Many novice traders try their luck in trading, but only a few can make their way to success. It is difficult but not impossible. If you have a solid mindset to learn, educate yourself, follow the rules correctly, you surely can make profits and be successful in trading.
A successful trader does not just know about charts, entry, and exit signals; it takes much more than that. Besides a proper trading strategy and risk management system, firm control over emotion is equally important.
Without forex education, no one can be a successful trader, who must have the ability to see the insight of the market and how it works. In addition, he must know the political and economic impact on currency pairs.
Every business has its ups and downs, and so has forex. So the first thing that might come to your mind while thinking about trying your luck in trading is that — is it possible to make a living by trading forex? If you have the quality and deep knowledge about forex, you can surely make a consistent profit by trading forex.
- Top 10 tips for beginner traders
- 1. Remember that proper education is a must
- 2. Build a trading strategy
- 3. Focus on consistency
- 4. Risk and rewards
- 5. Follow trade management
- 6. Take into account trading psychology
- 7. Use the time management principles
- 8. Make money: full-time vs. part-time profit
- 9. Notice the trading journal importance
- 10. Study the technical analysis
- Final thoughts
Top 10 tips for beginner traders
1. Remember that proper education is a must
One can not think of trading without proper knowledge and education. You need to have the ability to see the insight of the market, to know how currency pairs work, how politics and economy impact currency pairs. You can not trade if you do not know how to read a chart and make strategies. All of these are not possible if you don’t educate yourself.
For example, if you don’t have strong knowledge about technical analysis, you will fail to identify the more precise trade level. Therefore, as a trader, it is essential to react like a professional trader. They think about the outcome of the deal. If you focus only on making a profit and not making a loss, you will forget about trading rules.
So, for example, having earned $3, a trader can close the deal, although the market movement could subsequently bring in profits of $30. The same thing happens with losses. When a trader sees a loss of $3 in the trading terminal window, he can close the deal in fear of losing more.
2. Build a trading strategy
A good trading strategy is halfway to success. You can build your system by researching various resources, books, and articles. You can also observe successful traders, learn from their strategy, and then make your strategy that meets your goal.
The best thing about forex trading is that all of the trading strategies are available online. You have to pick one that suits your personality. Some common trading strategies are candlestick bases strategy, price action, order flow, order block, fundamental analysis, etc.
3. Focus on consistency
Consistency is the essence of success in any business. However, having a good plan and strategy is not enough. Sticking to the plan and remaining consistent is the real challenge. Consistency in trading helps to avoid over-trading and maintain risk management. It also allows you to approach every trade plan in the same way to prevent loss.
Trading is like driving a car where you have to react according to the market behavior. Here consistency means doing the same reaction over and over again. So, for example, you should avoid trading when the market direction is not favorable, and you have to repeat it every time.
4. Risk and rewards
Risk and reward are something that helps a trader to manage how much money he’s going to lose and how much he can make a profit. Risk and reward are like the balance in trading.
As a beginner, you must know the ratio between risk and reward. Always focus on trades with a higher return with a minimum risk and avoid dealings with a lower return with higher risks. The general idea of risk and reward is 1:2, where if the risk is 50 pips, the reward will be 100 pips.
5. Follow trade management
The purpose of trade management is to minimize the loss and maximize the profit. Trade management is all about how methodically you complete the trade sequence, monitoring the entry and exit. You must know the market and discipline for trade management.
Let’s have a look at some basic trade management techniques that every trader should know:
- Always use stop-loss in every trade so that you can get out of the market with a minimum loss.
- Always take a partial close in every trade so that you can grab some profit if the market return.
- Move your stop loss at breakeven if the price breaks below or above any significant level.
Experienced trader’s advice: always set a stop loss, as it will allow you to save the deposit and minimize losses. “Take profit” can be set to fix the gain at the predicted level.
6. Take into account trading psychology
In trading psychology, a trader’s emotions and mental condition influence trading decisions. Therefore, trading psychology is essential as trading knowledge, experiences, and other skills. For example, fear and greed are common in the forex market, where desire urges to take more significant risks, and fear urges to avoid trouble, which generates little money.
One must have firm control over his emotion to become a successful trader.
7. Use the time management principles
Forex is known for its flexibility, but still, many traders don’t know how to manage their time. There are four trading sessions in forex. Though the forex market is 24hours a day, it is a false idea that you can make money any time. Trader’s activities depend on the trading sessions and time.
Make sure to trade in an active trading session. The trading session is a time when banks and other financial institutes are active. For example, London and New York trading sessions are most active in the forex market, where most institutes remain active. Therefore, your trading strategy and price anticipation will work well in these trading sessions.
8. Make money: full-time vs. part-time profit
Forex gives you the freedom to be a full-time and part-time trader. A full-time trader makes more money as he doesn’t hold any other job but trading. He can devote all his time to strategy and trading.
On the other hand, a part-time trader trades alongside his job. Thus, he deals to make some extra money besides his job. However, making money as a full-time trader is not an easy task. It requires a lot of effort, experience, and skill that may cost years to achieve.
9. Notice the trading journal importance
A trading journal is something a trader keeps his each trading record on. You can not grow as a trader if you don’t monitor and evaluate your trading. By keeping a trade journal and recording trade, one can quickly figure out their shortcomings and work on them.
For example, if you take a trade, you can include the entry price, trading types, profit/loss in a spreadsheet with a short explanation of the reason behind the entry. Therefore, you can review your performance on the weekend to stop the same mistakes from happening.
10. Study the technical analysis
Thanks to technical analysis, experienced traders can predict market changes with reasonably high accuracy. Technical analysis includes many varieties, each of which has its advantages and how you can build your trading system.
By practicing this type of analysis, you will learn to trace patterns in the behavior of the market, which will make it possible to trade in the financial markets successfully.
Like any other business, trading also has its ups and downs. Many novice traders quit trading because they don’t make much money from the beginning. To become a successful trader, you must learn from your failures. Therefore, you should spend time gathering knowledge. You can learn from expert traders and follow their strategies. Try different methods on a demo account to improve your trading skill.
Nevertheless, if you follow the tips given above and apply them, you are on the right track to be a successful trader.