If you are like many consumers, you could be looking for effective ways to supplement your existing income. The prevalence of the Internet has opened up a veritable “wealth” of possibilities and one increasingly popular choice is to enter into the realm of Forex trading. Predicting the movement of one currency in relation to another takes skill, patience and dedication. However, the associated trade-off is well worth the initial commitment. Let us take a look at some strategies that work well for beginners as well as how they can be leveraged to your advantage.
Think Small to Earn Big
Many novices are tempted by claims that they can accrue a massive amount of spare capital within a few short months. We should state here that this is the exception as opposed to the rule. Be prepared to put in the necessary hours. Also, avoid focusing upon individual trades. This habit can take your attention away from the bigger picture. Your wealth will instead come in increments and as a direct result of making the correct decisions over time. It is also prudent to become very familiar with the Forex marketplace before establishing your financial “comfort zone”.
The Rule of Ten Per Cent
Many professional Forex traders state that you should never risk more than ten per cent of your total capital at any given time. This observation makes a great deal of sense, for becoming overexposed to a specific position could lead to substantial losses. Even if you lose the entire amount, ten per cent will not be enough to cripple future prospects. However, please note that this level can vary depending upon your income and personal preferences.
Set Aside Specific Trading Hours
While the Forex markets are active 24 hours a day, you can never be. Trading when you are tired or otherwise distracted can result in entirely avoidable mistakes. Set aside a few hours each day to delve into the marketplace. At least half of this time should be spent researching any recent events as well as analysing the movements of specific currencies.
Choose Specific Currencies
Dozens of currencies are traded on the Forex exchange and it is impossible to follow them all. Therefore, select between two and three to follow. It is much better to familiarise yourself with a single pair (such as the relationship between the dollar and the euro) as opposed to attempting to master numerous positions. Once you have gained a significant amount of experience, you will be able to make well-informed decisions when they are needed the most.
Leave Emotions at the Door
Modern films tend to erroneously display successful traders bringing emotions to the table (Wall Street is a perfect example). However, the exact opposite is true. Adept Forex investors appreciate that emotions such as greed and fear can quickly cloud their judgement. It is best to embrace this very same concept from the very beginning. Pragmatism is much more desirable when compared to gut instinct and similar knee-jerk reactions. An objective point of view can work wonders and always remember that losses can and will occur from time to time.
Find out more about Forex Trading at CMC Markets.