The Basics of FX Trading – Making Your First Trades

The global currency market has been extremely active over the past few months, and since this is the most liquid sector of the financial industry, it is attracting a large number of inexperienced traders. On the one hand, daily ranges are limited, which aids in managing emotions. On the other hand, costs and margin requirements are low, allowing you to get started with limited resources.
If forex trading is something that interests you, this article will guide you through your initial trades. Before we begin, keep in mind that the initial phase is all about familiarising yourself with the market and achieving consistency.

POSITION SIZING

Returns should be the least important priority for a beginner. Despite the fact that everyone begins trading with this objective in mind, trading is a profession like any other, so mastering it properly is the initial step. Keeping this in mind, ensure that position sizes are limited.

The majority of online brokerages permit trading in micro lots. If the initial trades result in a loss, which is highly probable, you will limit the potential loss by not initiating trading with a large volume right away. Become accustomed to trading micro lots and then, if your account size permits, gradually transition to mini lots and even lots.

ASSET LIST

You should concentrate on the major currency pairs. EURUSD, GBPUSD, USDJPY, and USDCHF would be an excellent starting point. A large asset list at the outset serves no purpose because it is difficult to monitor and analyse so many different pairs.

Start with a short list of currency pairs, and as you gain experience with the larger ones, you can naturally expand to include crosses and exotic pairs.

Market research.

Trading is a flexible endeavour, and your job is to constantly monitor a variety of variables, as they are the ultimate determinants of price development. Whether you’re observing the market’s reaction to key support and resistance levels or focusing on fundamental factors such as inflation figures, GDP, and employment, you should employ a rules-based approach.

Analysis must be performed prior to, during, and after the closing of a trade. This is a labor-intensive endeavour in which small details frequently make the difference. Discretionary trading becomes a liability; therefore, ensure that you have a strategy that consistently generates profitable trading setups.

You can also read: Top Three Financial Metrics for Entrepreneurs to Monitor

RISK MANAGEMENT

Risk management is one of the most important considerations to keep in mind. Ensure that you risk no more than 1 percent, 0.5 percent, or even less as a percentage of your account balance on your initial few trades. Some traders refer to the “two percent rule,” but in the beginning, this is excessive.

Risk management is what distinguishes successful professional traders from those who become trapped in the market with no way out.

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