Last Updated on May 15, 2022 by admin
The global currency market has been extra active over the past couple of months, and since this is the most liquid sector in the financial industry, it is certainly attracting a lot of newbie traders with no experience. On one hand, daily ranges are tight, which helps when it comes to managing emotions. On the other hand, costs and margin requirements are low, so you can get started even with limited funding.
If forex trading is of interest to you, this article will guide you through your first few trades. Before we get started, keep in mind that the beginning is all about getting accustomed to the market and achieving consistency.
For a beginner, returns should be the least important priority. Although everyone starts to trade with this goal in mind, this is a profession like any other one, so mastering it properly is the initial phase. With that in mind, make sure that you keep position sizing limited.
Most online brokerages out there allow for trading even micro lots. In case the first trades end up being a loss – something that is very likely to happen – you’ll keep the downside limited by not starting right away with very large trading volumes. Get accustomed to trading micro lots and then gradually shift towards mini lots and even lots, if your account size allows it.
You should be focused on some of the larger currency pairs. EURUSD, GBPUSD, USDJPY, and USDCHF would be a good start. There’s no point in having a very large asset list at the beginning because it’s difficult to monitor and analyze so many different pairs.
Start with a short list of currency pairs and then, as you get accustomed to the large ones, naturally the coverage can include crosses or exotic pairs.
Trading is a flexible activity and your job is to constantly monitor different variables because that is what influences price development at the end of the day. Whether it’s about watching how the market reacts to key support and resistance levels, or paying attention to fundamental factors such as inflation figures, GDP, and employment, you should have a rules-based approach.
Analysis must be done before, during, and after closing a trade. This is a meticulous job and many times, small details make the difference. Discretionary trading ends up being a liability, so instead of that, make sure that you have a strategy and it is constantly generating successful trading setups.
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Last but not least, one of the most important aspects to keep in mind is risk management. Especially when it comes to the first few trades, make sure that you risk 1%, 0.5%, or even less as a percentage of your account size. Some traders talk about the “2% rule”, but in the beginning, that is too much.
Managing risk properly is what separates professional traders who succeed, from those that can get stuck in the market, with no positive end in sight.