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The following guest post is courtesy of freelance writer Emily Miller.
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1. Learn, learn & learn some more
Lacking the financial knowledge or trading acumen? If the answer is yes, you are not alone. The more knowledge you accumulate, the more skilled you’ll be. Many aspiring investors start out without any prior Forex trading experience. With constant guidance provided by a financial expert along with some research will bring you up to speed. Participate in webinars, 1-on-1 trading sessions, read plenty of trading books, news and financial websites, ask questions. Education unlocks all the doors!
2. Take it slow! Practice makes perfect.
To become good at something requires practice. Rarely does anyone master something immediately. The best way to practice is by opening up a Forex demo account so you can test your skills before going into the real action. A key for achieving trading success is taking it one step at a time. Aggressive trading from the beginning is a common mistake many new traders make. As tempting as it may be, trading is something that is best done methodically. Methodical traders are the ones that almost always yield the best returns. Remember practice makes perfect.
3. Keep your emotions in check
You must control your emotions during trading. Keeping a cool mind and being able to identify the right trades for you is a difference maker.
Consider reducing your trading size after a losing streak, as opposed to going all in trying to win it back. Also, don’t be driven by fear either. Keep your head cool and think about stock trading as a long-term investment. Remember trading is available 24 hours a day, five days a week so there is no need to sit in front of your computer all day waiting on edge.
4. Pick an account type that suits you best
Pick your account type that is best suited for your knowledge level. It is advisable to use one with the lowest leverage in order to reduce your risk exposure, especially if you are a beginner. There are a lot of great online trading platforms that you can choose from. Before venturing into trading, the wisest thing you can do is carefully quantify your risk capital. This factor determines the upper limit of your positions sizes.
Most of the traders advise not to risk more than 2-3% of your overall risk capital in a trade.
5. Choose a trading plan and stick to it
So many variables influence the markets and have the potential to negatively impact traders who are unprepared. However, for those who select and stick to a specific trading plan can mitigate those outside variables. As long as you stick to it, a trading plan will enable you to handle all of the different trading situations and scenarios that will come your way.
Think of this like a business plan. Who would want to start any business without planning ahead?
6. The stop loss order is your best friend
The stop loss order is your best friend in the Forex and CFD world. Learn how to protect your money by using it all the time!
Another important tip that you should be aware of: always place a Stop Loss before validating your order!
7. Trade out of passion, not obligation
You should never start trading out of obligation. Learn how to enjoy doing it, set yourself reasonable goals and manage your risks accordingly. If you started trading because you want to get rich overnight, lose your 9 to 5 job or become famous, then you may become disappointed … fast.