Forex trading is a practice for the most technically minded. However, it’s a skill that, like any, can be developed with enough time. One doesn’t have to be tech-savvy to master forex trading with these ten actionable tips.

Nail Down The Basics

Forex trading is indeed a technical endeavour. However, it can be broken down into basic elements. At its core, the purpose of forex is to exchange international currencies at different prices.

A trader speculates on various currency pairs by buying a more valuable currency against another or selling a weaker currency against another. Various chart-based and economic factors determine the price of each forex market.

From this point, one can learn basic concepts like types of currency pairs, pips, spreads, and leverage.

Practise on a Demo Account

Demo accounts are an essential phase of a forex trader’s journey. On the one hand, the saying “never test the depth of the water with both feet” (as in heading straight to a live account without experience) is relevant. However, newbies will need to “get their feet wet” at some point.

Demo accounts exist for this purpose, slowly transitioning the trader into the dynamic world of forex without financial risk. Traders will want to spend at least a year familiarising themselves with the trading platform and testing various strategies until they find the best one.

Gather Data

Trading forex is a data-intensive activity. This is where a demo account becomes crucial, as it’s the perfect environment to gather data. As one refines their strategy, one must understand how to optimise certain performance metrics, such as drawdown and the risk-to-reward ratio.

Learn Risk Management

Any experienced trader knows that forex is speculative trading. Beginners can be gullible and believe that becoming profitable is straightforward. However, mastering risk management is the key to surviving and eventually thriving.

This means that a trader has a plan to manage every risk while participating in forex. The most prominent risk is directional risk, in that one cannot predict the direction of a pair accurately at any given time. You’ll want to manage risks so that if a trade doesn’t work out as planned, you’ll lose only a small portion of your account.

Develop A Trading Style

Forex trading isn’t one-size-fits-all. Traders come in all forms — scalpers, day traders, swing traders and position traders. While each participant in a market may be viewing one chart, there are countless interpretations.

This is where trading styles come in, and it’s something to consider earlier in one’s journey. People are naturally inclined towards short-term trading like scalping (or even news trading) due to the perceived instant gratification.

However, it’s a challenging method that doesn’t suit everyone. Each trading style suits different personalities and preferences. Regardless, a trader must decide what works best for them rather than copying someone else.

Create a Trading Plan

While a trading style is about the trader type, a trading plan determines how that individual should perform when faced with an opportunity. Among the key elements of a trading plan is a strategy, which can take several years to develop.

A strategy is a guideline of rules or techniques that determine one’s best entry and exit timings. It involves one or several trading set-ups the trader uses to hopefully make a profit. Strategies have many moving parts, combining technical, fundamental, and sentiment analyses.

Other parts of a trading plan include defining your risk-to-reward parameters, watchlist, routine and trade management.

Get a Mentor

Many who trade forex are self-taught and quite successful. However, getting a mentor can ease the steep learning curve. Usually, most people can grasp the basics themselves in a few months.

A mentor’s purpose is to impart their first-hand experience, teach advanced concepts in a simpler way, and provide special, edge-defining knowledge.

Unfortunately, finding a trustworthy and reliable mentor is difficult. A person’s best bet is to find someone through verifiable recommendations and track records.

Choose a Reliable Broker

A bad broker can derail a trader’s success even if they’ve accumulated enough skill. The decentralised nature of forex means that not every trading platform is reputable. Thus, it’s key to use properly regulated brokers.

These would provide the best trading environment and act as fairly as possible, particularly when processing withdrawals.

Journal Your Trades

Journaling or keeping records allows one to track their performance and seek areas to optimise for the best results. Rather than using time-consuming Excel spreadsheets, traders can use journaling software.

This makes it easy to gather data insights that should ultimately improve their behaviour and bottom line. Proper journaling aligns with having a plan where one can always ensure they follow their rules.

Start Small as You Transition Into Live Trading

A common mistake newbies make is committing too much money once they enter the live trading stage. While demo accounts are essential, they don’t accurately reflect the real markets, whether considering the technical or psychological dynamics.

Fortunately, you can minimise the risks by starting small. This is possible through allocating a small portion of your disposable income. A cent account is another considerable avenue for trading smaller position sizes than a standard or regular account.

The main takeaway is that live trading is a massive shift from demo trading. It’s vital to transition smoothly into this stage, gradually building up your confidence and profits.

Putting it All Together

While forex is a complex practice, it all starts with nailing down the basics. From this point, traders should spend ample time on a demo account, gathering data, learning risk management, and creating a trading plan.

Following this stage, one should also remember to choose a trustworthy broker and start small once they enter the live stage in the hopes of a complete transition.