Simple Steps for Forex Trading Beginners
Beginners usually lose money and there is no secret about it. They are quick, make their moves independently and do not keep track of what they do. Here are some simple steps for Forex trading beginners. Call these the tips for trading for beginners, call it the ultimate rules for expert level trading, the steps outlined will help you keep in tune with your skills and make you more aware of the changes that take place on the trading floor.
Big and Small Picture of Forex Trading
Suppose you undertake to trade currency pairs and you set your mind on a particular pair. You make a profit when the currency you sell has gained in value. The government whose currency you are dealing with makes an announcement regarding its monetary policy. Your currency plummets and you begin to lose money. You have set your stop loss and so you do not lose much money. Are you with me so far?
Here the big picture is the government and its policy of changing the interest rate on the currency you are holding. You along with your broker and the trading floor represent the smaller picture. There are thousands upon thousands of people like you, all small traders who want to and in most cases through careful trading, make a small profit regularly.
The big picture affects the small picture by changing the value of the holding the trader has at any point in time. The small picture is defined by the individual trader who determines how much he will lose or gain, in which currency he will trade and who will be his or her broker. He or she further sets their own trading platform to make their financial transactions easier.
Familiarity with the Norms and Terms of the Trading Floor
The way to avoid stress and hence wrong decision making is to become familiar with the trading floor terminology. You also must become well versed with the working method. Things like ‘stop loss’ and ‘spread’, will become matter of rote. Or will it not?
You have to realize that the only way to become familiar with the trading process is to open a practice account with one of the big brokers and learn. Though you gain an insight into the mechanism, the actual trading will be much different when you use your own real money. However, the practice of ‘follow the leader’ – copying the moves of an expert trader will keep you moving in the right direction.
FOREX TRADING BEGINNERS – Keep Notes and Check Back
This is one of the most important things in trading. The mind is fallible and you will be convinced that you are doing something correct when a mere look at the trading of the previous day will show you that you are on the wrong track. Keeping a record of things that transpired will help you maintain a tight purse.
Nature and Scope of the Forex Market
Every swing of the Forex market brings tears of joy or sorrow to the traders on the Forex floor. The volume of trading exceeds $4 trillion on a daily basis. Every government in the world and most of the established businesses indulge in trading. Individual traders make money by being on the ball always.
By this we mean, keeping an accurate account of the money you can afford to lose (precise calculations exactly exclude all money you need for running your business, daily existence and for your family), the decisions of companies to issue stocks or bonds and form mergers, and government moves that will affect the stock or share price and anything else that will affect the price of the currency pair you are holding. You have to be in constant touch with fellow brokers who have good experience in the field.
Lastly, remember that no single broker has ever broken the Forex market. It just is too vast and highly complex. So, if you seem to be headed in that direction, you are making a very wrong move. The Forex market is a cozy place to make money if you belong to the breed or traders who are always careful.