Putting your very first forex trade is easy. All it takes is a few clicks of the mouse. But making your very first effective trade? This is a completely different undertaking altogether. It takes incredible discipline and solid technical and fundamental analysis to be able to make an effective forex trade. Here’s five things to consider before making your very first effective forex trade.
Sites are great resources for upcoming economic news that could potentially move the currency pair/s you plan on trading. See if you are about to put on a trade before the Feds release their interest rate decision or China’s industrial output numbers get printed. These high-level news can easily send pairs in free fall. Being on the wrong side of the move can result in heavy capital losses.
Target Profit/Stop Loss
Having a target profit and stop loss for each trade can cap your potential gains, yet more importantly it caps potential losses. This is especially useful for leaving open positions overnight. It’s not effective for limiting losses incurred from weekend gaps, though, so be sure any open positions left open over the weekend have financial room to move otherwise you may get margin called.
Write on a journal to build a database from which you can use for future trade ideas. Include details like currency pair, position size, reasons for taking the trade, and the end result. Recording your very first forex trade and future trades to follow can help augment your strategies by exposing weak spots.
Before making your very first effective forex trade, you’ll need a forex broker that will make a market for you. Choosing the right broker is essential for the long haul. Broker commissions can chip a significant portion off your capital for every roundtrip trade you make. Ultimately, you’d want a broker who is financially sound to overcome economic adversities. If a broker goes belly up, recovering your capital from them can be a challenge, if not even impossible.
Your computer screens and any price charts it displays play an equally essential role as the first four items. A single computer screen will suffice. But if you wish to trade various strategies across multiple currency pairs, you will need multiple computer screens to get real-time data including price feeds and indicator changes.
Making your very first effective forex trade is an exciting moment for your trading career. Yet if you desire to become profitable in the long term once the excitement dials down, use the five aforementioned guidelines.