If you want to be a successful trader, there are certain rules you should always keep in mind. While it can be tempting to hop into the exciting world of trading right away, it’s best to spend time beforehand studying your market of choice and seeking advice from more experienced traders to make sure you are making well-informed decisions with your money. This can be overwhelming to the new trader; there is a lot of information online, and you might receive conflicting advice from different sources. However, if you stick to these basic rules as much as possible, over time you will build up both your confidence and, hopefully, a strong trading portfolio.
1. Do your research beforehand
It goes without saying that you need to know where your money is going. Before you even think of what your first trade is going to be, take the time to carry out market research, find a broker that works for you, and decide upon a trading style. You can always adapt your technique once you’ve gained some experience and know what works best for you, but having core knowledge like knowing what times of the day are best for trading will make sure you can hit the ground running.
2. Make a plan and stick to it
Anyone who knows even the most basic principles of trading will tell you that going into the markets without a set trading plan would be a recipe for disaster. Having a trading plan gives you an organised and planned approach to place trades with, which is another reason why doing your research first is so important. This also gives you a framework to use when analysing your trading performance, which will help you adjust your techniques along the way.
3. Practise, practise, practise
As the poet Robert Burns once said, ‘the best laid schemes o’ mice an’ gaft-a-gley’ – or, to put it simply, even the most carefully prepared plans can go wrong. That’s why it’s crucial for you to practise your trading plan before committing to large investments. You should consider using a demo account to see what a real-world trade actually looks like, and to make sure your plan works without risking any of your own money. Take the time to build up your confidence, and make the most of this learning experience, so that your actual trades have a greater chance of success.
4. Keep your emotions under control
You should never underestimate the psychological side of trading. Once your capital is in the hands of the market forces, it’s easy to let your emotions take over. The excitement of a potential profit, or the anxiety of a loss, might lead you to get carried away and make careless decisions. Do your best to keep a clear mind and stay disciplined. If you feel yourself getting overwhelmed, it’s okay to take a break and reflect on ways to manage your emotions so they don’t interfere with your trading.
5. Keep an eye on trends and important events
As part of your studying, make sure you are keeping an eye on market trends and major news headlines that might affect your trades. Things can change in mere minutes in the light of political or economic events, one famous example being how the value of the British pound plummeted after the Brexit referendum result was announced in June 2016. If you keep an eye out for this, you will be better prepared to avoid losses or make unexpected profits.
6. Be flexible with your strategy
While having a trading plan is important, you should stay open-minded and accept that your strategy is never going to be completely airtight. External factors will cause market changes with a moment’s notice, so you should factor some flexibility into your plans. Stay humble and take the time to examine your trading plan on a regular basis and consider what you can do to strengthen it. Consider joining a trading group or seeking a mentor, as peer feedback might help you notice a weakness in your plan and improve your overall strategy.
7. Make time for studying
Whether you prefer to study through watching videos, listening to podcasts or reading books for guidance, as a new trader you have to put your ego aside and accept that you have a lot to learn. While the practical experience of using a demo account is useful, you should also have a degree of theoretical knowledge to base your trading decisions on. A benefit of the forex market is that it is usually closed over the weekend, so you can dedicate the time you would normally spend managing your trades on your financial education instead and identify what you want to improve. Peer feedback, or speaking with a mentor, might also be helpful in regards to this.
8. Know your limits
This applies to both the financial and personal aspects of trading. Start small with your trades at first – after all, it’s better to make a small profit than a huge loss. You should never invest more of your money than you are willing to lose, nor should you go ahead with any trade that you aren’t completely certain about. You should only trade when you are feeling relaxed and clear-headed, so if you are starting to feel pressured or overwhelmed then it’s best to take a break. Stay disciplined, and if in doubt, play it safe.
9. Roll with the punches
You will have losses – every trader does, even if you never see them talk about it! While you should do your best to expect the unexpected, sometimes a trade simply won’t work out how you want it to. Don’t let yourself get down in the dumps; instead, treat any and all of your losses as a learning opportunity, and think about what went wrong and if there is anything you could do to avoid those mistakes in the future.
10. Give it time!
If there is one essential trait you must have as a new trader, it’s patience. In the short term, you might need to keep an eye on your market of choice for hours, days, perhaps even weeks at a time in order to make the best decision with your capital, which may be frustrating at times. In addition, you should try not to compare your journey against others. Do your best to ignore the private jets, magnums of champagne and fancy cars that other traders brag about on social media. You won’t become a self-made millionaire overnight, but as long as you work hard, stay open-minded and trust the process, hopefully it will pay off for you too!
At FX Career Swap, we will give you the training and education you need to successfully enter the world of FX trading, with access to experienced professional traders. Visit our website here to find out more, or to book a call and find out more about us and our courses.