The first step in getting involved in daily trading the forex markets (after making the decision to set aside risk capital for a trading account) is to decide on one or more trading strategies that you will implement on a regular basis. But determining which strategy is most effective for you will require you to define a set of specific parameters that only you can choose, as there is nobody that knows your personal needs and trading goals better than you do. “There is some truth to the suggestion that any strategy will require some degree of trial and error,” said Haris Constantinou, currency analyst at TeleTrade , “and testing your proposed methods using a demo account before real money is put at risk is something that is always recommended.”
But once these tests are conducted and you find a trading style (and method) that suits you, trades can be opened and profits can start to be accumulated. Here, we will look at some of the initial steps involved when you are outlining your trading needs and developing a strategy that can successfully meet those needs.
Determining Your Level of Commitment
One step that is often missed is that new forex traders need to complete an outline that defines your level of commitment. This, essentially, means your level of personal availability with regard to time and risk capital (the amount of money you are able to comfortably put at risk when trading). Some traders (especially those starting their trading careers) have other jobs or some other activity that will place time restrictions on their daily availability. One of the first steps in becoming a successful long term trader is to fully understand the amount of time that you can regularly commit to your trading efforts.
It is also very important to have realistic expectations when dealing with this initial step in the process, as miscalculations can prove to be very costly and leave you with many unpleasant surprises when you begin trading. This is probably even more true in the second aspect of the commitment definitions (definitions of available risk capital) because it involves the amount of money that you will be willing to risk in your trading accounts. In many cases, new traders have only limited capital with which to trade and it can become very easy to keep adding money to your trading account if you start to see losses initially.
But it is important to have a very clear understanding of the amount of capital you can invest and to never risk more than you can afford. This is the only way to create a trading account and surrounding environment that is conducive to long term gains, and losses that are limited on a relative basis.