We all like to believe in that old adage beginners’ luck, because there’s something reassuring about the idea that you can just leap into something new and come up smelling of roses. In some walks of life, this might be possible, but not necessarily when it comes to trading currency on the foreign exchange (or fx, as it’s sometimes known). Many people decide to start trading as they think it’s an easy way to make money or a get-rich-quick scheme, but they soon realise that there’s much more to trading than meets the eye.
There are two main tips for beginners: always develop your own trading strategy and make sure you are playing without emotion. Many new traders fall into the trap of trading before they are fully ready and many others let their hearts rule their heads.
Practise to perfection
Developing a trading strategy to suit you takes time and diligence. The best thing you can do is open a dummy trading account, which you use with fake money. This gives you the time to study the markets, establish when to enter and exit a currency and learn what your own style of trading pattern is, without having to suffer huge losses. It can be frustrating to play using fake money as it can seem as though, when you win, you could be making real profits. But don’t forget, when you make a big loss that could be actual money you’re losing. Only when you are completely comfortable that you are operating at a manageable level of profit and loss should you even think about trading using real money. You also need to do some homework, studying past market patterns and developing a trading strategy that you need to stick to at all costs.
Use your head
Which is where the next tip comes in ? play without emotion. Not terribly easy when there’s potential big money at stake, but you absolutely must stick to your trading strategy at all costs. This is why it’s important to make sure your strategy is accurate in the first instance. It can be difficult to exit a currency when you think you could just hang on a bit longer, but you mustn’t listen to that little voice whispering in your ear. Trading the fx is an unemotional, rational pastime which you need to approach with reason.