Online forex trading, now in 2010, is starting to make a comeback in a big way. It can be seen in the increasing numbers of forex traders online, the expansion of online forex brokers, and the general wave of activity in the industry. Additionally, unemployment is finally levelling off as opposed to rapidly increasing, companies both public and private are showing a profit, and there is a significant increase in the number of mortgages being issued by the banks. So, in light of this upward positive movement, here are ten top tips for online forex trading in 2010 that, if abided by, will definitely ensure you make the most of your investment – however great or small it is.
1. Ensure you can afford to trade.
It seems obvious and yet so many online forex traders trade under the belief that they will be guaranteed a profit. With online forex trading – as with any activity that allows you to gain high profits in a relatively short space of time there is always a high risk involved. Although this risk can be managed by offsetting position when the market changes and placing a stop loss instruction, it does not rule out the possibility that you may lose some or all of your initial investment if you are not careful. Don’t count your chickens before they’re hatched: make sure you can afford to lose the money you trade with.
2. Decide whether to trade independently or use a professional online forex broker to manage your accounts.
Trading online can be done one of two ways: independently using a set of online tools or by utilizing an experienced and knowledgeable professional trader to manage your accounts. Unless you are a skilled trader (with years, not months, of experience) it is not advisable to manage your own accounts if starting with a large investment. Before you start up a portfolio, decide which of these two methods you would like to pursue.
3. Do your research.
If choosing an online forex broker, make sure you do your research. In addition to being experienced, look for a broker who is licensed, regulated, and provides security for your funds. Equally, if you wish to use certain features such as stop loss take profit, scalping, or hedging, then you need to check that your chosen forex broker allows these. For both scalping and hedging, a recent NFA ruling has meant that US brokers are not allowed to offer these strategies, so you would need to choose a broker from outside the US. Do not be tempted to use unregulated brokers just for these strategies as there are many regulated brokers outside of the US who can offer you this facility.
4. Be informed.
The markets are affected by every major world event whether it be political, economical, social, or environmental. Make sure you are up to date with market news and world news which provide unique trading opportunities as the market is affected. Learning to forecast how the market will react to a situation is an extremely valuable skill and one of the reasons why so many online forex traders use online forex brokers for their excellent market news, analysis and forecasts.
5. Know your trading platform.
The trading platform you use needs a number of features, indicators, analysis, and a high execution speed. Make sure if your chosen broker uses a custom platform that it offers everything you will need. Alternatively, you can go with a larger, more popular platform such as Metatrader 4 which has an excellent range of resources as well as a substantial support forum, in addition to all its features. If you think you might want to move into a different area to forex such as commodities, futures, or CFDs, then whether or not your platform can provide this functionality will also be an important factor in your decision.
6. Learn all you can.
Take advantage of analyses, tools, and charts wherever you can find them. Learn to correctly interpret GANN, Jackson Zone, and Fibonacci Studies and make the most of any resources your online forex broker may provide. In the world of online forex trading, knowledge is most definitely power.
7. Exploit the forums.
Connect with other traders to compare and review services and facilities, options and market activity. Though opinions will vary (and should mostly be taken with a pinch of salt), it is always beneficial to know what others think about various aspects of trading and adjust your own activity accordingly.
8. Practice! Practice! Practice!
Before spending a cent of your own money, practice with virtual money in a demo forex account, which will give you the opportunity to test trading strategies such as scalping and hedging. Once you are comfortable with your virtual activity then practice some more! You need to be 100% confident in your trading abilities when you go online and invest “real” money.
9. Start small.
Need it be said? Don’t spend all your money at once. Invest gradually. Start with small amounts, as all good online forex traders do.