Useful Forex Trading Tips for Beginners

Getting into trading has never been easier. But, understanding trading remains the same.

14:23 15 June 2021

It can be super daunting trying to figure out exactly how to make your trades, when, and why. Below, you will find a few useful forex trading tips for beginners. So, if you’re ready to start your journey into the world of forex trading, read on to find out all you need to know.

 

Understand Forex Trading

 

In the first instance, you need to understand exactly how forex trading works. When trading currencies, you will be working with pairs. That is two currencies paired off against one another. For example, if you choose the pair of USD/EUR, you will be selling USD and buying EUR at the same time for the same value.

 

So, if you are selling one currency in exchange for the same value in another currency, there has to be a chance of making a profit. You sell your base currency for the quoted currency in the hope that the value of the quoted currency is going to increase. Therefore, you have made money. When you sell back into your base currency, you will receive more of it. 

 

Research, Research, Research!

 

To achieve profits like this, you need to educate yourself. You should never make trades based on assumptions or guesses. It takes a large amount of research and preparation to make profitable trades. You need to be constantly learning about your chosen currency pairs and how various things can affect their value, whether that’s a political event or another socio-economic reason. Even then, you are betting. No one can accurately predict what is going to affect a currency every single time. Sometimes, your research will fail you and you may make a loss, so you must also be prepared for this. 

 

Choose a Good Broker

 

Though trading is something you can learn and do in your own time, you still need to trade through a broker’s platform. So, it is time to consider your options on forex brokers. There are a huge amount of brokers available to choose from, so making a decision can be quite tough. The main thing to make sure of is that they are properly licensed and regulated. Without this, you are placing your money into a company’s bank account with little protection or guarantee that it is safely looked after.

 

Forex brokers make money from your successful or profitable trades. They will take a small percentage which may vary from broker to broker. They may also charge for using different types of order - more on these later - or have features that are only available to paying customers. You must weigh up all of these costs to see which broker is most affordable and suitable for you.

 

Don’t Invest Emotionally

 

So, you do a lot of research and you get excited about trading, great! However, successful traders will tell you to leave your emotions at the door. Invest based on research, facts, figures, and information. Never invest based on emotion. This can lead to panic buying, panic selling, or simply making mistakes. Make sure you are carefully considering your investment options and sticking to your investment plan. Then, whether you make a profit or loss on any given trade, you will always know you acted logically.

 

Understand Order Types

 

Much like when trading stocks or shares, there are different types of orders you can place. Most of the time, beginners simply place market orders. This means buying a currency at today’s value and buying it immediately. This feature is available on all trading apps as it is the most basic form of investing. 

 

However, as you learn to trade you will quickly learn about other types of orders. Stop and limit orders are both used to buy or sell a currency at a chosen entry price. A stop-loss order is used to sell a currency as it falls to a certain place, in an effort to minimize losses. These order types will probably become a large part of your investment choices as you learn more about forex and trading.

 

Start Small

 

One of the best pieces of advice for any new investor is to start small. Don’t rush in and buy and sell things of huge value before testing the waters. Slow and steady investing over long periods has been shown to be very efficient. As you learn, you can take more risks and spend more. But, as you get started, just learn the ropes and get to grips with how everything works. As you build confidence and experience, you can invest more heavily.

 

Only Spend What you Can Afford to Lose

 

On that note, investing is risky! Forex traders - even the best of them - can and do lose money. It is for that reason that this piece of advice is so important. Never put your life savings or a life-changing amount of money into your investment account. Do not spend money that, if lost, could ruin your financial situation. Only invest what you can afford to lose. 

 

The temptation may be there to spend more in the hope of making more. Sure, if you’d bought $10,000 worth of EUR instead of $500 on that successful trade, you would have made more profit. But, you also could have lost that $10,000. Always have your own personal savings set aside for emergencies before risking money in investment accounts.

 

Try a Demo Account

 

Before you take any risk at all, why not try a demo account. Many of the top trading apps out there now provide these demo accounts. This means that you get to try your hand at forex trading without having to spend a single cent! You can learn how the systems work, practice trading, and see if you think you have the knack for it. If you find after a few days or weeks that it’s not for you, you can back out with no expense whatsoever.

 

Hopefully, you are now in a position to give forex trading a go with some confidence. Try a demo account, invest small, and work your way up from there. As you learn, you can invest more and hopefully be more successful.