Taking the plunge as a forex trader is both exciting and risk-laden in equal measure, with this market delivering both liquidity and extreme volatility to investors. The risk to reward balance is therefore difficult to achieve, particularly for novice traders who are striving to make their mark. This underlines the need for a considered and strategic approach from investors, who must create a viable plan with actionable steps prior to entering the market for the first time.
3 Steps to take as a Novice Trader
While this may make perfect theoretical sense, however, translating this into practical steps can be challenging. With this in mind, here are three crucial ideas that will help you to launch successfully as a forex trader: –
Determine your Objectives and Philosophy as a Trader
While this may seem unnecessary when you consider the complexities of trading, taking this step can actually help you to operate with clarity and a clearly defined vision. It can also help to negate emotive decision making, which often encourages you to take risks that you are not comfortable with.
The bottom line is that cultivating a strong sense of identity and a trading philosophy enables you to understand your appetite for risk, while also making it easier to appraise potential market opportunities. Creating fixed objectives also aids decision-making, as you execute orders based on facts and trends rather than an overriding emotion.
Select a Forex Platform and open a Demo Account
The next step is to select a viable forex trading platform, as this will have a huge bearing on the speed with which you are able to grasp the complexities of the market. Leading online brokerage firms such as FX Pro also enable traders to access real-time news bulletins and a huge suite of analytical tools, driving more successful orders over time.
Once you have selected a partner; you must then open a demo account. This is essentially a practice account that you can trade through for a period of between three and six months, using virtual currency to execute orders in a simulated and real-time market environment. This allows you to trade and hone your strategy without risking your hard-earned capital, which is a win-win scenario by anyone’s standards.
Always look for opportunities to diversify
As you begin to execute forex trades, you will need to allow yourself time to learn about the market and adapt to its high levels of volatility. This does not mean that you should ignore opportunities to diversify, however, whether this is in terms of the currencies that you trade or the alternative derivatives that you consider.
In terms of the former, considering minor or exotic currencies can add diversity and flexibility to your portfolio over time. The latter also helps to drive long-term gains, so remain alert and show courage when presented with new opportunities.
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