Tips for First Time Forex Traders

von Anthony     Sept. 18, 2019

8 mins read

Forex trading (or "foreign exchange trading") is the process of buying and selling currencies, and trading them back into their original form when the held currency has risen in value. It is an effective way to make money simply because of the massive volume of currency that moves in and out of the Forex trading arena to the tune of almost $2 trillion every single day. Forex trading is a great opportunity to make money; but it isn't for everyone on the market. Some traders may enjoy other types of capital ventures, like stock trading or e-currency trading more than Forex trading.

In Forex trading, the term "money management" refers to how you manage the capital that you have available for trading. This specific type of money management includes decisions related to how much you will risk on each trade, how much money you will decide to buy or sell, and which indicators means that it's time to buy or sell. Money management is a crucial skill that everyone involved in Forex trading should have. It helps you not only make smarter trades, but also guide you when to bow out. As a Forex trader, unless you implement long term money management techniques, you will likely lose money; including money you may have made from accurate market forecasts.

We've collected some of the web's best money management moves that can help save you money and earn more when Forex trading. So before you hop into the world of Forex trading and open an account, make sure to go through the list below for things you should know before entering the world of Forex trading.

Be ready to do thorough research.

One of the most costly mistakes traders make is to jump into the Forex market without doing any research or studying how the world of Forex trading works. They may be overly confident after watching a few video tutorials, or may believe the skills they gained in stock trading will seamlessly transfer over to Forex trading. However, all traders should know that if you want to engage in effective Forex trading (i.e. make significant amount of money trading currencies), you need to be willing to put in the time and effort. You need to research trading styles, choose one that's right for you, and undergo a period of trial and error. Contrary to popular belief, Forex trading is not a "get rich quick" scheme;" it takes a significant amount of time and education to become successful.

Keep yourself updated with politics and current events.

The best Forex traders know that a large part of the movement of currencies and determining how it will react (i.e. increase or decrease in value) depend on the culture, history, and strength of the economy of a country. Some Forex traders even monitor world news and events every minute. If you have no interest in learning about the world and how countries interact, chances are, Forex trading may not be the right type of trading for you.

Determine when you will trade.

One of the biggest advantages of the Forex trading schedule is that it is not confined to a strict 9-to-5 plan like the New York Stock Exchange. Because those engaged in Forex trading can be located all around the world, the market is open twenty four hours a day, five days a week. This makes it ideal for single parents, students, or those who work traditional office hours to make a great living trading Forex in their spare time.

You need to have discipline.

By far, the most important quality a Forex trader must possess is discipline. One of the biggest rookie mistakes new Forex traders make is trading based on their instincts and emotions. For example, when the Brexit occurred and the value of the British pound was speculated to crash; the actual decrease was much lower than expected because so many beginner investors chose to dive in immediately without fully looking or thinking about the consequences of the market. This type of impulsive and emotion-driven trading is guaranteed to cause investors to lose money. While it might be tempting to dive right in and invest when you see currency match pairs rise and fall, the smartest Forex investors take the time to do their research and track the market before throwing themselves into a trade.

Exercise accountability.
What do governments, banks, investment funds, and individual traders have in common with the Forex market? The ones who make the most money (or avoid losing their investments) are the ones who trade with a plan and remain accountable for their actions. Regardless if it's a strict set of predetermined market movements, or the recommendation of a group of investment experts, every smart Forex trader has rules and guidelines for how and when to exchange and trade currencies. What holds these investors to their trading plan and stops them from diving in to a trade on impulse is accountability. If you're going to be a smart Forex Trader, you need to develop a set of rules that regulates how and when to decide the best trades to make. You also need to hold yourself accountable and be disciplined enough to stick to your rules in case your strategy fails.

Now we will look into the more technical aspect of Forex trading. Below are some tips that may be helpful in maximizing gains and mitigating losses when making moves as a first-time Forex trader.

Position sizing limitation.

Position sizing refers to the amount of total capital you invest on each trade. In essence, it is the volume of your trade or order. Proper money management involves strict limitations of your position sizing. It is generally advised to risk no more than 1 or 2% of your total capital because going over this amount can put your entire Forex trading portfolio at risk. Think about it as deciding to "put all of your eggs in one basket." Limiting position sizing based on the size of your portfolio allows a cushion in case you lose money on a trade.

Implementation of stop-loss orders.

A stop-loss order is an order given to a broker to sell a security when it reaches a certain price. It is useful for a number of reasons. First, many Forex trading systems are now automated, and they do not require you to sit in front of your computer 24/7 and constantly monitor the prices of the currencies you invested in. Second, stop-loss orders provide you with a type of "insurance" against unforeseen trading or technological events. Should an occasion arise wherein you cannot access your account, a stop loss order will sell off your securities if the price of a currency suddenly drops. Finally, implementing your Forex trading account with a stop-loss order prevents you from allowing your emotions to influence your trading, and can even protect your savings should the value of a currency drop.

As a Forex trader, you'll need to determine when your stop-loss orders should be implemented. Failing to use stop-loss orders opens Forex traders to the possibility of massive losses.

Use of conservative estimations.

When a rookie Forex trader loses money, most of the time it is because the trader risks too much and gets too bold with their trading strategy. Applying a conservative attitude and knowing when to sell with conservative earning can save you stress, as well as a large amount of funds.

Superior money management.

Forex trading doesn't end when the trader is finished exchanging currencies for the day. The best traders carefully manage their money and save so they are able to jump on a hot currency when the time is right. Before you start trading Forex, it is recommended that you have your money management skills in check. This will give you a sense of control over your outstanding balances and allow you to take advantage of quick changes in the Forex arena – which are relatively rare – but allow for the biggest risk-reward paradigms in the currency-exchange market.


Forex trading is not a “get rich quick” scheme. It requires a lot of time, patience, and perseverance to become a successful Forex trader. It is important to educate yourself about the world of Forex trading before anything else. When you make your first move as a Forex trader, remember to keep yourself disciplined and always hold yourself accountable for your moves as a Forex trader. Thorough research, discipline, position-sizing limitation, stop-limits, conservative estimations, and superior money management are going to be your friend when making your first Forex trade.

Erhalten Sie unbegrenzten Zugang zu unserem Learning Center,
Broker-Insights und exklusive Werbeaktionen kostenlos!