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Often when people tell us they want to start trading Forex, their eyes get big, and they start imagining all the different ways they’ll make money through trading – or worse, all the different ways they’ll spend money they haven’t even made yet.
We’ll be the last people to tell someone that they shouldn’t be eager to trade. Trading is not only a potentially lucrative endeavour, but it’s a beautiful discipline with its fair share of excitement and artistry as well. It’s always good to have enthusiasm when you enter the trading world. That being said, beginner traders need to understand that trading isn’t a get-rich-quick scheme, nor is it a form of passive income with zero risks. Trading takes skill, and it comes with risks.
That’s why we believe that before any beginner places that first trade, it’s crucial to first take a step back and consider several factors which can significantly impact their trading journey. Otherwise, they risk jumping into the market with little to no preparation, leading to costly mistakes and losses.
So let’s explore some of these factors that new traders should consider before they step into the exciting world of trading:
To the outsider, it might seem as though trading is easy, especially when they see successful traders able to make good trading decisions intuitively. But that intuition doesn’t come from nowhere – it comes from having a solid foundation of knowledge.
Experienced traders understand that trading isn’t a game of chance. This is why many of the best traders spend years on end learning more about how to better analyse markets and make good trading decisions.
As a beginner, we don’t expect you to have this level of knowledge right away, but it will be very useful if you dedicate time to learn the basics of trading, analysis, risk management, and trading psychology before you even place that first trade. And once you’re a full-fledged trader, it will definitely help to set time aside to enhance your knowledge even further by attending webinars, reading books, watching video tutorials, and seeking guidance from experienced traders or mentors.
Another thing to consider when trading is to think about what exactly your trading goals are. Clarifying your goals is just generally good advice for any endeavour, but with trading, your goals actually define your strategy and what you can expect to earn.
It would be good to take some time to define your objectives by asking a few crucial questions – are you looking for short-term gains or long-term investments? Do you have a level of risk you’re willing to tolerate? Are you willing to commit to trading full-time or just part-time?
In answering these questions, you’ll benefit from tailoring your strategy and, as such, choosing the appropriate assets and timeframes. In addition to this, setting these goals helps you stay consistent and disciplined, and will generally help you avoid making emotional trading decisions because you have a system you can trust and stick to.
As a beginner trader, you might be eager to get everything done on your own, but trading is never a purely solo journey. That’s because you will still need to trade through a broker. It’s your broker that provides you with the platform to trade, and any of the tools and resources that can help you along the way.
Evidently, choosing a good broker is a very important decision to make, as it is pivotal to your trading journey. When you pick your broker, consider things like their reputation, how intuitive and usable their platform is, how responsive their customer service is, and the kind and amount of fees they charge.
Don’t worry about taking time in making this decision, because the synergy between your trading needs and a broker that caters to them will surely help your trading career become smoother and easier.
Great, you’ve acquired a good bit of knowledge! Now it’s time to actually put your knowledge and skills to the test through practice.
Naturally, you might not want to practice your trading by immediately risking your capital, which is why many brokers thankfully offer demo accounts. A demo account lets you trade with virtual money using real market conditions so that you can simulate your strategies and test their viability without needing to risk real funds. Demo trading helps you identify weaknesses in your approach, refine your tactics, and gain confidence before you transition to live trading.
Finally, make sure to keep those emotions in check! We can say from experience that trading can be an emotionally exhausting thing to do, especially when the market is volatile. But in trading, it’s in the most emotionally vulnerable periods that it’s advisable to be more emotionally restrained.
Often, traders can fail to make good decisions when they let emotions like greed or fear derail them. These emotions can manifest in the fear of missing out (FOMO), or in the desire to make more trades to compensate for a lost trade. These feelings have a tendency to lead to impulsive decisions that you might regret in the future.
There will be days when our emotions get the best of us, but do your best to stay disciplined and stick to your strategy, regardless of how your emotions feel. Other than outlining your trading plan, some techniques to manage your emotions would be to prepare beforehand for any potential emotions depending on different outcomes and to have go-to moves like mindfulness and meditation for when things get emotionally heavy. Remember, when you can navigate your emotions, it becomes easier to navigate the market, too.
