They say that the key to building wealth isn’t making money, but investing it. 

And, without a doubt, after reaching a certain level of financial independence and building an emergency fund, pumping money into your savings account no longer seems that rewarding. Having these funds is certainly a good thing, but how can you put them to work and multiply them?

As far as income opportunities go, Forex trading is one of the most popular options out there: it has low barriers to entry, it’s a global market with high liquidity, and it’s flexible enough to do in your spare time. Forex trading has become particularly tempting to young, tech-savvy people because it doesn’t require extensive experience with financial products, and you don’t need more than a smartphone to get started. However, you do need the right guidance to have positive results. You can find further tips and useful information on fx-australia.com.

But not every Forex trading journey is a successful one. Even with lower barriers to entry and many lucrative opportunities, Forex is easy to start and hard to master, so here are some tips to help you avoid rookie mistakes and have a rewarding experience.

Decide on a trading strategy you’re comfortable with

Some people started trading Forex and ended up complaining that it’s not for them; either because it was too stressful, too demanding, too risky, or that they did not make enough money from it.

While Forex trading has its disadvantages, like all investment vehicles, for that matter, many of these initial shortcomings are due to the fact that people didn’t take the time to analyze all trading strategies and choose the right one:

1. Scalping: scalping is a very short-term trading strategy where you hold on to your assets for no more than a few minutes. It offers you the possibility of many small gains at the most liquid times, but it’s also very demanding because you need to be alert and think fast.
2. Day trading: day trading is a short-term strategy where you pick a side at the beginning of the day and end the day with a profit or at a loss, without holding on to the assets overnight. While not as demanding or fast-paced as scalping, it still requires you to think fast.
3. Swing trading: swing trading is a medium to long-term strategy where you hold on to trades for a day, up to a few weeks. It’s generally considered a good entry-level option because it requires less alertness.
4. Position trading: position trading is a long-term strategy where you hold on to trades for a very long time, up to several years. With position trading, you need extensive knowledge of the economy, which is why it’s recommended for experienced traders.

Manage your risk

All types of trading come with a certain level of risk, and it’s up to you to know how much risk you’re comfortable with. First off, you should never trade money you’re not willing to lose. And second, you should set a stop loss. This way, you won’t be tempted to let your trades run a little longer in case they turn around. In general, the recommended stop loss is around 5%, but you can always set it lower if you don’t feel comfortable. With time, you will gain more confidence and learn how to calculate the risks of trading Forex.  

Find a broker that matches your needs and trading style.

If you ask the people who quit trading Forex about what pushed them towards this decision, many of them will give you reasons such as: they didn’t know what to do, they were scammed, the service was too slow or unintuitive, or they didn’t feel like the platform they used served their needs. Looking closely at these reasons, it’s obvious that they have nothing to do with Forex itself, but with the broker.

Choosing a good broker is key in having a good experience, so always use reliable platforms to read reviews and compare options. When deciding what broker to go with, consider factors such as: whether it’s regulated, transaction costs, trading styles available, deposit and withdrawal limits, the quality of customer service, and the trading platform it uses. Professional Forex traders use a variety of apps, so make sure you start with a good foundation. Other extras, such as a free news feed and educational resources, are always a plus.

Educate yourself

Rome wasn’t built in a day the world’s most successful trader didn’t get where they are now by sheer luck. If you want to be a master of the Forex market (or at least not lose all your money), you will need to inform yourself and calculate each and every action.

Like we mentioned before, Forex doesn’t have high barriers to entry, so start off by reading some general articles about it. Books such as Currency Trading for Dummies, by Brian Dolan, or Forex Trading: The Basics Explained in Simple Terms, by Jim Brown are great because they explain all the terminology in plain English. Then, as soon as you become familiar with basic notions of Forex trading, you can delve in-depth into more advanced notions, at your own pace.

Learn to control emotional trading

Do you know who a trader’s biggest enemy is? No, it’s not the market, with its seemingly unpredictable fluctuations, nor major events that trigger recessions. A trader’s worst enemy is their own emotions. Because no matter how carefully you plan your strategy, it takes one moment of panic to make a rash decision and everything goes down the drain.

So, how do you avoid getting there? First and foremost, stay informed. If you know what’s happening and aren’t trading randomly, you’ll be less likely to react chaotically. And second, develop analytical and critical thinking skills. In this day and age, conflicting information and blow-out-of-proportion headlines will come flying at you from all directions, but you need to learn to stop and analyze them before acting on them.

If you can, find a mentor.

If there’s someone who can make your Forex trading journey easier, that someone is a mentor; someone with experience, who knows the market and can teach you some invaluable tips and tricks (and you can learn from their mistakes too!). Of course, not everyone is lucky enough to know an experienced trader, especially in regions where Forex trading hasn’t taken off yet, but online mentorship is always an option.