Because the international currency market has been unusually active over the past few months, and because it is the most liquid sector in the financial industry, it is undoubtedly drawing a large number of novice traders who do not have any prior expertise in the market. On the one hand, daily ranges are limited, which is beneficial when it comes to controlling one’s emotions. On the other hand, both the charges and the margin requirements are minimal, which means that you can begin even if you just have a small amount of cash.
Content Recap:
This article will walk you through your first few trades in forex if you decide that currency trading is something that interests you. Before we get started, it is important to keep in mind that the starting stage is all about being familiar with the market and establishing a consistent routine.
Position sizing
Returns ought to be the least essential priority for someone just starting out. Even while this is the end aim for all new traders, the first step is to become proficient in the actual trading process itself because trading is a career just like any other. Keeping this in mind, you should make sure that the size of each position is kept to a minimum.
Even tiny quantities can be traded through the majority of online brokerages now available. If your initial trades turn out to be unsuccessful, which is something that is extremely likely to occur, you may reduce the amount of money you lose by not jumping right in with very huge trading volumes. This will help you keep the risk of loss to a minimum. Learn the ropes with trading micro lots, and after you’re comfortable with that, work your way up to mini lots and even lots, if your account size will support it.
Asset list
You ought to put most of your attention on some of the more important currency pairs. A excellent place to begin would be with the EURUSD, GBPUSD, USDJPY, and USDCHF currency pairs. Because it is impossible to monitor and analyze so many diverse pairs, having a very big asset list at the beginning serves no purpose and should be avoided at all costs.
You should begin with a modest list of currency pairings, and then, as you gain experience with the major ones, you should gradually expand your coverage to include crosses and exotic pairs.
Analysis of the market
Trading is a fluid endeavor, and it is your responsibility to keep a close eye on a number of various variables. These variables are what ultimately have an impact on how prices develop throughout the course of the day. You should have a rules-based strategy, whether it be monitoring how the market reacts to key support and resistance levels or paying attention to fundamental data such as inflation numbers, GDP, and employment levels.
Analysis needs to be done not just before, but also while, and after, a deal is being closed. This is a very precise job, and the difference may often be found in the tiniest of details. Trading at will can turn out to be a problem, therefore rather than engaging in this practice, ensure that you have a trade technique and that it is consistently producing profitable trading setups.
Risk management
Not to put too fine a point on it, but one of the most essential considerations to bear in mind is risk management. Especially when it comes to the first few trades, make sure that the amount of money you risk as a percentage of your account size is only 1 percent, 0.5 percent, or even less than that. Some traders refer to the “2 percent rule,” but in the beginning, that percentage is too much to risk.
Those professional traders who are successful are able to differentiate themselves from those who can become trapped in the market with no good end in sight by practicing effective risk management.