Have you been thinking of starting to trade in the forex market? If yes, let us tell you that it is certainly a good idea to trade in the foreign exchange market. In comparison to the stock market, trading in the forex market can be done all week at different times. This is because the forex market opens and closes based on different time zones of different countries.
Therefore, if you have decided to begin trading in the forex market, you will certainly get a benefit over the long run. But as a beginner, it can seem all too daunting to trade in the forex market. You may think that it is complicated to understand the market.
You might think that you have to spend hours looking at the trade charts to trade efficiently. But such is not the case! There are a few beginner strategies that you can implement to trade effectively in the forex market. This will give you some time to learn and enhance your knowledge and become an expert forex trader.
But before we tell you the four basic trading strategies for beginners, let’s look at some basic principles and two important factors that you must consider before forex trading.
Important Factors to Consider Forex Trading
If you ask any expert forex traders, what piece of advice they would give to a beginner, they will certainly mention the following two factors.
- Investment percentage: Most forex traders experts suggest that to manage your overall investment risks, you shouldn’t invest more than 5% of your total capital per trade. This is to ensure that you don’t experience huge losses due to fluctuations.
- Leverage: Another factor that experts ask beginner traders to consider is leverage. They say that any beginner trader must not trade above the leverage of 1:10. Again, this will ensure that they don’t experience huge losses due to fluctuations. This also allows the beginners to have margin calls where they can decide whether to withdraw their investment or wait for a reversal.
These two factors were considered by all traders from the start of forex trading. But sometimes, the traders who intended to take more risks ignored these factors which cost them a lot.
Especially, after the Great Recession in 2007-08, most traders have started emphasizing to strongly consider these two factors. Whether you are a beginner or an expert, considering these two factors before forex trading will always benefit you.