It is not very difficult to see the appeal of currency trading and the foreign exchange market for beginners. After all, the forex market is renowned all over the world because it has a daily trading volume of a whopping $5.3 trillion. Furthermore, the fact that currency is a derivative that allows traders to make profits even in a depreciating market also makes it attractive. Nevertheless, it is important to bear in mind that forex trading involves margin use, which means that people can end up losing a lot more than their initial deposit. Moreover, the volatility of the market is also known for creating significant shifts in price within a short span of time.
So, when you are thinking of starting out as a forex trader, you should exercise caution. Shay Benhamou has highlighted some dos and don’ts that can come in handy and help people in optimizing their chances of success in the long-term. What are they? Let’s take a look:
- Do have a trading plan
When you are investing your hard-earned money into something, you should have a plan in place. If you want to become a successful forex trader, you will require a clearly defined plan, along with a trading strategy as it will help you in thriving in real-time market conditions. You can formulate your strategy as you learn about the forex market. Shay Benhamou recommends that you take advantage of demo accounts because these will help you practice in a risk-free and simulated environment.
- Don’t pay attention to rumors
It is well-known that the forex market is one of the most studied and watched markets in the world. In addition, in today’s digital age where social media platforms are widely used, it is not unexpected that there are different rumors flying around about various currency pairs, especially during the trading day. However, it is important for traders to not make their decisions based on these rumors. If you believe that there might be some truth to the rumor, it is best to investigate and verify it before you do anything.
- Do your research
When you have to make investing and trading decisions in the forex exchange market, Shay Benhamou suggests that you do your research beforehand. Don’t depend on others to give you guidance or advice and you should dig deep and learn as much as you can before making any move. Knowledge is power and you need to be armed with it in order to achieve the kind of success you want. Don’t just follow the trends in the market blindly; read about these current trends and understand the political situation and other factors that might affect currencies.
- Don’t be greedy
While greed may have played a prominent role in your decision to start trading currency pairs, you shouldn’t allow it to interfere when you have to make trading decisions. This is because if you become too greedy, you will eventually become undisciplined and will start making decisions based in potential returns instead of a trade’s viability. This can never be good for you in the long run.
- Do have patience
Experts like Shay Benhamou will tell you that patience is often the distinguishing characteristic between successful and unsuccessful traders. The currency market is a volatile one, as stated earlier, and things can change in a matter of seconds. If you start making decisions based on every movement, you will eventually end up incurring hefty losses, something that you want to avoid at all costs. When you decide to trade in the forex market, you shouldn’t look for instant gratification because sometimes it can take time for you to make smart trades that can generate the kind of returns you want.
- Don’t let your emotions control you
It is understood that human beings are emotional by nature, but there are times when you have to keep these emotions in check. People tend to become even more emotional when they are stressed and this stress is magnified when they have put their money on the line. As stated above, you shouldn’t let greed get in the way of making sound decisions and the same is applicable to fear. There are times when traders panic because a trade is not going in their favor and they end up making rash decisions because of it, which can result in losses. Shay Benhamou recommends that you keep your emotions under control and make decisions practically.
- Do have a mentor
Yes, you shouldn’t follow anyone blindly when you are trading in any financial market, but there is no harm in people having a mentor who can give them guidance and suggestions to help them in trading. These mentors are usually experts who have deep knowledge of the forex market and can provide the right advice, along with tips, which can be extremely useful for traders.
- Don’t practice revenge trading
This is a major mistake that a lot of forex traders make and it is one that doesn’t really do them any good. According to Shay Benhamou, you should know better than to indulge in revenge trading, which means reacting emotionally to losses and making rash decisions in order to try and recover what you have lost. Indeed, it is natural for people to want to recoup as much of their capital as possible, but you should always stay in the ‘now’ and make trades based on their merit, rather than doing something that strikes your fancy.
- Do invest what you can afford to lose
One of the most common suggestions that you will come across from people is to only invest what you can afford to lose. Betting your rent money on a trade that can wipe out your investment is a big risk, one you want to avoid. Therefore, you should keep your investment small and only invest an amount that will still leave you financially stable.
As per Shay Benhamou, following these dos and don’ts can help you make the most of your forex trading journey.