Learning how to start trading currencies successfully is a difficult task not suited to everybody. However, if a trader has a clear plan, he can overcome the obstacles associated with it. Of course trading currencies involves a significant degree of risk. Many traders have losses, this raises a question why trade forex. Nevertheless, trading performance depends also on the attitude. This differs considerably depending on who we talk about. Some people trade simply because it is a nice pastime and they want to experience the thrill. Others perceive trading as being very successful. They also don’t do a very good job of documenting themselves or practicing on a demo account first. That is not the right attitude a trader must have. By taking the time for thorough documentation, a trader can increase the chances of belonging to the class of traders that register profit. Forex Bonus Lab provides you with a full guide on how to start trading Forex online!
What are the Vital Steps in Online Trading?
It is important for a trader to document his trades and reasons behind them. A trader is also advised to know all the brokers existing on the market. Choosing a broker that can provide a trader with the best facilities also contributes to the growth. Furthermore, with reliable broker, the question how to start trade forex will be answered much easily, since good brokers will always help you!
There are a few principles regarding managing money and risk that a trader must know. He also has to know about both fundamental and technical analysis in order to know the best time to execute a trade, how fast to get rid of it or how long to maintain it, and the most effective closing price. He needs to have a strategy for the long them to which he must adhere at all times, even if the situation is not favorable for him.
The principles of how to start trading online are explained below.
- Principle 1: The trader doesn’t need to have his mind set on a specific level of earning or risk losing more money that he has. This is indicative of a strategy that is not set up properly and that can have disadvantages and even lead to the failure of the trader.
- Principle 2: Instead of a specific level of earnings, a trader should try to maintain a rate of winning trades higher than the losing ones. This could be quite hard to accomplish at first, but the trader must be persistent until he reaches it. A ratio of 50/50 is a good place to start, but the trader has to keep in mind that in order to pay the broker’s commission, a higher ratio of 55/45 may be required. In order to become profitable, the ratio can also be 60/40. These ratios refer to the amount of money, not the amount of traders, because lots of small winning trades may not compensate for a few trades that have large losses.
- Principle 3: The trader needs to know how to follow trends in order to know when to open a position and when to close it. The trend is the most useful and clear indicator that a trader has access to. It is also useful to know that the short-term trend of an asset and the long-term one may be two different things altogether and in periods of uncertainty where no trend is distinguishable a good rules to not open new positions.
- Principle 4: The trader should know how to set his stop loss and exit points accordingly. At first the trader should not use for a trade more than 2-3% of his account balance. The trader should know that the closer he set his stop-loss and the farther he sets his exit point, the more exposed he is to risk. For example, if the stop loss is $5 and the exit point is $25, meaning that the risk reward is 5X1 and he has a much higher chance of reaching his stop-loss then reaching his point of closing the position. Exit points might also be adjusted on the go depending on the trend and on the conditions in the market.
- Principle 5: At first the trader’s strategy has to be simple: just observing the market and using a few indicators can be a recommended way to go. In time the trader has the opportunity to refine his methods, but at the beginning simplicity is the key in order for the trader to focus on a manageable amount of information and not be overloaded with it. The amount of information he can interpret and use in his trades will increase at a steady rate over time, as he becomes more comfortable with the platform and the instruments.
How to start trading forex online? It all begins with an action. Check our forex broker reviews to see trust places for your trading account.
You can also open account with Plus500 and see how to start trading online on a demo account.