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Forex: Practical Tips for Beginners
Written by: PaxForex analytics dept - Saturday, 19 January 2013 0 comments
In this article, we decided to give some very practical advices and unwritten rules, developed over a long time in the environment of experienced traders of this financial market. We hope that this set of tips will be useful for all beginners.
Trend is your friend Forex market always has a definite direction. It is important to understand the "mood" of the market and most of the positions should be opened in the direction of the prevailing trend. The trend is the only friend of Forex trader!
Buy dips - sell the rallies This assertion is rather humorous nature of axioms. The basic meaning of the market is just to buy low and sell at the top. It is important to determine when to enter the market - where is the bottom and where is the top. For the novice trader it is more important to determine the top or bottom of the current trends, correctly understand the dominant mood of the market and build his strategy accordingly.
In this sense, the last statement echoes earlier. For a successful trading in this market you need to correctly predict more expectations of its participants at a time, rather than build a "100% correct" forecast from the academic and technical standpoint.
Determine in advance the action script A very important point is the definition of entry points, as well as, of course, the exit points. Do not enter the market when it’s under the unclear situation or, if occurring fluctuations do not fit o one of the expected scenarios, and try as much as possible to fix the previously open position as it is during periods of chaotic motion there is the greatest risk of loss.
The bad habit is when a novice trader, sitting at the computer begins to frantically search tools and the direction in
which he can open a trade. Starting work in this case means a superficial market analysis and a desire just to begin to "work". Serious analysis is also a job and its most important stage. Before opening a position it is necessary to determine the preferred level for the start in advance, follow the development trend and enter the market in the case of coincidence of trends with your expectations.
Ride on profits long. Cut off losses short These two statements relate to extremely important issue - risk management at the Forex market. Novice trader, saeing a small profit, often immediately takes it and at the same time he doesn’t want to close a losing position for a long time in the hope of a favorable change in the course. This is one of the main causes of losses at the initial stage. It is important to commensurate volume of gains and losses.
Limit the amount of information One of the most important points is to identify sources of information that will benefit the trader inhis work. There is a lot of Information about the markets. You need to identify just those sources that may have practical value for your trades. It is important to determine what to use and what to read for understanding the market, and not to rush in search of any information.
Stay cool and calm You should always keep yourself in hand. A huge amount of losses happens due to loss of control. Excessive euphoria of a profitable trade is no less dangerous than the nerves during losses. Today you lost but you always have a chance to win tomorrow. After fixation of a loss or a good profit do not try to immediately enter into the market again in order to "earn more" or for "revenge." Try to cool down and reflect on the results, and only then with the "cold" head you can re-enter the market.