If you want to learn to trade forex here are some important tips that can help you scale that learning curve and become a profitable trader.
- Gain some practical experience by demo trading before going live. Once you’ve learned the basic concepts of how to trade in the currency markets, it is very tempting to think that you can just jump in and start trading. Unfortunately, this is not the case and many beginning traders who have done this have suffered big financial losses. Before you start to trade a live account with real money, you should always practice making paper trades first using a demo account. This will allow you to make your mistakes without having to risk real money. It also allows you to test out your trading strategies to see how effective they are. And signing up for a demo account is free so there is no reason for you not to learn to trade forex using one.
- Find a good mentor. One of the best ways to learn to trade forex is by having an experienced trader standing beside you and pointing out your mistakes as you trade, as well as offering you tips and advice on the best trading strategies. Most good online forex training courses will offer mentorship as part of the curriculum. A good mentor should be a successful active trader or one who has a solid record of winning trades behind him. But you should avoid mentorship and training programs that use exaggerated claims to attract students, such as those promising 100% winning trades.
- Learn to manage your emotions. One of the most important things you must learn to become an effective currency trader is to learn how to control your emotions while trading. One of the worst things that can happen is you starting to chase your losses in the hope that the trend will reverse and your trades will start winning again. The best way to control your emotions is to create a trading strategy before you start to trade and then stick to it, no matter what happens during trading.
- Know how to use leverage properly. Leverage enables you to trade with much larger amounts than what is in your trading account, since the forex broker essentially lends you the additional money. This enables you to enjoy higher profits, but also increases your risk of losses when the trade goes against you.
- Know where to place your stop loss and take profit orders. These are among the most important skills you need to develop when you learn to trade forex. A stop loss or take profit order closes your trading position when a certain level is reached, i.e. ten pips below the opening price. Placing a stop loss will protect you from losing more than planned whereas a take profit will lock in your profits.
