One of the major advantages of online forex trading is that you can perform your investment activities in your spare time, since you’re trading at home using your computer and an Internet connection. How do you become a successful part-time currency trader? Here are some tips to help you.
- Decide which currency pair to specialize in. The most successful traders are the ones who focus on a particular currency pair, learning everything about them so that they can make profitable trading decisions. Choosing a pair to specialize in is not as hard as it seems, since unlike stocks, there are only a handful of major currency pairs that are traded in the markets. If you’re just starting out, you should restrict yourself to currency pairs where the US dollar is the base pair, such as the USD/EUR (euro) or the USD/JPY (Japanese yen). If you have more experience, you can trade pairs where the euro is the base currency, such as the EUR/GBP (UK pound) or EUR/CHF (Swiss franc). Since these pairs are the most traded, you can enjoy high liquidity on them.
- Maximize your limited trading time. As a part-time currency trader, your time spent online forex trading is precious. So you should keep developing your trading skills even if you’re not making active trades. For example, you can familiarize yourself with the economic and political developments that influence your chosen currency pair. You can also open a demo account to test your trading strategies with dummy trades before you use them on actual live trading.
- Use an automated trading system. Better known as forex robots, these automated systems allow you to do online forex trading without actually having to be in front of the computer all the time, monitoring your trades. In fact, many of these programs simply let you turn them on and then leave them alone to perform trades. And they’re also customizable, so that once you gain more experience, you can program your own settings into them for a more hands-on trading.
- Keep a trading journal. A journal is one of the best ways for you to record the lessons you’ve learned, as well as the mistakes you’ve made so that you can find ways to correct them. In addition, you can record market nuances in your journal that you’ve noted so that you won’t forget them and make trading mistakes.
- Learn to trade with discipline. The worst traders are the ones who trade using emotion, since they inevitably lose more often than they win in their trades. One way to trade with discipline is to set stop-loss and take-profit orders that will limit your losses in case of a bad trade. Another is to limit the amount of money you will risk per trade.
- Start trading with smaller lots. Typical online forex trading is done with full-sized lots of 100,000 currency units. To make currency trading more accessible, however, many brokers now offer mini-lots of 10,000 units. This will not only allow you to limit possible losses, it also lets you trade with smaller deposits in your trading account of as little as $1,000 to $2,000 with leverage taking care of the rest.