Forex Basics: Beginner Trading Tips

Beginner Trading Tips (we've used capitals, so you can burn them in your brain more easily)

ALWAYS PUT IN A STOP/LOSS!
This really is a no brainer and doesn't require any knowledge of the market whatsoever, but it will save you from the biggest disasters. There are fields Neo, endless fields, filled with traders and their sad stories about how they were gone for only just an hour, or suffered a power blackout for a short time, only to find out later that they lost their entire bankroll (by the way, this is impossible at eTORO, because there you can only loose the specific amount you allocated for the trade) or lost more than they wanted to risk. You can easily prevent yourself from ending up in those fields, just by putting in a stop/loss.

So no excuses and ALWAYS put in a stop/loss.

Putting in a stop/loss will also encourage you to think about the ratio between the money you're willing to risk and your profit target. For instance, you are willing to loose 25 pips in order to win 100, which would be a ratio of 4:1. This in turn will help you to think more in terms of probabilities, instead of feeling bad for every trade you loose.

ALWAYS PUT IN A TAKE/WIN!
In part, this is for the same reasons you have to put in a stop/loss. Maybe you have to go away for a while, or your computer crashes etc. It also forces you to think about where the price is going to go, what will be the best point to get out. To determine both your ENTRY and EXIT point before you put on a trade is half of its success. If you do this, you won't have to walk around the room nervously, trying to come up with a good exit point; because you've done that already before you put on the trade.

Of course this doesn't mean that you can never change your mind while a position is open already. If you decide it's time to get out because you think the target won't be reached, you can do this of course. But don't make a habit out of it; because you didn't choose that specific bandwidth between stop/loss and take/win for nothing.

DON'T KEEP ADDING TO A LOOSING POSITION!
This really is one of the big traps in trading. You've opened a position, put in a stop/loss and then the price takes the wrong direction. Fearing your stop/loss will be triggered you move it up/down a little bit more; the price continues to move in the wrong direction (your old stop/loss point would have been triggered already) and you open up another position, because it's now at a 'better' price (which all depends on of course). You know this is acceptable, because you've read about professional traders doing this all the time, in order to lower their break even target. Only, you're NOT a professional (at least not yet) and 99% of the times a trader adds to a loosing position he does so because he doesn't want to loose on the trade. And this, is of course the absolute WRONG reason.

So just don't do it. Just accept the loss, quit for a while if you feel this one got to you, analyze what went wrong and that's that. Remember, no trader makes only winning trades, really, not a single one. Everybody knows loosing trades, the trick is to win more with your winning trades than you loose with your loosing trades. So keep your losses small.

DON'T BE OVERCONFIDENT
Often it's the less the knowledge, the more the confidence. But you're not trading to boost your ego, you're trading to make money. It's a nice bonus that you like trading, but at the end of the day it's all about pecunia, dollari, the salt of the earth, in other words: money.

Overconfidence leads to recklessness, recklessness leads to disasters.

Be confident that you will learn the necessary skills, but take my advice and start out small. Small stop/losses, small profit targets, small bankroll. After a couple of hundred trades, if you're still on the plus side, then you know you're on the right track.

DON'T CREATE WRONG EXPECTATIONS
It's really not that terrible if you loose $100, just as it doesn't mean that you're God's gift to trading if you made $200.

Take the time to become a consistent winner and keep a realistic view of your progress, without getting too caught up in how it went last week/month.

NEVER TRADE WITH MONEY YOU CAN'T MISS
The beauty of forex trading is that it really is the least risky market out there. You can never loose more than the money you allocated and you can determine this amount of money right down to the dollar.

So reserve a certain amount for your trading (a small amount in the beginning) and accept that you might loose this bankroll -especially while you still have to learn a lot. Make sure you don't loose even one night of sleep because of your trading adventures. It's not worth it.

NEVER TRADE WITHOUT A PLAN
Only fools rush in, so think before you open a position. Don't just do it because you've read some tip somewhere, but draw your own conclusions; you'll notice that when you do this, you'll be more confident about the trade. So check out some opinions on the forum, do some fundamental (news) analysis, look at the charts and only then decide if you see an edge, meaning a better probability of the price going in one direction than the other.

Then decide on a good ENTRY and EXIT point, so that when you open the position you've already decided how much you are willing to loose to get to a certain profit target.

Obviously your plan will be simple in the beginning and probably not very reliable. But practice makes perfect, so you'll definitely get better as time progresses.

DON'T EVER OPEN A POSITION WHEN IN DOUBT
You know how the saying goes: 'When in doubt, stay out.' Of course you don't have to be a yellowbelly either, but if you still have doubts about putting on a trade after you've made your analysis, just don't put on the trade. Just find another currency pair with better prospects, or wait for improvement, or go out for coffee. Remember, you don't HAVE to put on a trade.

DON'T GET OUT BECAUSE OF A WHIPSAWING PRICE DIRECTION
Another nice saying: 'Monitoring extended periods of whipsawing is like watching paint dry.'

often prices whipsaw before breaking-out; it's as if the market builds up energy before jumping to somewhere new. Several analysts also state that the break-out will be in the same direction prices were moving before the whipsawing started.

Patience, patience, patience.......

BE FOCUSSED WHEN YOU OPEN A POSITION
Every trader has made mistakes when opening a position. Click this button, and than that button and then, oeps, clicked the wrong button. You went long when you wanted to go short, or the other way around. Leverage of 200 instead of the 100 you wanted etc.

Of all the tips we can give you this one is the most simple: focus when you open a position so that you know exactly what you're doing. Because every spread you pay extra (because you opened the wrong position) will go directly into your bottom line.