The forex market is a great place to test your mettle, seeing as how it’s more dynamic than position trading and less volatile than the cryptocurrency market or penny stocks. In other words, it is a great place for those who want to invest their money in order to create a bit of side income. Moreover, the more you exercise forex trading, the more skilled at it you become, which means that, apart from diversifying your portfolio, you also get to add one more item to your resume. Nonetheless, here are the top five considerations you should make when entering the forex market.
1. Don’t set unrealistic expectations
The first thing you need to understand is the fact that with the forex market, your income and your outcomes will be quite modest when it comes to a value of a single trade. Seasoned forex traders often set their stop loss order somewhere at around 1 percent, while setting their stop gain at 6 percent. In other words, those expecting to get ROI in hundreds and thousands of percent should perhaps reconsider whether forex trading is something they are interested in, in the first place.
2. Platforms instead of human brokers
In the past, for an investment of any kind, you had to get in touch with a broker. Nowadays, this is all digitalized, which is why most human brokers are replaced with online platforms. Not unlike actual brokers, these platforms differ in reliability, skill and quality of the service they provide. When it comes to looking for your own tools for forex trading, you need to look for great availability, low latency and great flexibility. Ideally, a trial period would also be a huge plus, seeing as how everyone looks for different features.
3. Leverage and margin
Another thing you should understand is that you’re not restricted to trade only with the money that you’re willing to invest. With the right leverage, you can invest up to $100, $200 or $400 for every $1 that you invest. This is possible due to the leverage/margin feature, where you get to trade with the money that’s not yours (leverage), based on the guarantee of the deposit that you’re willing to invest (margin). In this way, you can boost your profits but also increase your losses. Nonetheless, you never stand to lose more than you’ve deposited, thanks to the feature of margin call as a safeguard.
4. Can you keep your head cool?
Earlier on, we talked about expectations and percentages, however, inexperienced forex traders often find it difficult to rein in their emotions. While winning, they might start believing that they’re on a streak, while once they start losing, they might expect their luck to change. Either way, if your trading strategy is based on luck, it is probably closer to a gamble than it is to an investment, which is something you should definitely keep in mind. With tactics described in the first section, you are supposed to stay profitable with only 30 percent of successful trades. Sure, this may seem great but the thrill of success isn’t nearly as recurring as an outsider may imagine it to be.
5. Changing your strategy too often
Finally, in order to be consistent in your winnings, you have to adopt a trading strategy. Unfortunately, a lot of people are reluctant to stick to a strategy they deem to be inefficient. However, in order to properly estimate the successfulness of a strategy, you need to stick to it for at least a year. Because of this, you need to be 100 percent sure that the strategy you’ve chosen is the right one in order to resist the temptation to change it as soon as something goes wrong.
By taking these five things into consideration, you won’t merely guarantee your success, due to the fact that this is completely impossible. What you’ll do instead is ensure that you enter this field with realistic expectations, goals and objectives. In this way, you will create a mindset that is oriented towards sustainability and long-term objectives, instead of hoping for some immediate gains.