Forex, or Foreign Exchange, involves the trading of currency pairs, based on their exchange rates. The key concept about trading forex is buying at a low and selling at a high. This will let you make money if the trade goes your way, else you will have to take a loss. Here are a few tips that may help you become a better trader.

Forex

Practice on a demo account

Most Forex brokers will let you use a demo account to make trades, by simulating actual market conditions. You should make sure you spend time trading on this account, before you decide to trade using actual money. The best way to do this is to set your capital to the amount you plan on investing and try to make consistent growth using this. You can use this to try out new systems as well or trading methods, without having to risk real money. However, though it does involve actual market conditions, it may not make you go through the actual emotions that you will feel if you were to trade using real money.

Learn to cut losses

One of the biggest mistakes that most forex traders make is that when a trade starts going against their favor, they let their losses run, due to the fear of taking a loss. This is something you will need to overcome if you plan to become a good forex trader as you will need to learn take losses as they will be inevitable. The key is to identify the right stop loss levels, based on key support or resistance levels that you can identify on your chart. You could also use a trailing stop system to automatically cut losses when they go against your way.

Forex

Technical Analysis vs Fundamental Analysis

The main trading methods that are involved are technical analysis and fundamental analysis. Though you can trade by solely using one of these methods, the best way to trade would be to use a mix of both. Trading using fundamental analysis alone may involve making a lot of speculations. However, when you mix it with technical analysis you can identify which trades to make and which to avoid, based on whether they both agree with one another. Another advantage is that adding technical analysis to your trades will let you identify the best places to make the trades.

These three tips should help you with making money using forex. Remember that forex trading requires a lot of experience to make it profitable, so you will need a lot of patience.

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