Forex trading tips for beginner traders
As with every other financial investment, trading forex successfully will depend on your personal knowledge, experience and skills. There are traders who have been trying for years to become profitable while others achieve this as soon as they finish practicing on a demo account.
Below we ‘ll look at some key forex trading tips and insights from successful traders that have managed to leverage their knowledge of the markets into a profitable trading strategy with amazing results.
Pick the right partner
It goes without saying that no matter what you set out to do, your first step should always be to find the best tools for the task at hand.
Therefore, if you plan to learn how to trade forex effectively, you need to first start by finding a reliable and reputable forex broker that provides clients with the most effective trading platforms and services. Getting it right from the get-go will alleviate a lot of stress and hassle down the road.
If you still haven’t decided with which broker you will open an account to trade forex, CM Trading offers free demo trading accounts through which you can experience the markets and test the broker’s platform and offering under real trading conditions.
Sign up today to start trading on demo and test your skills with a $50.000 deposit of virtual money for free.
Narrow your focus
The currency markets, while incredibly favorable for both beginner and experienced traders, they often are incredibly unpredictable and volatile. The exchange rate of currency pairs tends to spiral out of control which sometimes may magnify profits, but losses as well. If you manage to make a correct assessment and predict the direction of the price ahead of an important event, the market may move in your favor, but if it doesn’t, you may quickly find yourself in the red.
Since there are so many currencies and economic data to monitor, one of the best forex trading tips we can offer is that you shouldn’t spread out your attention, or your money, across multiple markets or currency pairs. Try to focus on a single market, preferably one that is sufficiently active and liquid. The more you become familiar with that specific currency pair or commodity; you will find it much easier making accurate forecasts consistently.
If you are wondering which currency pairs are the most favorable for beginners, you should first look at the major pairs which always include the world’s reserve and most valuable currency – the U.S dollar – and that of another powerful economy.
Major forex pairs include the EUR/USD, GBP/USD, USD/CHF, USD/JPY etc. These are the most widely traded pairs in forex and therefore they offer the highest amount of opportunities while remaining favorably priced. Highly traded currencies are competitively priced so that is another factor that you should consider before opening a position.
Learn how to determine support and resistance levels
Support and resistance levels are key for technical traders, but this is such a simple to grasp concept that it will benefit traders of all skill levels no matter what form or method of market analysis they employ.
In general, support and resistance levels are certain zones that the price of a commodity, stock or currency pair can’t easily move below or surpass. You can think of support as the bottom the price will usually trade towards and then bounce back from, while resistance is the ceiling that the price typically refuses to breach past.
These levels or zones that a financial asset usually ranges between are so important because they help traders determine favorable entries into the market. If for example, you know that EUR/USD typically doesn’t drop below 1.1000 then as soon as it gets close to that point, you can enter a buy trade and watch your profits increase as the price starts to bounce upwards from that level.
Improve your timing
Arguably the most obvious of forex trading tips that if you aim to become successful in trading forex, or any other financial market, you need to improve your timing – when you make your entries is as important as when you should close your position.
These financial markets are easily affected by political developments and financial news from around the world and can react violently as investors and traders lose or gain interest in a country’s economy. Entering a trade too late may cause you to lose most of the price movement while closing a position too late can lead you to not taking advantage of further profits.
Thankfully, most of these financial news and data that are bound to have an impact on the markets have a set schedule of release and therefore you can anticipate and trade around them. These include any central bank announcements on monetary policy, like the Federal Reserve interest rate decisions, unemployment data, trade deficits and inventories.
Forex traders have a lot of data to crunch through, but you can always make use of a forex economic calendar that makes note of all upcoming news and events that may affect the financial markets.
Open your account today to learn more interesting forex trading tips and start trading with the incredible conditions that only the largest and best-performing forex broker in South Africa has to offer.