While Forex trading is a good source of passive income, there are still those who compare it to betting in a casino. Forex trading is in fact an investment, which requires careful management and a sound strategy. Participating in Forex is not about waiting to hit the jackpot, but rather, knowing certain rules to help you achieve trading success. We share several Do’s and Don’ts when trading Forex.
Have a Trading Plan
A trading plan is key to having profitable trades. Serious traders should look to have a good grasp of Forex basics to help them build a sound trading strategy. There are many channels through which you can improve your Forex knowledge – be it through educational webinars or one-on-one coaching! Plan your trade and then trade your plan.
Stay in the Know
Economic trends and significant world events have implications on Forex. Stay updated on the latest news – from policy changes to central banks’ decisions and changes in inflation or interest rates – to better forecast market movements and identify currency pairs to trade.
Learn how to identify price patterns and trendlines. Although this may take a while to master, using both fundamental and technical analysis can help you generate steady profits and reduce your losses.
Manage your expectations – it is unlikely that you’ll become a millionaire in a week with a capital of USD500. Trading success rarely happens overnight; you would have to cultivate a positive trading mindset, understand that losses are part of trading, and first build your confidence with small profits.
Choose a Trusted Broker
Invest with brokers with established credibility and legitimacy. There are tons of Forex brokers who are just market-makers. So what are the criteria you should be considering? Good brokers are transparent with their prices, offer safety of funds and often, the resources and solutions to guide you to achieve success in the markets.
Don’t Be Impulsive
Never act on impulse or allow emotions to lead your decisions. Study market movements and act on strong price indicators. Practise patience and use the data available to you to identify when best to enter and exit a trade. Don’t let your feelings cloud your judgement – this way, you avoid compounding your losses.
Don’t Risk It All
Manage your investments wisely – remember to only invest what you can afford to lose. Have a stop loss in place to avoid heavy losses or worse, risking all your capital.
Don’t Give Up
Forex is not just about winning. Rather, losses are inevitable. Finding a strategy that works best for you might take some amount of losses before you finally have a winning plan. Stick to it, make adjustments along the way, look to master your plan, and you’re on your way to trading success!