Precautions to Take When You Start Forex Trading

Precautions to Take When You Start Forex Trading

Forex Trading PrecautionsThe international currency market called Forex is one of the most liquid markets that traders love to dabble in. It has an easy entry system and has the concept of leverage, that allows traders to trade for bigger amounts. These are some of the traits that make the Forex market a lucrative attraction for traders. However, like any other trade, FX is also a speculative market and is inclined to its own share of risks. Seasoned traders who have been trading in this market and have had their share of ups and downs, big failures as well as successes, understand, that there are some precautions which cannot be overlooked ever when starting out as an FX trader.

It is, therefore, advisable for a new trader, who has made up his mind about being a part of the FX trading scenario, to begin with, some professional guidance. There are beginners courses available on how to start Forex trading for new traders. Here are a few pointers on what precautions should a trader adhere to, when he  starts trading in the FX market :

1) Answer the “Why FX trading for yourself”:

As mentioned earlier, the FX market is easy to enter into. But should this be the reason enough for a new trader to enter the market? This could be one of the reason, but is this enough of a reason? Research the market, follow case studies, take some classes or follow Forex experts like Kishore M, who are traders’ themselves and draw inferences. Jumping into the bandwagon of FX would be the easiest move. However, if a trader does so, he must be prepared to bear loses and still keep on going strong. If these basic Fx market risks are not feasible for the trader, he should probably look at other market options to trade in.

2) Evaluate financial standing:

Forex is an investment market where, as a new trader he or she will be betting money on currency pairs. Before a trader hits the buzzer for a currency pair, it is better to stop and re-think. Are you prepared to take a hit? The money a trader would be investing in the FX market might be worth a car or a long dreamed vacation or could be the part payment of a new apartment’s down payment. If a trader is okay with such compromises and sacrifice, then he should go ahead.

3) Look for a reliable broker:

Forex Trading broker

Forex trading can be done only through a broker, especially when a trader is trading online. Before deciding on a broker, he must ask, talk and investigate(if needed be) about the broker. A genuine broker will let a new trader look at their trading record without hiding their failures.  Here are a few pointers to look, to help a new trader find a broker:

  • The broker must be affiliated to any one of the regulatory bodies in USA, UK, Australia, Canada, Switzerland, Germany or France.
  • Check the commissions and the spreads that the brokers will take
  • Check for deposit and withdrawal systems of that brokerage firm
  • Check the trading platforms that are offered by the broker for its user-friendliness; and
  • Check with other traders who are with the broker already, about their efficiency in filling in orders

Kishore M emphasizes on the need for patience while he states that for a new trader, finding the right broker might be frustrating. In such cases, being patient is vital. He also advises that new traders, who opt for courses for beginners, must ask their guides about broker names that they might suggest.

4) Practice makes a man perfect:

Though in the trading world in general, including the Forex market, nothing is ever perfect homogeneously, yet the need to practice in a demo environment cannot be stressed enough. Before a new trader finalizes a broker, they must ask the brokers if the brokers provide a demo or a practice account. Most of the brokers do provide such an account.  A trader must utilize this opportunity to trade via the demo account. This will help the trader, to not only get a feeling of the real trading world, but it will also make a trader realize the importance to be on top of the world events and the need to follow trading mantras of their brokers for learning but will also help the new traders to develop their own strategies.

5) An emotional check is a must:

The way a new gift or a new purchase excites us, for a new Fx trader the first few days will be exciting and filled with great hopes. If a trader strikes gold, he will most likely go overboard and end up losing what he had won. Or he might lose most of what he invested. In both these cases, emotions will take hold of the traders and push them to either play harder or lose all hope. Both the situations are bad and need to be handled. No one can blame a new trader when even seasoned traders many times give in to trading emotions. Before entering the market, a new trader should, therefore, understand the depth of why emotional control is important and start trading, level-headed.

6) Small start:

Starting with a small amount will mean lesser risk and low profits. Yet profits all the same! A trader cannot overlook the fact that as he trades he has costs to bear too like the broker’s commission or the inevitable spreads. Hence while starting out, its best to stick to stable currency pairs with limited, smaller pips.

7) Using stop-loss orders has to be a religious mantra:

The trading world gets a trader involved in it, intellectually and emotionally. The adrenaline rush of a challenge makes a trader focus on the prize. He might lose sight of the fact that he also needs to safeguard his profits and his investment, by calling it quits when he starts making losses more than what he can afford. Hence it is strictly advised that before a trader starts trading, his stop-loss orders must be in place so that when he starts losing, his position in the market closes automatically at one point.


Forex is enticing and challenging, yet being level-headed and patient along with dedicated research, pays off at the end. Today, with technology, signals, trading platforms and online updates are all available. Optimizing on the resources to advantage is one of the best ways to be cautious before entering the precarious world of FX trading.