do not overlook something. Oftentimes, a split-second mistake can cost you a profit.
Second thing you look for is the technical support. The best Forex trading platforms are those that 24/7 customer support either via e-mail, voice chat, SMS or over the phone. The software should support other languages such as German, Arabic, Chinese, Spanish, Hebrew, French and Russian. After all, not all traders are comfortable with the English language.
No hidden charges
The best part about these trading platforms is eliminating the middle man. So it doesn't make sense for some companies to collect a portion out of your profit. So this is the third thing you should look for: good platforms do not ask for commission from you. Relative to this, the company should make it easy for you to deposit the money when you start trading. That means the platform should be able to support e-wallets like credit cards, wire transfers or Money Bookers.
Point you to where the money is
The fourth characteristic of best Forex trading platforms is the ability to let you see what the others are doing. Currencies and non-currency Forex products that are presently trending occupy a prime spot for you to see them easily. It's now up to you if you want to join the bandwagon once you analyze the deal direction and popular currency pairs. A good addition of this feature is a tool that allows you a clear view of profit-and-loss situation.
The fifth characteristic you look for is the capacity for the technology to limit your risks. It's especially difficult for a beginner to gamble with his or her money on some arcane venture likes FX trading. A tool that allows you to simulate trading and gauge your ability to close some deals in real-life situations without necessarily losing money should be a feature of all trading platforms in the market today.
Forex trading can be a rewarding activity. Success in Forex trading boils down to having a well-laid-out plan, proper management of risk, careful analysis of charts and news, and being unemotional with gains and losses.