THE LONG| STRATEGY
Foreign exchange is one of the fastest growing financial markets for retail investors, with day trading volumes currently being estimated at £145 Billion per day. While the FX market might sound overwhelmingly complex to novice traders, it can be mastered by individual investors if they are presented with the right training, tools and have access to other traders to learn from their experience.
Here are some best practices that can boost success for first time traders. 1
know your platform
Many systems provide data feeds, charts, and graphs that take time to absorb and interpret. When starting off in the Forex market you should select a user friendly platform that will take no longer than a couple of minutes to master. Systems designed to include all the professional tools you’ll need in a convenient and user friendly way speeds up the learning process and adds to success. 2
Don’t trade alone
When should you open a position? And just when should you close the trade? Well, via an online trading community you can immediately receive answers to your questions, and compare your trades to other professional traders. eToro’s answer to this problem is CopyTrader, with which you can instantly copy the trades of their preferred experts based on track record and risk levels. When the copied experts close their trades, all the copied trades are also automatically closed. This feature enables anyone to trade like an expert without the need for specific expertise in foreign currency trading. 3
Take advantage of e-tutorials
Many systems include tutorials that walk through the fundamentals of forex trading including the basics of the economic indicators, currency pairs and movements. If you take the time to understand the underlying facts and analysis you will feel much more confident when opening your first trade. 4
Knowledge is Power
Remember that no one is born a trader. Even though it does take a couple of trades to get the hang of things, never stop sharing tips and tricks, using education tools, and analysing your trades and your peer’s success to continuously improve your portfolio’s performance. 5
Customizable leverage
Leverage is a term used to describe a situation where a trader can open a larger trade than his/her account balance. While this is a major advantage of the Forex market, new traders are often bamboozled by the option of leverage,
consequentially causing losses. Before opening your first position fully understand this term, as it will help you to customize your positions’ sizes, to match your account balance. 6 A 24 hour market, with 24 hour support
The currency market is also the only market that is truly open 24 hours a day with decent liquidity throughout the day. For traders who may have a day job or just a busy schedule, it is an optimal market to trade in. The important thing when starting off in this market is to develop a trading strategy that suits your daily lifestyle. 7 No one can corner the Forex market
The Forex market is the largest financial market in the world meaning no single firm or even central banks can corner the market, or manipulate the prices, especially if a country has adopted a floatable rate exchange. This arena is perfect for new traders who haven’t yet decided whether to become a full time trader. 8 getting into the right frame of mind
Emotions are the number one cause of losses. A major part of our introductory course is to help you get your mind set. One must accept that a part of this market is losing trades, but with the right coaching teaching you correct portfolio management, your profitable trades should cover your losses, allowing your account balance to increase. 9
Momentum and the Trend
New traders are often unaware that as a new trend starts, momentum tends to increase. Additional traders jump on for the ride, strengthening the trend as it continues to climb higher. Try to trade with the market’s momentum on your side, as it will often push your trades in the right direction, hitting your take-profit sooner than you expect. 10 Don’t waste your time on a losing trade
If you find yourself in a losing position, remember that sometimes it’s better to cut your losses and move on to the next trade. The Forex market is full of profitable opportunities, just waiting to be taken.
September 2011 | THE EXCHANGE | 45