The trading always generates curiosity among investors interested in getting this market. After all, with trillions of dollars flowing through the platform daily, you can see a huge potential for profit in the future. However, knowing how to get started in Forex, in the right way, is the main way to do that and can make all the difference down the road.
Here are 6 powerful tips to get you started!
Tip #1: Pay attention to the initial steps
When we talk about buying and selling foreign currencies, the first thing we should remember is: operating in this type of investment is not synonymous with guaranteed results . You have to be careful and acquire as much knowledge as possible to see the numbers increase exponentially. So, follow this checklist:
- Understand about the market and how it works
- Choose a regulated stockbroker
- Prefer institutions with lower commissions
- Open an account and learn to use the trading program
- Train A LOT, as much as you can, in the demo version
- Choose a way to operate (manual or automatic)
- Respect your profile to follow a strategy
- Invest and succeed in Forex
Remember not to skip any of the essential steps in your progress as a trader! Let’s go now to the next tips on how to get started in Forex with great success and safety
Tip #2: The Forex Market Order Types
In addition to the information we saw earlier, to learn how to get started in Forex you need to understand the types of orders. They are nothing more than commands to start or end a negotiation. They can be used on the fly or programmed to run in a particular configuration the trader chooses. Next, I’ll explain a little more about the most used orders in the Forex market. Follow:
Market Order : Market time or real-time order. It is widely used by traders to place the buy or sell order at the current price or condition.
Purchase Order: When purchasing a currency pair, it means that we buy in the first currency, that is, we gain with its appreciation and lose with its devaluation. In this case, the USD/BRL pair means that we buy in dollars and gain from its rise against the real.
Sell Order: When selling a currency pair, we gain with the appreciation and lose with the devaluation of the second currency. So, in the USD/BRL example, we are going to gain with the rise of the real against the dollar.
Pending Orders: Pending orders are used to open a position (Bought and/or Short) only when the quote reaches a previously defined parameter of values. There are four ways to apply pending orders , they are:
- Buy Limit: When the current quote is above the stipulated maximum, we place the pending buy order below the market price. Apply this command when betting that the stakes will drop to a support point and then increase in sequence.
- Buy Stop: When the current quote is below forecasted prices, we make the opposite move and leave the pending buy order at a higher value. Good option when you notice the possible break of resistances for uptrends and appreciation.
- Sell Limit: When the current quote is below the desired value, the pending sell order is limited to a higher price. It is interesting for periods of sequential rallies to resistance points that cause values to fall, therefore sell high.
- Sell Stop: When the current quote is above the configured price, we place a pending sell order below. Use on downtrends followed by breaks in supports and resistances starting bullish movements.
Stop Loss and Target Point: These commands are always connected to pending orders. STOP is used to limit losses if pairs move in unprofitable directions. TARGET, on the other hand, is the objective point, that is, how much we want to earn in each operation. Once this is done, when it reaches the defined limits, the orders will be closed automatically.
Tip #3: Know what to do
Now that you know how to get started in Forex, let’s pay attention to some precautions when trading, look:
Take advantage of the benefit of the demo account offered by the broker and train hard before going to the market. With it, you can feel how operations work without needing real money for it. Also discover everything about their trading platform, adapt to the broker and be keen to start with full trading skills .
Another very important thing is to be aware of your actions so as not to allow emotions to take over the decisive moments. And leverage should be your first warning: use it wisely and let the excitement celebrate results already achieved. Even more: never risk so much. Leveraging 3% to 4% per operation is great!
Therefore, remember to always use Stop Loss and Target Point orders , both are fundamental for your risk management . That’s because currencies move so quickly and you can often miss the chance to close profitable trades. But with this schedule, your chances become much better.
Finally, follow market trends so you don’t miss opportunities and avoid long losses. And if the ‘sea is not for fish’, don’t despair. Analyze the mistakes you may have made, point out changes to be made, and keep in mind that new chances to start over will never cease to exist. Go ahead and don’t be discouraged.
Tip #4: And what not to do too
Don’t overuse leverage (strengthening). This feature is very good, but if used improperly or excessively it can put your account at risk. Use leverage smartly and put emotions aside so you don’t act on impulse and get hurt. Memorize: take full control of the risk.
Don’t overtrade. In other words, don’t do multiple operations at the same time. This kind of attitude can lead you to lose control of the strategies and to trade in an uncontrolled way, either manually or by robots. Without a well-formatted selection criteria to make money faster, you will only have losses.
Avoid inappropriate strategies that are inconsistent and/or unproven by a professional trader . These ‘methods’ may even work in the short term, but when the market goes in a certain direction, this inefficient use could break your account.
Tip #5: Choose your robot well
To know how to get started in Forex, and not make beginner’s mistakes, you still need to understand how robots work. Understanding the program’s pre-configured strategy, running the appropriate pairs, avoiding manually closing orders and setting risk proportionately are among some of the basic requirements of automated trading . With that in mind, I have prepared a step-by-step guide to help you in this task:
- Know all the features of the robot
- Assess the risk/return (% profit x % loss ( drawdown) )
- Review the history to see its behavior
- Confirm the best pairs to run
- See how risk management is done
- Check if your account carries the chosen risk
- Test the robot’s stability and compare with others
- Do everything according to your profile
And, after following the step-by-step above, put the robot to work with micro-batch in a real account and then set the risk to test. Notice if you will be comfortable with the working format of the software and know that there is a possibility it stops working. This is an unpredictable question, hence the importance of following the criteria. Combined?
Tip #6: Learn to configure risk
Many people ask me “how much risk to take?” This is a very personal question as it depends on a number of factors , such as financial condition, greater or lesser risk tolerance, in short… My suggestion, in these cases, is to ask yourself: “What is the maximum drawdown I am willing to tolerate? Analyze your situation and know how to proceed.
The results are directly proportional to the risk taken. They can either amplify profits or losses.
So when do you consider increasing the risk? Note the following indicators : good hit rates, few simultaneous trades, high risk-return ratio; drawdown less than tolerable, having smaller accounts, having a more aggressive investment profile, using various strategies to reduce losses.
And when to decrease? If hit rates are small, there are many trades with low risk-return ratio, drawdown close to or greater than tolerable, accounts are large and you have a more conservative profile, so consider lowering your risk. Between 0.2 and 0.5% per operation is ideal! With more than that, Forex can become a gambling game