BC: Answering Forex Beginner FAQs – Punch Newspapers
These answers highlight some of the best practices beginners in Forex trading should embrace.
Ebuka Ambrose, a skilled trader with over 2.5 years of experience, answers the questions beginners often ask him below. He has hosted many educational events, both virtual and physical, for OctaFX. Here is one of his latest Question and Answer Sessions with Nancy Isime
How much does a trader need to have to start trading Forex?
Just how much capital a trader needs differs vastly. People have different profit goals and risk appetites. Forex brokers also have their minimum deposit limits. OctaFX sets its limit at only $40, one of the lowest there is, opening up the Forex trading market to many in lower socioeconomic class.
Best practice: it is advisable to practise strategies on a demo account until you’re confident enough to go live with a real account. Deposit as low as $40 on OctaFX to start earning.
What currency pairs should I trade as a beginner?
It’s advisable to start your trading journey with the popular currency pairs. Typically, you want to stick to currency pairs that are associated with the United States Dollar (USD). The USD market is highly liquid and volatile, so you’ll likely be making profits more quickly than with other currencies.
Based on historical performance and global adoption by traders, here are the most popular currency pairs you can add to your trading portfolio: USD to EUR; USD to JPY; USD to CAD; GBP to USD; USD to CHF; AUD to USD.
When is the best time to trade?
Although the Forex market is open 24 hours a day, there are periods when the market is especially active. These periods are called trading sessions. There are four major trading sessions which operate during official business hours around the world: Sydney (Australia), London (UK), Tokyo (Asia) and New York (US) sessions. Each trading session lasts 9 hours.
The best time to trade is when the markets are highly active and experiencing high volatility (that is, active price movement). If the markets don’t move, traders don’t make money. Simple logic suggests that you can see the highest market volatility when more than one trading session is open. It’s advisable that you trade when there is an overlap of two or more trading sessions—that is, when multiple sessions are open.
Here’s an example of a good time to trade: The NY session opens at 1pm Nigerian time and closes at 10pm. The London session opens at 8am Nigerian time and closes at 5pm. The overlap of these two sessions (1pm to 5pm) is a great time to trade.
Which Sources Do you use to Analyze the Forex Market?
The Forex market can be analyzed in two ways—using fundamental analysis or technical analysis.
Fundamental analysis requires that you analyse the market based on events and news that happen in a country the currency of which you plan to trade. Some brokers, like OctaFX, provide its clients with reports on the events and statistics in a country like the employment rate, inflation rate, GDP, and many more in their economic calendar.
Technical analysis is analysing the market based on what you see on your Forex chart. Historical data and basic economics like demand and supply play a large role here. Technical analysis thrives on the unwritten principle of ‘What has happened before will likely happen again’. On OctaFX Trading view, you can check out trading ideas, strategies, opinions, and analytics at absolutely no cost. You can learn about market insights from OctaFX YouTube channel, webinars, live trading etc.
How do you close and open an order?
After analysis is done, you may decide to open an order that you believe will make you a profit. In this case, all you have to do is select whatever instrument you want to trade. Then, you input your lot size, as well as takeprofit and stop-loss levels. You’re instructing your broker to take you out of the market at extreme levels that you have preset for profit and loss. Final step, click on ‘Buy/Sell’. Your trade is now open.
To close an order, click on an open trade and then a button to exit, (usually an X) and you’re out. It’s that simple!
How much risk should be taken per order?
When you’re thinking of opening a trade, think about how much you can possibly lose on a trade. While the thought of how much money you can make is playing around in your head, always consider the risks involved in your trade. In conservative strategies, your risk level should be no more than 1% of your trading balance per trade.
If you have a $1000 account, you should only allow a $10 loss on a single trade. This way, with an appropriate stop-loss level set, it’s nearly impossible for your entire portfolio to be wiped out in a single trade if things go bad. Keeping your risk small per trade allows you to have more room to open several other trades at a time.
You may see other professional traders risking a larger percentage of their account size in their trading strategies. Remember, different people have different risk appetites, often built up with experience in the market. What’s common for both beginners and professionals is that it’s in everyone’s best interest to lose as little as possible.
How do you control your emotions when trading Forex?
- Beginners have to come to the realization that losses are an integral part of trading Forex. There is simply no way to avoid it entirely. Any trader, even the very best Forex trader, will lose at least one third of all the trades he enters.
- Implement strategies that you will use to mitigate losses and reduce the risks on your trading account. This way you don’t get too confused that you can’t have a clear mind to achieve set profit goals. We call this ‘falling into a tilt’.
- Don’t cut your losses in a hurry. When you lose, it’s not the end of the world. Stick to your trading plan. You’ll be amazed at how much your compounding interest will come to be.
- Protect your capital. Your deposit is your instrument to make profit. If you don’t have money to trade, you can’t make any money in the market.
What are the main characteristics of a successful Forex trader?
- A successful trader is an educated trader. When we say ‘education’, what is meant isn’t necessarily formal education. Rather, it’s having applicable knowledge of the foreign exchange market. You have to deeply understand how the market works to succeed as a Forex trader.
- Think of profits in percentages, not money. This makes it easier to disconnect your emotions from your trading experience. Win or lose, your rationale should be that you have increased (or decreased) your trading portfolio by a certain percentage, not by actual money.
- A successful trader is patient and consistent. Showing patience when entering a trade and having patience while a trade develops are integral parts to successful trading and investing. You don’t want to be that guy who impatiently closes a trade moments before the trade goes in his desired direction. Leaving profits on the table can be hurtful.
- A successful trader doesn’t chase money. Whatever profit you make in the market is the reward of a successful trade. Focus on having more successful trades than unsuccessful ones. Forex is not a ‘Get rich’ scheme. If you spend your time chasing money, you’ll likely never get it.
OctaFX is a global trading platform awarded for its excellence in providing innovative tools with which beginner and professional traders can reach their investment goals.
When you pick up a hobby, you will likely recruit friends to do it with you. It’s no different with trading. It’s better enjoyed with friends. OctaFX has an Affiliate Program called “Invite a Friend”. You send any friend a link to come learn and trade with you, and you get rewards for every person you successfully bring on.