- December 17, 2015
- Posted by: Jack Hudson
- Category: Forex
Thanks to leverage the currency market or Forex (Foreign Exchange) has come to the small investor and has become popular as an option investment. This market operates 24 hours a day and moves massive amounts of money, in fact, is the most active and liquid market there today.
As in any investment will be at risk and we have to evaluate them before you start investing. If you decide to take the plunge and dive deeper into the world of forex trading, here we give a few tips before you start to invest…
Learn the basics
This is very simple, but always keeps in mind. Many people skip the basics and want to learn to operate directly in the currency market. This is a fatal error and we can get quite expensive. If you are a novice in Forex, the first thing we have to do is to learn and understand the basics.
The experience will make you money
If you expect to get rich overnight, you are wrong and you better not miss before you start and look for alternatives. Do not be naive; the experience in the world of trading is one of the most important factors. The more we operate in the market, the more efficient we become. With the experience we can get to see things that are not novices. The way to become a good trader is long, so you must be willing to learn and gain experience until you become an operator consistently profitable.
Beware of “experts”
The problem of the financial markets is a rookie that curdles a good week thought to be an “expert” or guru. Another type of “expert” that we can find online are those who beg us to buy their book. These people may have failed as traders and now want to make money teaching other traders fail. These self-proclaimed experts tend to:
- Release generic information that is not working today.
- They say they are traders with lots of money and still trying by all means to put you his book.
- They claim to have invested 1000 dollars and 1 million won per month.
- Skillfully use mathematics to look more professional.
Before blindly believe in one of these “experts” reflect and think things through. If someone had a magic wand with which to make money easily, I would not say, but other operators would do the same and would lose its advantage. What we seek such “gurus” are people who fall into the trap of buying this book (in which usually only found basic things, impractical and currently not served).
Make your own analysis
Further to the above, blindly following others will make us blind. Our goal is to become a successful trader and not copy anyone or follow other strategies. What do others helps us to analyze and reflect on it. What we learn we can incorporate into our analysis in order to become an operator consistent long term. Simply copy others will not make us better traders, we will be good but not negotiating copying.
As an operator we have to develop a strategy and learn to analyze the market. Being able to do our own market analysis will take us closer to being a professional trader. Make a proper analysis allows us:
- Learn to trade currencies
The myth of demo accounts
For example, if we want to be professional footballers, we will not buy a football game to start our training. The same happens with demo accounts that we provide most platforms and people used in the hope of becoming a successful Forex trader.
Demo accounts do not work for 2 reasons:
- We offer a false confidence and make us to catch bad habits.
- These accounts do not work like a real account in terms of speed of execution and other relevant factors.
Moreover demo accounts have the advantage of allowing us to know the basics about operating in the Forex market. When it comes to gaining experience, we only operate in a real account.
We can start with little money and as we go picking fluidity and consistency gradually increasing.
It is the most important rule to follow is mandatory. You must be willing to assume some level of loss and put there a maximum limit of money we lose. Thus if prices fall below this level alone we will have lost what we were willing to lose. We have to play with these limits and not too much tightening at the bottom prices because small fluctuations may cause premature closure of our position.
We also operate with a clear head. For example if we take a run of several days at a loss, it is best to rest a few days and come back fresh. Negative gusts can lead to large losses and to make decisions that had not taken another time.
Be prepared for the ups and downs
Each strategy has its ups and downs. There is no system that is 100% profitable throughout the year. So we must be prepared for fluctuations. As we said earlier, success is measured in the long run. The problem is that many novices tested this strategy and if it does not work during the first week set aside and a new test. It is advisable to see how the strategy behaves medium / long term.
Keep it simple
No reason to look for a complex or convoluted strategy. The best strategies are perhaps the simplest, which involved fewer elements when making decisions. By most indicators, graphs, ratios, oscillators, etc. You use will not have better results; even it is more likely that your results are worse long term as many indicators can give you conflicting signals.
Specialize in a single currency pair
Following this, simple works. Needless to handle and all currency pairs and which thus may escape us interesting things. Focus on one currency pair allows us to concentrate all our efforts on understanding how its price moves.
If we try to deal with 5 pairs at the same time, learn to negotiate it becomes very difficult. We will have to learn the characteristics of each currency pair separately as each pair is unique. Each currency pair:
- Reacts differently to the news
- They are moving at different speeds
- Experience different movements depending slots
- It must be managed in different ways as it remains an open position
If you are new, you start with a single pair. Once you are consistent with one, you can begin to learn the characteristics of another.
Choose one term
In the same way as above, it is advisable to start trading using always the same timeframe. This has several benefits:
- Allows us to focus on learning one time, therefore, we eliminate the confusion that can lead us to operate in multiple time horizons.
- We should only look at a single graph, thus improving the efficiency and quality of our analysis.
- We avoid conflicting signals that can occur if we use different time horizons.
Remember that all this is to make everything easier. Once you go through experience can start your analysis more complicated.
Most novices accumulate as many indicators as possible within a price chart. They feel that the more indicators used will fare better.
The reality is that the greater the number of indicators, the greater the degree of confusion as many are contradictory and give conflicting signals. Besides graphics become more difficult to read and have no clear signals.