Forex Trading: Steps Every New Trader Should Follow

Forex Trading: Steps Every New Trader Should Follow

What steps should new traders take to maximize their chances for early success?

Of course, there are no guarantees you'll earn a profit during your first weeks or months in the securities markets. But, the smart way to start is to follow a plan that covers all the bases of trading knowledge. Consider the following suggestions as a method for identifying a broker you can trust and rely upon, locating an online trading platform that suits your style of investing, and doing enough research to gain a decent understanding of the markets you'll be involved in. 

It's also important to practice placing orders and exiting positions. Likewise, every new trading enthusiast should learn to manage money, review their results regularly, and know when to avoid particularly volatile, seesaw-type sessions. 

Here's a summary of the seven components of a sound plan for anyone who is new to buying and selling securities.

Finding a Suitable Broker

Shop around, compare reviews, read up on fee structures, check out the fine print on brokerage websites, and take advantage of trial periods. 

There's no other way to get a feel about which service providers are best suited for your particular trading style and level of expertise. Keep in mind that many brokers specialize in working with new traders, while others tend to cater to the more experienced practitioners.

Using the Right Software

In the age of digital everything, it's smart to experiment with different trading software. Fortunately, there are plenty of choices. Just remember to do at least two free trials and pay close attention to online trading platforms that make it easy for new account holders to place orders, exit positions quickly, and maintain detailed records of every transaction. 

For beginners, it's helpful to use a platform that is not too complex and doesn't have a long learning curve. This is where a trial period can be of immense help.

Doing Market Research

There's an old saying among lawyers that big cases are won in the library, meaning that research and study are the backbone of success. In many ways, the same principle applies to investing, especially for those who are new to the markets. Spend at least a couple of weeks boning up on your chosen sectors, segments, and niches. Stay on top of the financial news. 

This doesn't mean you need to become an expert or a statistician. Devote a few minutes each day to reviewing the big stories in the world of investing, economics, and business finance. It's also wise to keep an eye on major political developments that can have widespread effects on social and monetary trends.

Learning to Manage Money

It's surprising how many otherwise competent traders run into difficulty simply because they fail to institute a commonsense money management system

Even if everything else goes well and a high percentage of your positions return a profit, unwise bankroll management can turn an otherwise winning strategy into a losing one. Give thought to setting up a percentage system, like the popular two-percent method. You can choose whatever amount suits your financial situation, but the point is to limit the amount of capital devoted to each position. 

For example, if you decide on a three-percent approach, you would never place more than that percentage of your total available trading capital on a single position.

Knowing When to Stay Out

It's understandable that many trading enthusiasts love the action and excitement of aiming for profits and working hard to minimize losses. The pursuit is full of adventure and compares favorably to most other part-time or full-time jobs in terms of mental engagement. 

However, it's important to know when to say you’re staying on the sidelines today. When is it wise to make such a decision? There's no hardandfast rule, but many peoplego to cash when markets are stuck in a sideways trading pattern, are extremely volatile, or when volume is very low. 

These kinds of sessions are not frequent but tend to occur just before major holidays, in the middle of the summer vacation season, and leading up to major political elections or announcements.

Doing Regular Performance Reviews

There's something about human nature that makes people avoid keeping detailed records. Nobody likes paperwork, but it's imperative to maintain precise tallies of every trade you make, how much of your money was on the line, and what the result was. 

These documents, which can be kept on a simple digital file, will help you improve your technique, avoid mistakes, and sharpen the skills necessary for achieving long-term success.
Consider spending about an hour each week examining your recent performance and trying to identify behavior patterns that caused trouble or led to profitable outcomes.

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