Thorough preparation for Forex trading is always necessary if traders want to earn a lot of profits in trading. Before starting Forex trading, there are basic preparation steps that new traders need to take to achieve the best results. Let's find out the basic steps to prepare well for trading!
Learn about the Forex market
The most important thing before participating in Forex trading is to understand the concept of the Forex market. In short, the Forex market is the largest financial market in the world, where investors buy and sell currency pairs from different countries. This market operates continuously 24/24 hours a day and 5 days a week. Each currency pair traded on the Forex market includes two types of currencies, base currency and the counter currency. The value of a currency pair is determined by the value of the counter currency against the base currency. In addition, organisations or individuals can participate in Forex trading in three different ways: the spot market, futures market, and forward market.
The spot market in Forex is the market where trades are executed immediately at the current price. This means that trades are settled within a few seconds or minutes after placing an order. In other words, this market allows traders to buy and sell currencies at the current price and receive money immediately. Moreover, this market is also seen as an attractive market for many investors to participate in Forex trading.
However, the spot market also has certain risks. Especially in the event that market volatility occurs too quickly, traders may have difficulty placing orders or executing trades. Therefore, mastering knowledge and experience is very important when participating in the spot market.
The forward market in Forex is the market where Forex trading is executed at a later time, usually from two days to one week. Unlike the spot market, trades in the forward market are settled at a specific time in the future. This market is often used to minimize risks in currency trading because the value of trading contracts is determined in advance and not affected by market price fluctuations in the future.
However, the forward market has lower liquidity than the spot market and futures market, as trades on this market are settled in the future. Therefore, traders need to carefully consider before participating in the forward market and master knowledge and experience to achieve high profits and minimize risks.
The futures market in Forex is the market where trades are executed at a predetermined price at a future time. In other words, futures trades can be settled at any time in the future. This market is often used to minimize risks in currency trading because the value of futures contracts is determined in advance and not affected by market price fluctuations in the future.
However, the futures market may have characteristics similar to the forward market. Therefore, Forex traders need to carefully consider before participating in the futures market and master knowledge and experience to achieve high profits and minimise risks.
Set specific goals for each Forex trading
To be successful in the foreign exchange (Forex) market, it is very important to have clear trading goals. Clearly, your goals need to be specific and measurable. In short, if you have credible goals, you will absolutely feel motivated to achieve them. In addition, you need to determine a trading strategy that is suitable for your goals, such as following trends or technical analysis. You need to research and test different strategies to find the most suitable one for you.
With a clear trading plan, you make decisions to buy or sell based on your strategy. As well as, it will help you control your psychology well in each Forex trading. Finally, you need to monitor and evaluate your trades to see if they achieve your goals or not. If you do not achieve your goals, reconsider your trading strategy and plan.
Always be mentally strong in Forex trading
There is no doubt that the Forex market can be very unpredictable and stressful. However, Forex trading is one of the most popular forms of financial investment today. If you want to succeed in this field, the most important thing is to have a strong mentality.
Understanding the market, how it works, and the factors that affect prices will help you be confident and avoid unnecessary risks. In addition, you should create a comfortable working environment, and focus to be able to make the right decisions.
On the other hand, your psychology will be influenced by market fluctuations. Try to keep a calm mind and adjust it when the market fluctuates. At the same time, modify your opinion on money. Not only that, you need to have a clear understanding that losing money will happen and focus on minimizing that situation. As a consequence, if you have a strong mentality, you will increase your chances of success in Forex trading.
Improve knowledge and practice
One thing for sure is that knowledge and experience will be an important factors for you to have good psychology in Forex trading. Learning from previous trades, especially failures, will help you improve your skills and avoid mistakes in the future.
In the current Forex market, most brokers provide demo accounts for traders. With these types of accounts, traders can test their own strategies and not be afraid of risks. That is, traders can use virtual money and trade on the real market. Through trading experience on these demo accounts, you will have a better understanding of the MT4 or MT5 platform and all management tools on the platform.
Try not to be greedy for trading and know how to use stop-loss
Being eager to Forex trading is a virtue, but you should also have it in moderation. It is true that greed in trading can lead to unwanted risks. To be able to control this mentality, you must set a maximum number of trades and losses that you can accept in your trading plans. As a consequence, when that number reaches its maximum, you will know to stop trading and not be overwhelmed by the feeling of greed.
In addition, you can incorporate a Stop-loss tool to increase performance in preventing you from overtrading. On the other hand, this tool can help you close in positions that cannot be done manually. With this tool, you will not lose all your account capital in bad trades.
Create a Forex trading diary
Besides having a specific trading plan, you can refer to some resources to improve your knowledge of Forex trading. Learning more about this market will help you to have clearer and more correct views in making trading decisions. In addition, you should also create a Forex trading diary to track and evaluate the effectiveness of your trades. This diary not only helps you to recognize patterns and trends in your trades but also helps you analyze trading results to improve your trading strategy.
By keeping an accurate and regularly updated trading log, you can improve your trading skills and increase your odds of success in the Forex market. Not only that, you can also take courses or seek information from trading experts to improve your knowledge and skills. There are a lot of elements that you should note in the trading diary, for example, Entry and exit dates with the best currency pairs, Profit or loss from trading, Long-term market analysis, etc. Therefore, the Forex trading diary will be necessary for every trader in order to build a better trading strategy.
With these things, beginners will have an overview of Forex trading and the important factors to note to achieve the best results. However, to be successful in Forex trading, new traders need to invest time and effort to learn, practice skills, and always update information about the market to make accurate investment decisions.