TRADING

Do's and don'ts of trading forex – ForexLive


Forex Trading is the
biggest market in the world in terms of activity. A mammoth $5 Trillion is
traded each day. With the amount of volume traded comes great opportunity. 

Traditionally it was
only the wealthy who had access to trading high volumes on an exchange but now,
thanks to leveraged trading, virtually anyone can compete and trade in the
Forex market.

There is a wealth of
online brokers which facilitate trading with leverage, granting accessibility
to traders with less capital who want to trade higher volumes. 

New Broker EagleFX allows
users to start trading with as little as $10 and lot sizes starting from 0.01
lots up to 1,000 lots – catering for beginners and professionals alike, in
pristine trading conditions.

It is important to
consider some key fundamentals before entering the market with a ‘buy’ or
‘sell’ position. 

This article will run
through some of the key ‘do’s’ and ‘don’ts’ which will help you, as a trader,
be more successful by following a few simple rules.

Do’s

Have a trading plan!

It is massively
important to have a game plan and hence why it makes it to the top of the list
for this piece. Not only is this true in sport but is especially true in Forex.
Traders need some sort of clear goal and objective when entering a market.
Forex trading is considered an aggressive marketplace so having a plan is
pivotal to success. 

Without a plan,
trading might as well be considered gambling.

Do your own research

Knowledge is power so
make sure you are doing some reading of current market trends and political
situations that might affect a particular countries currency.

Politics is a good
place to start when looking at how a currency may fluctuate as well as other
factors such as war and natural disasters. In August 2005, Hurricane Katrina
devastated New Orleans costing the US economy an estimated $45.15 Billion.

Epidemics can have
damaging effects not only on the populous but also on markets. The ongoing
Coronavirus has hammered markets in recent days and weeks. Global Stock Markets
have been gripped by fear and UK Stock Markets are seeing their biggest fall
since the great financial collapse of 2008.

In addition to the
Footsie having its worst day in 12 years, the DOW had 2,000 points wiped off as
many economists are concerned over a looming global recession.

Be patient!

Patience is a virtue
and a vital ingredient when looking towards trading successfully. Being patient
helps to keep any impulsive behavior patterns at bay.

Goals

Set yourself a target
of how much you are willing to lose. Not only this, set yourself a target
profit you would be happy with.

Trading Platforms
such as MT4 have tools where you can set a desired ‘take profit’ and a
‘stop-loss’ where you will be stopped out of a trade when the profit or loss
amount is triggered. This is especially useful in long term positions and if
you are unable to log into your trading account.

Trade over 60 Stocks
at EagleFX
all backing into the award-winning MetaTrader4 platform. Sign up is free!

So now we have seen the ‘do’s’ let’s explore the ‘do nots’!

Don’ts

Don’t overcomplicate strategy

We know that having a
strategy is crucial to trading success. Having a clear outlay of objectives
helps maintain discipline but try and keep things simple. Having too much to
think about may serve to cloud judgment.

Don’t let your emotions take over.

Human beings are
extremely emotional and even more so when under stress. Stress can be magnified
when money is involved!

What is vital in
trading is to not let emotions cloud judgment when in an open position. 

The big 2 emotions
traders will experience at some point or other are:

  1. GREED
  2. FEAR

Greed, one of the 7 deadly sins
and a particularly dangerous attribute to have when trading. Greed makes humans
behave differently and without clarity. It is a feeling of want rather than need.

Greed can affect
traders in several ways. Greed can make traders ‘overtrade’. Overtrading in the
sense of chasing losses or having multiple positions open to try and offset a
losing trade.

Traders can and will
take unnecessary risks if greed starts to seep into the trading psyche. This is
why having a strategy is essential and – sticking to that strategy even more
so. Traders should have a particular profit in mind pre-execution. Maintaining
discipline and taking that profit is the challenge to most.

Fear can leave traders feeling
like deer in the headlights and debilitate us – resulting in a fight or flight
scenario.

When a trade starts
to creep into profit, fear can make traders close positions too early in fear
that the price will begin to fall when in fact the market is moving on up.

Equally, fear can
make traders close positions too late when a target profit has already passed
and the market starts to shift against us.

New traders are
particularly susceptible to FOMO – fear of missing out.  Traders open positions without thought or
analysis, fearing that a chance might go when in reality, it wasn’t there in
the first place.

Don’t fall into the trap of revenge trading

Once you have reached
your target profit, take it. Make use of ‘take profit’ features to alleviate
temptation.

Don’t use money you can not afford to lose!

This goes without
saying, only invest capital which you can afford to lose! 

Trading should be
taken seriously. With the right blend of analysis and research, trading Forex
can be a profitable side earner.

Don’t turn trading
into gambling and stay within budget parameters.

Take advantage of a
range of analysis pages at Award Winning ECN Broker, EagleFX. Traders can make use of
daily market analysis features including charts which can be edited as well as economic
calendars highlighting global events and press releases which will affect
global market performance.

Trade on over 55
currency pairs and much more. Join for free today.

This
article was submitted by EagleFX.

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