To invest in Forex, you need to have capital. The level of profits and losses varies according to the value of the invested capital. The novice trader needs to determine the amount invested in the forex market in the short to medium term. He must also adopt a methodology and know-how to manage risks. By reading books and reviews such as Trade Horizon Review , the novice trader can assimilate the fundamentals. So, here are some of the basic rules for trading currencies.
Apply a methodology
Having a trading plan in place is a fundamental rule for success in Forex. The trader must determine his strategy of buying or selling currencies according to the market trend.
To be successful in operations, you must not act by intuition but by planning, taking the context into account. The prices on the foreign exchange market can be in a bullish or bearish phase. In all situations, you have to know how to adapt the plans.
Mastering graphical analysis
Proficiency in graphical analysis is essential. It allows you to make decisions and develop effective trading plans.
The trader must therefore know how to detect on a chart the phases of recoveries when currencies are devalued.
By anticipating changes in the market, the investor can make purchases when prices are low enough. It must also recognize long bearish phases such as that going from 2000 to 2003.
In Forex, it is useful to temporarily withdraw from the market when the trends are down and not suitable for trading. It may be better to focus more on strong trends.
The novice trader should avoid trading in Forex derivatives such as warrants, trackers, certificates, bears, turbos and Cfdcs, which can cause large losses.
With the prospect of gains of up to 200% of the capital invested, derivative products have prices that are particularly difficult to control. Transactions in derivatives present a significant risk. The probability of winning 200% of the initial investment is slim.
A trader wishing to invest in derivatives must limit his commitment to 2 or 5% of the capital.
Adopt a good strategy and good behaviour in the face of risks
In Forex, you have to adopt a risk limitation strategy by diversifying operations. A beginner will not be able to follow several lines simultaneously.
The experienced investor can intervene on ten lines and observe the movements of currencies daily. The most seasoned traders will be able to follow around twenty lines.
A loss on a transaction consisting of a single purchase on a line will have serious consequences.
It is recommended to avoid diversifying the portfolio without performing effective analyzes on the profitability of certain operations and the risks.
Risk management by controlling emotions
All transactions carried out on the foreign exchange market present risks. The risks must be controlled by taking several parameters into account. A good trader should not be put off by a loss. The best traders can also lose in their trades.
So, in Forex, emotions should be kept under control and should not influence trades. It is necessary to persist, not be destabilized, and remain in conformity with the objectives that must be determined before the operations.
Risk management by meeting objectives
Buying and selling decisions must be made within the framework of certain predetermined objectives.
The trader must respect the value of a share for its sale and systematically use the stop loss. If the value of a currency increases, the sale should take place when the target is reached.
It is recommended that the novice trader not try to exceed his objectives since the prices can vary abruptly.
The use of the stop loss helps reduce losses in the event of a fall in stocks. Thus, in the event of losses, one should not attempt an overtrade. The trader should apply the stop loss to reduce losses.