When you enter the foreign exchange market you will have a great deal of questions. Will all the information available it can be very difficult to know where to start. It is also very difficult to decide what is relevant and what is not. To overcome this confusion it is advised you set initial goals to get you started. However, the goals should be about process and the act of trading not about profits exclusively. Successful trading begins with a sound trading plan.
Setting the initial goals
All new traders are recommended to determine what they hope to achieve from trading the foreign exchange market. The majority of traders aim for profits, but profits cannot be attained without a sound procedure as is mentioned above. While no trade is guaranteed to result in profits, the three goals below can help a trader experience more advantageous than disadvantageous trades.
Always have a forex trading plan
Many beginner traders enter the live market without undergoing trading and experience devastating losses. This is not only due to inexperience but also lack of knowledge in how to create a forex trading plan. Every time you trade it must be according to a well laid out and calculated plan.
This trading plan is one of the first tasks you must complete as a trader and acts as a guide to your trading. It includes information on how trades will be determined, entered and exited. It also informs you of the different trading, risk and money management tools available to you. The goal here is to create a complete plan of action to help you trade effectively on the forex market. It is also important that you stick to this plan or find yourself in damaging trading situations.
Develop simple foreign exchange trading strategies
Many new traders believe that a complex trading system or strategy will be more effective than a simple one. However, this is incorrect as a complex strategy may be confusing to a trader and can lead to damaging losses. It is recommended that one avoid being too fancy with analysis and trading strategies even if this means using only one trading tool, for example. As you gain more experience you will be able to build up your trading plan if you should wish to.
The goal here is to be comfortable with your trading plan and strategy. One you are comfortable and can understand your trading system the chances are higher that you will incur profits. Furthermore, keep any revisions to your plan simple. Complex revisions will only result in confusion.
Learn when and when not to trade
New traders must realise that there are instances when it is detrimental to trade. When you begin trading you must learn about both your currency pair and the market conditions. You must also realise that there are certain times when these two factors do not agree and avoid trading in these instances. Of course, this requires patience as the condition may last a while but taking inappropriate trading opportunities can be devastating to your trading capital. The goal here is to learn patience to protect your money.