The foreign exchange market (Forex) is one of the largest financial markets, based on trading volume and daily turnover. Norway’s economy is dependent on external trade and this has led to a strong focus on international business and economics in educational institutions.
Consequently, many students are studying abroad every year and Norway exports 95% of its goods. As a result, most people living in Norway are well-informed about the foreign exchange market and its significance for economic stability.
However, most Norwegians who participate in the Forex market are professional investors, rather than beginners.
Five essential tips to help you get started
Trading in the forex market can be incredibly rewarding, but only if you know what you are doing. There is a lot of money to be made and lost when dealing with currencies, so you must give yourself every advantage possible before putting your investment on the line. If you want to successfully trade in this market – or any other- following these five tips will help you to avoid many common pitfalls.
Have a plan
When trading in the forex market, you must have a clear idea of what your goals are and how you plan on achieving them. If you do not know why you are doing something or where you want your money to end up, you likely will not make it there. You need a plan and a goal to be successful at anything, including trading.
Know the risks
While forex trading can be a great way to make money, there is also the possibility that you will lose everything that you invest if your trades go poorly. When you enter a trade, there is always the chance that it will end in failure and leave you with nothing. In forex trading, success is never guaranteed- even when you follow your plan to a tee.
Never focus on short-term profits
Many beginners tend to look at the markets as an instant way to make money. They often begin trading with the expectation that they will have a huge boost in their financial situation within a short period. This is entirely unrealistic and can lead to disaster. A lot of traders start with a small amount of money that they will not be able to handle losing. If you want to ensure that you can withstand the bumps that come along with trading (and they will come), you need to focus solely on long-term goals and leave the short-term expectations by the wayside.
Do not give up if your first few trades go poorly
Like most other things in life, learning how to trade takes time and experience. That means that you probably will not make it your first time out. It is important not to get discouraged and give up if your early trades do not go well. This is a learning process and you need to take the time necessary to understand how things work before expecting that they will go smoothly.
Think twice about trading with high leverage
As is the case with most things, trading at high levels of leverage can be dangerous. If you trade with too much money on the line you run the risk of losing it all in a single bad move. While there are people who make use of high leveraged accounts, they often have many years of experience under their belts and know exactly what they are doing. If you want to avoid a situation where your entire account is wiped out in a single day, low or medium leverage should be your goal.
Pros and cons of trading at high levels of leverage:
- high leveraged accounts allow for greater profits but also come with a much higher risk
- low leveraged accounts are less risky as you are trading with less money but can lead to smaller profits
Remember that to be successful, you need more than just a solid strategy. You also need patience and the willingness to learn from your mistakes. If you are not willing to spend time learning about the market before putting your money on the line, then it is probably best that you avoid trading in the forex market altogether. You should always read more about forex as a beginner in order to become a successful trader.