As the convenience and accessibility of technology become better, more digital platforms offer ways to trade, transact, and save finances. Over the last five years, many have shifted to digital transactions for financial activities like trading forex, buying stocks, and mutual funds. Today, you can do much more than just pay bills and transfer money digitally.
Thanks to the internet, today’s generation values handling their finances better and working on growing their money. One of the most popular financial platforms people use is forex trading. You’ll see many online videos, content, and articles about how to trade forex and tips to grow your money in the market.
More and more people are looking into starting forex trading. But with all of the content online, it’s challenging for beginners to know what to follow to trade wisely. Honestly, there is no road map on how to trade forex perfectly. At some point, you’ll encounter losses, mistakes, and poor market conditions that could put your money at risk.
That’s why it’s equally important to have rules that you can follow to help yourself trade better in the market, even if you’re just starting. Here are seven rules you could follow, especially for beginners in the forex market.
1 – Read articles and watch videos that teach you about the market
One of the common mistakes many make when starting forex is they don’t understand and know the market. Most of the time, new traders only listen to the stories and tips shared by their family and friends who use forex. In most cases, those people are also unfamiliar with forex and are only trading because someone told them that it’s a great way to grow their money.
Of course, some people can succeed in forex despite not learning the market. But only a small percentage does. Usually, people diving into forex with zero understanding of the market don’t make it big and lose their money before they even start. To avoid that from happening to you, make it a rule to read articles and watch videos that educate about the market.
That way, before you start, you already have sufficient knowledge about the market and how it works.
2 – Research the best currency pairs that you can start trading with
Forex is the market where you speculate on currencies’ performance so you can sell, trade, or buy them to make a profit. If you want to trade well, you must research and know the best currency pairs you should start with instead of just following what other people are doing.
According to many forex articles, the best currency pairs are EUR/USD, USD/JPY, GBP/USD, AUD/USD, and USD/CAD. The U.S. dollar is the most dominant currency in the world, making it the best pair to other top-performing currencies in the market. Before you start trading, make sure that you research and review the past trends and performance of the currency pairs you’re eyeing.
Doing so will help you avoid losses and have the confidence that the performance of your currencies will be reliable.
3 – Make it a habit to know the updates regarding the market’s movement and conditions
Another rule you should follow is to constantly know the updates regarding the market’s changes and performance. This third rule is similar to the previous point I discussed. But this time, you should also monitor the entire market’s forecasts and conditions to apply them to your trading plan.
You should know that the forex market is highly volatile. Currency prices can drop or rise within a minute–that’s why learning and monitoring how the market works would help you. Never rely on just one data regarding the market’s performance. Again, change is the only constant thing in the market. So use it to your advantage by making it a habit to know its ever-changing condition.
4 – Try a demo account before officially starting
Not all forex platforms and broker companies provide demo accounts for their clients. But if you find one that offers demo accounts and free trials, I recommend taking the opportunity. Trying a demo account will help you navigate a broker’s platform and see if it’s compatible with you.
Some forex brokers only use one platform, while others use all types available for trading. Give it a shot if you find a forex broker company that offers a demo account.
5 – Never go “all in,” especially when your emotions are high
Just like gambling, gaining profit from trading can be addicting. Once you see that you’re earning more than you’re spending, you’ll start thinking that it’s okay to go “all in.” or put a massive amount of money into trading. But in real life, we all know that that’s not a wise move.
Practicality-wise, it’s best to be conservative with your money when trading, especially if you’re just starting. Whenever you think you should put a massive sum of money into trading, remember the saying, “never put all your eggs in one basket.” Moreover, don’t make impulsive decisions when your emotions are high. Most of the time, we’re not logical when we let our emotions rule us.
6 – If you’re losing more than you’re earning, stop and review what’s wrong
As a beginner, it’s normal to lose than earn more when trading. Many new traders don’t know when to stop, and they spend more money than they should. Also, many have negative trading experiences because instead of pausing and reviewing what went wrong, they continue without assessing their past moves.
If you catch yourself losing more than you’re earning, stop trading first and review your past performance before trading again.
7 – If you think your trading partner is not the one for you, choose a new one
Lastly, if you think your trading partner is not for you, don’t hesitate to choose a new one. Even though all forex companies seem the same, having a reliable trading partner makes a massive difference. Your trading partner’s pricing, customer service quality, market execution, and more contribute to your trading journey.
There are many forex broker companies out there. So don’t hesitate to choose a new one if you think your trading partner is not for you.
Use these rules to make rational decisions when trading.
It can be exciting and daunting to trade in the forex market. But as you start your forex journey, it’s best to have rules that will guide you to make rational trading decisions. If you don’t have one yet, you can start with these seven rules to avoid losing your hard-earned money in trading.
About the author:
Bianca Banda is a writer for FP Markets, one of the best-regulated Global forex brokers with over 40 global industry awards—and counting, making them the trusted trading broker by many.