It was my third year of doing a job when my friend introduced me to forex trading. At first, I shrugged off the idea of becoming a trader. But my friend offered to share his trade ideas with me to see if I could make any profits. The first few weeks were rough; my savings nearly ran out but by this time, I knew forex trading had the potential to change my fortune.
Nonetheless, I continued and, in the meanwhile, I started learning more about the concept of forex. Overall, I have now 7 years of experience and I been going to share a few important lessons that I have learned so far in this article. These lessons are going to help you even if you’ve already started your forex journey. So, without further ado, let’s get started:
Lesson 1: Mastering One Strategy is Enough
When I was in the early stages of learning how to trade, I came across multiple strategies. For example, most traders follow the Inner Circle Trader (ICT) strategy and the Smart-Money Concept (SMC) strategy. It was a mistake on my end to learn these two strategies side-by-side.
Firstly, my concepts were mixed up. And secondly, I failed to judge which strategy to use on numerous occasions. As a result, I did a confused analysis, missed some trades, and bore losses that could’ve been avoided.
Also, I had firm faith that my strategy would work every time. While it’s good to have faith in your market analysis, one should be realistic that the market can move sometimes without any logic.
Bonus Tip: Economic policies and global events affect forex markets. It is better to stay away from forex trading until the effects of economic policies and global events dissipate.
Here, I’d advise you to stick to a single strategy. Also, after mastering the strategy, implement it on a demo account. It’s because you can freely make mistakes and learn from them on a demo account.
One more thing, forex markets are highly volatile and continuously change directions. So, as a trader, you don’t want to miss out on the perfect entry because of a sloppy internet. This is why I always recommend a reliable connection, for instance, Xfinity Internet to forex traders. A quality connection will help them analyze the market in real time and open and close their trades without any delay.
Lesson 2: The Choice of Broker
It’s important to make the right choice when choosing a broker. If you’re a beginner and don’t know what a broker is, then let me tell you in simple words. A broker provides a platform for forex trading. Different currency pairs and commodities are listed on the platform. Before choosing the broker, keep the following things in mind:
- Make sure the broker you’re opting for is registered in your country.
- Beginners may not know about “spread”. It is the difference between buy and sell prices. As a trader, you want these prices to be at minimal difference for better trade accuracy.
- In case a trader maintains a position till the end of the trading day, then brokers charge interest in the form of a “commission” or a “swap fee”. Make sure it is not insanely high.
- As a trader, you want to deposit or withdraw money quickly from your account. Also, you might want diverse options for deposits and withdrawals. So, do check how many options a broker provides and then create an account.
- Although most brokers provide traditional leverage such as 1:50, 1:100, which goes up to 1:2000, you may want a custom leverage. Some brokers don’t offer custom leverage so you might want to keep a check on that.
Lesson 3: Stop-Loss and Take-Profit are Important
Stop-Loss (SL) and Take-Profit (TP) are crucial which most beginners don’t pay attention to. To clarify on the stop-loss process, it’s a certain point where your trade automatically closes to limit your loss. And take-profit is that point where your trade automatically closes when your profit target is triggered by the market.
In my early days of working in the industry, I didn’t use any of these. I didn’t want to suffer losses and when I did, I always hoped that the market would recover to my entry position. Sometimes it did, but most times, I had to close my trades because I feared more losses. If I had been using a SL, my losses would have been minimized and I wouldn’t have had to spend days recovering from them.
Coming to take-profit, trading psychology plays an important role here. I always thought that a TP hindered my profit margins and that was one reason I didn’t go for a TP. Here, I’d suggest you trust your analysis and keep greed at bay. Let the market hit your TP and close the trade. Otherwise, no analysis has a 100% success rate, and you never know when a profitable trade might quickly turn into heavy losses.
Some Valuable Suggestions
Before I end, here are some valuable but brief suggestions that would help you while trading:
- A pro-trader knows where the market will go just by looking at the charts. It takes some time to reach that level of expertise, but spend as much time as you can on reading the charts.
- Be careful when you select the lot size. Use big lots when you feel the analysis is perfect. Otherwise, use small lots for trading.
- Just like mastering a single strategy should be your goal, make sure to choose the best currency pairs or commodities for trading. Read their fundamentals and excel in them. Do not try to be a jack of all trades.
- Ideally, your goal should be to increase your equity by 1% every day.
- Set your SL to your entry price as soon as your TP is hit. This way, even if you don’t make a profit, you’d be sure not to lose any money.
