Forex trading refers to foreign exchange trading, which involves buying and selling foreign currencies in the international market to make profits. The forex market is the world’s largest financial market, with daily trade volumes of more than $7 trillion. With such high trade volumes, there is an excellent opportunity for traders to compete with other buyers and sellers and trade in the financial market to make positive returns. Unlike other forms of trading, forex trading is performed on OTC (over-the-counter) platforms, meaning there are no physical entities or exchanges where the trading occurs.
With the rising popularity of forex trading in Singapore, many traders are joining the market to earn revenue. However, currency or forex trading can be quite challenging due to several external factors at play and the high volatility of currency pairs. Traders must master the basics and specifics of the tricky forex marketplace to make Forex trading profitable.
In this article, we will explore the do’s and don’ts of forex trading to help novice traders make profitable decisions while participating in the forex market.
Dos of Forex Trading in Singapore
Below mentioned is your to-do list when trading in Singapore:
Set Realistic Goals and Expectations
Personal trading expectations are generally imposed on the forex market but traders often expect them to act according to their desires. The forex market operates independently of individual desires and can be impacted by various factors like economic events, wars, changes in government policies or interest rates, fluctuations in market demand and supply, and many more.
The best idea is to avoid unrealistic goals and expectations while formulating a forex trading plan. If it brings steady outcomes, traders should stick to it. With leveraged trading, even a small profit can be magnified, and as the capital grows, the trade size can increase to bring higher returns, and further trade strategies can be implemented or tested.
Learn the Basics Before You Start Trading
Knowledge and skill are power in every field. Without learning the basics of forex trading, traders can feel overwhelmed by the highly volatile forex market. Before stepping into the world of forex trading and registering with a reliable Singapore forex broker, traders must carry out extensive research on the different concepts of forex trading, such as currency pairs, leverage trading, and how to build a well-designed trading strategy. It is also important to be updated about the current market trends, political situations, economic events, and geopolitical relations that may substantially affect the currencies of different countries. Forex traders earn rich rewards but may fail if they try to run before walking.
Terminologies like trade lots, strike price, stop loss/ take profit orders, and pips may sound alien to many people. However, they are vital instruments required in forex trading that help convey relevant information for traders participating in the forex market. It is impossible to trade in foreign currencies without adequate knowledge of such basics.
Choose a Reliable Broker
The prosperity of the forex market has allowed dozens of forex brokers in Singapore to enter the industry either legally or illegally. Reliable forex brokers are as interested in the trading success of their customers as the traders are and will provide the best trading environment for traders to realize their trading ambitions and goals. Essentially, a Singapore forex broker is a trader’s partner in the forex market.
A reliable partner must be chosen that marks important features and functions, including proper regulatory measures, industry awards, good reviews and feedback from other customers, and top-notch security measures. Forex brokers can do as they please without proper regulations, which may result in unpleasant issues for traders. Since forex trading involves tons of money, it is the sole responsibility of the traders to choose a reliable broker and trade most securely.
Use Risk Management Strategies
The theory of risk management has survived for years and has connected all kinds of trading and businesses to positive returns. Forex risk management strategies are a set of measures to make sure that all negative impacts of forex trades are manageable. Effective forex risk management requires proper planning right from the beginning to avoid all kinds of risk factors involved in forex trading and uncertainties in the future.
Using risk management strategies includes understanding the forex market well enough to get a good grasp on leverage, Setting a risk-reward ratio, building a sound trading plan, using stops and limits, managing human emotions, and keeping an eye on current events and news in the market. The main objective of using risk management strategies is to mitigate all possible losses from the unpredictable and volatile forex rates that can lead to heavy losses.
Keep Up-To-Date with the Latest News and Trends
Macroeconomic news and trends have a great impact on the forex market. Currencies fluctuate when the government releases data about Major macroeconomic indices like unemployment and inflation. As a trader in the forex market, it is important to keep up-to-date with the latest news and trends as it decides the time to enter and exit forex trades. Massive volatility in currency prices ensures that the values touch unrealistic highs and lows, offering opportunities for forex traders to make a fortune. Nevertheless, traders must have a deep understanding of macroeconomics and keep an eye on the surroundings happening nationally and internationally.
Keep a Trading Journal
Trading journals are not just about noting down the entry and exit prices and the time of trade execution. It is also about refining trade methods and mastering one’s own psychology. Specifically, trading journals show individual emotional psychology at different times. Over time it helps minimize losses and shift the attention to the most profitable opportunities of their trading strategies.
Start Small and Grow Gradually
Many forex brokers in Singapore offer a demo account or a small trading account for traders to get familiar with the forex market. This allows them to learn how to make trades with small investments. It is wise to take baby steps and gradually grow as a forex trader without making hasty decisions.
Don’ts of Forex Trading in Singapore
Below mentioned are the points that you should avoid when trading in Singapore:
Don’t Trade with Money You Can’t Afford to Lose
Traders must trade and invest capital that they can afford to lose. Forex trading and investments must always be taken seriously with the right mix of research and analysis to be a profitable forex trader. Turning forex trading into gambling can be dangerous.
Don’t Let Emotions Drive Your Trading Decisions
It is essential to keep biases and human emotions out of the equation. Forex traders experience high market volatility, which can be overwhelming for them. However, despite the price movements, traders must learn to be unbiased and objective, keeping fear and greed away from forex trading.
Don’t Chase Losses
Chasing losses is used in gambling, and it is commonly seen in forex trading. Loosely speaking, when a trader makes a loss while trading foreign currencies, rather than stopping and evaluating why the loss was made, the trader may continue trading to earn back the loss. This can lead to bigger losses as traders try to recover their portfolios. Traders chasing losses are not trading but gambling, where the house always wins.
Don’t Rely Solely on Technical Indicators
Many traders tend to lose money solely depending on technical indicators. Having a good understanding of the technical indicator trading game is extremely important. Indicators are basically derivatives of currency prices, and they simply indicate what has happened in the past and that the same may not work in the future. Hence, technical indicators should not be used as the only aid to the decision-making process of the traders.
Don’t Trade Impulsively Without a Plan
Impulsive forex trading is something that all traders have been struggling with for ages. Impulsive trades often turn out to be great losers. This is especially when trades are made without any proper plan. Having a well-designed trade plan, sticking to daily time frames, and limiting screen time is essential to survive in the forex market longer than one can imagine.
Don’t Overlook the Importance of Trading Psychology
The psychology of forex trading is often overlooked even though it is a crucial part of an experienced trader’s skillset. Trading psychology includes all the feelings and emotions typical traders encounter while trading foreign currencies. Trading psychology is complex and takes time and effort to master fully. Traders who benefit from the positive elements of psychology are better at handling the volatility of the forex market and become better forex traders.
Conclusion
Keeping the do’s and don’ts of forex trading in mind can help traders get an excellent start with any Singapore forex broker. It is important to remember that the forex market is extremely volatile, so traders must constantly monitor the trends and patterns surrounding it. An effective forex strategy can boost a trader’s portfolio and keep them safe from losses common in the forex market. Trading can be complex, requiring proper skills and experience to execute trades profitably. Remember the two rules of forex trading – Rule #1 – Never Lose Money. Rule #1 – Go To Rule #1.
