Forex Trading Dos and Don’ts for Beginners:

Best Practices + Mistakes to Avoid When Learning How to Trade Foreign Exchange Pairs So You Can Start Trading Like a Pro without Blowing All of Your Accounts & Losing Money

If you’re brand spanking new to the Forex Markets and want to learn how to become a formidable trader, chances are you’ve heard of technical analysis and charting.

It’s important to remember that the Forex Markets are shark-infested waters full of moneygrubbing bankers, brokers, and investors with way more patience, knowledge, and ammunition than you.

In other words, they can out-trade you, out-perform you and out-wit you almost every time, unless…

Unless you avoid making the most common mistakes most traders make, while at the same time following best practices rooted in principle and not opinions.

If you do this, then it’s like you place a hedge of protection around your money and trades. If those ruthless traders, out to take your money are invaders, then you’re a stronghold, with walls 50 feet high, protected by a mote.

Without a STRONG foundation of knowledge, and routine practices, it’s likely you’ll get eaten alive by these folks and lose everything. You might as well leave your stronghold and meet them on the field of battle, one you will surely lose.

So without further ado, here are the Best Practices, the Dos and Don’ts of Forex Trading for Beginners that will help you make money and protect your money.

DO Understand the Basics:

There are so many factors that go into becoming a profitable Forex Trader (most of which I won’t mention here because the list is long) but I will say that you must first master the basics before you move onto the more advanced stuff.

The issue with most traders is they try to move too fast, from one technique to the next. From learning one indicator to the next without ever really mastering any one thing.

In sports, some athletes make it to the pros based purely on talent alone. But then they are forced by their coaches to revisit the basics of their sport. In basketball, that wild require they dribble properly, shoot properly, pass properly, do drill properly.

Basics in Forex include understanding Candles, understanding market cycles, understanding which pairs trade most and when, Volume, Timeframes, and a myriad of basic indicators such as RSI (Relative Strength Index), EMA’s (Exponential Moving Averages), MACD (Moving Average Convergence/Divergence)

DO trade the trend:

The trend is always your friend. When in doubt about the direction of the market, take a bird’s eye view. Change the time frame on any Forex Market Pair to a weekly, or monthly chart and look back to the last few years.

You’ll see things you wouldn’t see on a 4-hour chart that will help you to get an overall picture. Moves that may look big on an hourly chart will pale in comparison to the weekly chart and from there you will make better trading decisions.

Trade with the trend, it’s your friend.

DO Keep your charts clean:

Once you start to learn technical analysis, you must keep your charts clean so you see things you wouldn’t normally see otherwise. Most beginners start to slap on tons of new indicators and scratch up a bunch of lines and stone enough, their charts become some “masterpiece” that’s tough to understand.

Kind of like a cluttered room, it can be tough to find things. Less Clutter and fewer indicators are better, especially as a beginning trader.

Try to use 2 – 3 indicators max when you start.

DO Learn How to set proper support/resistance lines:

By far, this is one of the most crucial skills a beginning Forex Trader could learn.

A support line simply means a point on your chart where the price has bounced off of at least two times on the downside. A resistance line simply means a price that the pair has failed to break above at least two times.

It’s important to remember hearing that Candle closures are more important to track than wicks. If a candlewick moves below support but then the candle closes above the support, it’s a strong indicator that the market pair will move up.

The same is true on the upside. If a candle moves above the resistance line and wicks but then the candle closes below the resistance, then that’s a strong indicator that the market will move down in the short term.

Candle closure and higher time frames like the daily, weekly, and monthly are FAR more reliable than shorter time frames for swing trades.

DO keep up with the news and Subscribe to:

They say the fundamentals typically override the technicals but I’m not too sure.

It’s important to remember however that fundamental analysis is a longer-term trading strategy whereas technical analysis is considered more of a mid to short term trading strategy.

Fundamentals focus on facts and long term value and technicals are focused on price action/ market trends.

So it’s important to have a bit of both in your arsenal. Pay attention to the news. Because the news can easily wreck any current trades you’re in. All it takes is one market day or weekend where the president of a country speaks or the fed speaks to make the market unpredictable and out of your control.

DON’T Enter or exit a trade based on impulse/emotions:

This should be rule #1 of Forex Trading and every beginner shouldn’t be allowed to move onto step 2 until they’ve mastered step one, but sadly that’s just not how things work around here.

Learning to manage your emotions and your impulses to place a trade when you feel like you’re right but there’s still a sliver of uncertainty is a lifelong process. In other words, the more you practice self-control and discipline, the better of a trader you become.

A solid rule of thumb here is to avoid deciding to enter a position at all if you feel a sudden urge to place a trade. Place trades sparingly, especially if you’re feeling greedy or right. This is the reason most beginning Forex traders lose all of their money.

DON’T take a trade you don’t know your Risk/Reward Ratio:

The second reason most beginning traders lose their money is that they place a trade without setting a stop-loss. A stop-loss is an order to exit an open trade you’re in at a certain price to limit your loss.

Some of the best traders in the world are wrong about trades more than 50% of the time. They bet the market will move up and then it moves down. They bet the market will go down and it goes up. No one can be right most of the time, and you don’t have to be. You just need to set a stop-loss to protect your money.

This applies to Warren Buffett’s two rules of investing. Rule #1: don’t lose money. Rule #2: see rule #1.

So to set a good stop-loss, you need to know your Risk/Reward Ratio or R/R. A good goal to go for when looking to enter a trade is a 2/1. If you’re right about a trade, you earn 2 times the amount of what you would lose if you’re wrong. This way you can be wrong 75% of the time and right only 25% of the time and still break even. Learning how to set your R/ R is easily one of the most important skills you could ever learn as a trader.

DON’T trade without rules:

The last and final note I’ll make is the fact that you need to set and abide by your own rules you set for trading. Reason #3 most traders lose money when they start to get a bit confident about their abilities is because they ignore their own rules.

Some examples would be:

• I only trade on higher timeframes.
• I only enter a trade when 4-5 indicators all point to the same price target.
• I only risk 2% of my entire account balance on a trade.
• I only trade when I have a 2.5 R/R ratio.

Those types of things. Now I could tell you what goals to set, but every trader has different values, needs and goals, so define them for yourself and abide by them

DON’T be inconsistent:

Let me ask you a question, how does your body look and how do you feel if you neglect to go to the gym at all? Now would you look and feel better if you went 1 – 2 days a week? How about 3-4? 5+?

You see, just like your body, the more you work it, the better you become. The same is true of trading. If you want to go from Forex Beginner to Forex pro, you’ve got to do something every day (or at least 5 days a week).

You get out what you put in, that’s just the law of compensation.

There you have it, If you simply learn to apply the stuff we mentioned here and avoid the rest, you’ll be trading like a pro in no time. Also, if you want to Learn More about Forex and the stuff that’s required to get good as a trader, Click here to get a copy of my newly Released Book: In The Money: Million Dollar Forex Trading Secrets From a High School Dropout .