Things To Watch For as a First-Time Forex Trader

Forex trading is growing in popularity as a side business for many people looking for additional income sources. But beyond the potential as an income source, forex (foreign exchange, also known as FX) trading is also considered a way to gain financial and work freedom, thanks to the flexibility of trading from anywhere. These possibilities attract new traders and help them focus on developing their skills.

Trading Forex As A beginner

As a newbie, your first step would be understanding how the market works and honing your technical analysis skills. Trading analysis is a skill that takes time to perfect. If you are confident in your skills, find a trusted broker or trading platform such as MetaTrader 5, register, and fund your account with capital that you are comfortable with (there’s usually a minimum deposit amount).

If you are a beginner, you might find the amount of information available to you overwhelming. We’ve compiled this list to help you learn the essentials, unpacking the ins and outs of what you should know, understand, and avoid. Here are some of the things to watch for as you begin trading.

Dishonest Trading Mentors

While on your journey to become wealthier, you may contact more experienced traders for guidance and mentorship. That’s a good thing, but all newbies must watch out for dishonest mentors who are only out to make money from unsuspecting traders. So, how do you choose a trustworthy mentor?

Your ideal mentor should have a track record of being profitable and consistent in the market. The person should also be honest enough to show you potential pitfalls you should avoid and guide you right to become a successful trader in alignment with your trading goals (instead of theirs). Choosing your mentor is an important task that will help you avoid a long learning curve.

Trading With Emotions

Ensure you avoid extreme emotional responses when trading forex. Trading with emotional decision-making limits your potential and can open you up to making poor choices. As a first-time trader, you might find it challenging to keep your emotions aside when trading, but you can learn to do it through constant practice and being intentional.

Impatience and over-leveraging are two common results of emotional trading that you must avoid. There are many tools you can use to minimize emotional trading. Try Stop Loss (SL) and Take Profit (TP) orders to manage your positions even when you are away. Confidence in your analysis will also improve your patience when trading.

Avoid Over-Analysis

Another common saying in the forex industry is that too much analysis leads to paralysis. There’s really a thing called analysis paralysis, defined as the inability to take action due to overthinking or overanalyzing a situation.

All traders go through this phase, but breaking through the mental barrier is necessary, or you’ll never be a trader. Be confident in your skills, keep learning and improving, but don’t dwell so much on analysis that you do not take trades.

Trading Without a Plan

A trading plan is a set of rules you trade by; you only open positions when they respect the rules. Creating a plan will improve how you trade and help you build good habits early on. Here’s how to create a plan:

• Set trading targets.
• Choose a trading strategy based on the market.
• Set rules for entering and exiting trades.
• Define your trading session and duration.

One common piece of advice in the forex market is to plan your trade and trade your plan. You’ll do well to remember that statement in your trading career.

Market News

In forex trading, it is essential to remember that the market is impacted by many factors ranging from geopolitical to economic events. When these news are reported, they affect the demand and value of currencies. A news announcement could change the direction of the market in a short while. 

As a beginner, you should watch out for market news using an economic calendar and keep tabs on highly reliable sources. It is best to choose your trading periods carefully if you are unsure how the news impacts the market.

Market Sessions

There are four main market sessions: the London, Asian, Tokyo, and Sydney sessions. As a newbie, you’ll likely learn about these sessions as part of your forex education. Ensure you mark out the periods in your daily schedule to take advantage of the various sessions and avoid issues such as high volatility; volatility in one trading session may impact an overlapping session, and if you are trading that session as a first-time trader, you may be unaware of that factor.

Never Compare Yourself With Other Traders

The forex market opens up a window of opportunity that few other industries can: the possibility of earning massive amounts within a short time. The forex market is worth over $5 trillion in daily trading volumes; many traders get a tiny but significant part of that figure as profits. There are documented examples of traders who have built massive careers from trading.

While it is great to admire such traders, you must remember that your experiences are similar but unique, and you have your path as a trader. This is crucial in keeping your balance and trading according to your plan.

Conclusion

First-time forex traders go through various stages of emotion, from excitement to frustration and then to discipline and determination. Going from a newbie to a profitable trader takes time and physical effort, so be ready to patiently put in the work.