Jumping into an ocean serves well as a metaphor when describing first entering the Foreign Exchange market. The expert team of the international Forex broker OctaFX gathered some essential tips for you to make sure your jump into these exciting waters is a pleasant, organised and informed one.
With 6.6 trillion USD traded daily, Forex Exchange is the biggest financial market out there. In layman’s terms, the primary aim in Forex is to purchase a certain currency in relation to another and thereby generate an income.
With this essential Forex definition out of the way, one more basic statement before we start. All nine tips we are about to present revolve around one basic virtue: discipline. This doesn’t sound as exciting, but still, hard work and its results are accomplished through personal commitment and experience. Both are fuelled by discipline. So let’s dive right into it.
Always be realistic about your goals
This demands perspective and a good first estimation of your potential, especially at the beginning. This gets easier with time: the more experience you have in seeing what helps you reach certain goals, the more sensitive you become to the factors needed to succeed. An extreme example would be this: If you demand a full-week winning streak that will make you a U.S. dollar millionaire by the month’s end, you are doing yourself a disservice. Being realistic at the beginning means starting small and developing the level of expectancy gradually.
Make sure what you want long-term
Usually, after their first time trading, people understand whether trading Forex will just be a random hobby or eventually become a new secondary source of income. If they are serious about trading, their regular job might even start getting in the way—there are many examples of traders who choose Forex as their main occupation.
Appreciate your first small successes
Do not dismiss earlier, smaller successes. They keep you humble. They also give you the opportunity to hold on to an almost bulletproof perspective on your ever-developing capabilities. That way, you know which challenges to take on and which ones to dismiss for now.
Track your strategy
We have published content on how important it is to have a trading and investment strategy before making your first steps in Forex trading. Let’s say, you adopted one, or even devised your own. Keeping track of the results that are intimately connected to your strategy remains key. Adjusting and correcting a strategy, as you gain insights and experience, is the way to go. Your strategy needs to stay flexible for further changes and upgrades.
Be your own bookkeeper
Always keep track of your initial investments. Notice how much time you are spending trading. As the old saying goes, ‘time is money’. Time is part of your personal investment just as much as money. If you spend too much time on a particular trade, or you don’t see any returns for a long time, you are doing something wrong. Something is off with your trading and investment strategy. Find the flaw—and fix it.
DYOR (Do your own research)
Keep yourself up-to-date on what is going on in the world. On the micro and the macro level. This means, you have to understand general developments in world finance—economic and political shifts that might have a tremendous impact on your trading orders. Follow company news that issue or maintain financial instruments that you are invested in. Moreover, be aware of mid to long-term movements of popular currency pairs. Even though this sounds almost self-explanatory, many dismiss this crucial habit.
Risk management first, then profit
Always assess the risks involved and weigh them according to the proportion of your initial investment. No smart trader—that we know of, at least—ever went ‘all-in’ on a trading order. In fact, losing huge amounts of money comes from ignorance and erratic or irrational behaviour of the people who resist taking any advice or getting proper training. Keep the proportions of risk and reward as uncontroversial, pragmatic and methodical (according to your strategy) as possible.
No matter which reasonable rule you apply: be it the ‘1-percent-rule’ of your entire portfolio for a single trade—or the ‘6-percent-rule’ of your entire portfolio’s worth that represents your full trading engagement, taking all your active trading orders into account. Do not overextend these rules: the risk of losses becomes disproportionately high, especially in the beginning.
Conquer your ego
This friendly advice works well at the beginning of your journey and becomes even more important once you score some bigger successes. Many lose themselves after having achieved great gains. So, do not forget to stay down-to-earth and always remember where you started and how precious every step along the way was. Conquering your ego as a concept is a gradual process, refined by honest introspection and contemplation. Know this: a spoiled trader is a recipe for disaster, financial and otherwise.
Pick your broker wisely
To accomplish all of this, you need a reliable and trustworthy partner—a platform and service that will help you follow all the aforementioned advice. If you find one, stay with it. If a Forex broker does everything to uphold the outstanding quality in its services, you can expect a fruitful, secure, and motivating partnership. Compare the trading conditions with other brokers, their company history, and track record. Find out all you can about the brand, its philosophy, conditions, and overall services. Read up on customer reviews and deeper expert reports before you make up your mind.
The more care and time you put into this choice, the more likely your Forex journey will be a promising one.
OctaFX is a global broker that provides online trading services worldwide since 2011. The company is involved in a comprehensive network of charity and humanitarian initiatives, including improvement of educational infrastructure, short-notice relief projects, supporting local communities and small to medium enterprises.
In Nigeria, it managed to capture the ‘Best ECN Broker 2021’ award by World Finance and the ‘Best Forex Broker Nigeria 2022’ award by Global Banking And Finance Review.