Few markets have appreciated as sharply or consistently as forex over the course of the last few years.
In fact, the forex market recorded a global daily trading volume of $6.6 trillion at the end of 2020, up from just $5.1 trillion four years’ previously.
While a market of this size may be appealing to new traders, however, its volatile and highly leveraged nature means that the majority of investors lose money over time. In this post, we’ll appraise the best strategies for new forex traders, while asking how they can help you to achieve success.
#1. Make the Most of Your Demo Account
When you register for a new account as a forex trader, a reputable broker should offer you access to a so-called “demo account”.
Usually available for a period of between three and six months, a demo account will simulate a real-time market environment, enabling them to experiment with different trading strategies and apply their theoretical knowledge without risking their hard-earned cash.
This provides the perfect bridge between theoretical learning and practical market experience, while it can make all the difference in terms of your future success or failure.
#2. Learn the Art of Copy Trading
In the digital age, we’ve seen a marked increase in the deployment of social or ‘copy’ trading strategies.
This requires you to connect with experienced and successful traders, before copying and implementing their historically successful trades.
The key here is to identify strategies that can leverage recurring market trends, before timing their implementation accurately as a way of optimising your returns.
#3. Understand the Importance of Risk Management
As we’ve touched on earlier, the majority of forex traders lose money over an extended period of time (70% according to some estimates).
This reflects the volatile and unpredictable nature of forex trading, and in order to optimise your chances of long-term success, you’ll have to establish a viable risk management plan. This creates a safety net for your investment strategy and hard-earned capital, reducing losses and enabling your money to go further in the process.
For example, you could apply a “stop loss” to your individual trades. Stop losses work by automatically closing positions once they’ve incurred a predetermined level of loss, ensuring that you never lose more than you can comfortably afford on leveraged trades.
#4. Following Trends
On a final note, one of your best bets as a new trader is to develop a strategy that’s focused on following trends.
Once again, this will require you to study and analyse historical trade data that’s relevant to your strategy and chosen asset class, as you look to identify key trends that are more likely to recur in the marketplace.
You can then successfully forecast trades based on historical trades and price shifts, while enabling you to leverage an underlying sense of determinism.
