Savings and investments used to be so easy. Walk into your high street bank or sit down with a financial adviser, put some money into a high interest account and some more into some stocks and shares, sit back and watch your nest egg grow.
Sadly, these days of rock bottom interest rates, a domestic and global economy that is only gradually recovering from long-term recession and pension funds teetering on the brink of disaster mean that finding solid and lucrative investments is far more of a challenge.
It is against this backdrop that the notion of Forex trading has seen growing popularity among amateur investors. Once seen as an area where only expert investment bankers dared to tread, the internet age has demystified the subject to a large degree.
There are numerous online guides to help you tell your pips from your spreads and your bears from your bulls. But how about some real-world pragmatic advice from those who have been there and done it, that goes beyond the theory, the strategy and the terminology?
Here, we have gone out to some of those experts who have taken on the bulls, the bears and even the wolves and come out on top, and asked them what single piece of advice they would give to a new trader. Here are some of the best replies:
Be a risk manager
Many new traders set up an account, learn the basics and think they are there. In fact, they have not even begun the journey. Manage your account from the perspective of a risk manager and constantly nag yourself to follow those basic rules that protect your fund from catastrophe.
Plan to succeed
Benjamin Franklin’s famous line about what happens when you fail to plan is probably among the most quoted in history, and that is because it is such a fundamental key to success in every facet of life. That applies to trading as much as anything else. Plan your activities in terms of what trades you intend to make and when, keeping the Forex market hours at the forefront of your mind. Have your stops planned out and don’t mess with the plan once you have pressed the button, however tempting it might be.
There are no shortcuts to success
Anyone can succeed in Forex trading, but many fail. The reason is invariably that they try to run before they can walk. To make money on the Forex market you either need to be very lucky or very knowledgeable. Luck always runs out sooner or later, but knowledge is for life. However, to become knowledgeable, you have to invest time and effort. All the resources are out there online, just waiting to be discovered. But only you can read them and use them to your advantage.
Strive for consistency
The primary aim of any new trader should be to make daily gains. Don’t focus on quantity, but on consistency. If you can get that part right, growth and wealth will follow. To achieve modest but consistent yields, aim for low risk trades, follow a consistent strategy and allow your profits to accumulate and compound in your trading account. It’s all about little acorns and mighty oaks.
Don’t go too big too soon
Too many new traders dive in at the deep end and lose their shirts, never to be seen again. Why do they do it? Keep your account small while you are learning the ropes, and keep asking yourself what have you got to lose? If the answer is “not much” you can make those beginner mistakes and come back fighting the next day.
Be ready to lose
However well prepared you are, there’s no such thing as a dead cert. Sometimes even the most promising looking trade will go south. One of the oldest rules in the book is never to risk more than two percent of your fund on any single trade. Even the grizzled experts continue to follow that piece of advice because while the Forex markets provide a great opportunity to make money, they can also turn around and bite you without warning.
Follow your own rules
If you are serious about making a success in trading, you will have studied the market, set up a dummy account and devised a killer strategy. That’s great, now don’t throw it all away in week one. Newbie traders can be terrible at following their own advice, and that’s where they often come unstuck, changing tack on stops and suddenly doing crazy things as soon as a trade starts to go south.
Treat the market with respect
The market is an unfathomably large and powerful beast. If you try to take liberties with it, you will come off worse. Remember your risk mitigation strategies and treat them as the safety harnesses they are. That way, nobody gets hurt.