YLDFX: 4 Things To Consider Before Trading Forex
At YLDFX we focus on the client and trader. We want you to be a successful long term customer whilst working to help break the stereotype and statistics that 70-80% of traders lose money. To aid with this we have come up with a list of four things that we believe all traders should consider before they start trading the live markets.
1.Understanding of the Markets
Firstly, you need to understand the markets, their function and how they work. Starting simple with exchange opening times. The London and US openings being the two major ones. You need to understand news events and as a result of that news, how it is likely to move the markets with key decisions and results such as interest rates or the latest unemployment levels. Next you need to understand what makes the currency pair you’re trading move, take USDCAD for example, the Canadian economy is paired heavily with oil, so you could then look into oil. So what's the current state of oil? The markets are complicated but breaking them down can help navigation and focus. Continue to build up knowledge over time of the selected pairs and what affects them as you gain more experience and understanding.
2.Risk and Risk Management
Secondly, but arguably the most important of the four, is risk. The markets and trading in general have inherent risk, any trade can lose and with that, can you afford to lose what you have put in? Trading money you can’t afford to lose is a quick way to financially hurt yourself in the markets. Also, if the trade starts turning against you – how will you deal with that emotionally if it is money you can’t afford to lose? Anything you put into your trading account, you have to understand, you are doing so knowing, that you stand a chance of losing it depending on the decision you make. The most common thing we see are clients with unrealistic expectations when starting out. They have traded a demo account usually in the region of thousands of their chosen currency and they are used to making the profit that comes with a larger account. They then expect the results to transfer across with the same sized wins on a small live trading account. Alternatively, they start out on a small account with correct risk management and lose their inspiration due to the minimal returns that are associated with the responsibility of trading an account that size, eventually throwing caution to the wind, then over risk, negatively affecting the account with the potential to lose their initial deposit amount.
3.Trading Platform and Operation
Understanding the operations of your chosen trading platform is key and it is imperative that you know how to operate the trading platform in a confident manner. Opening trades, closing trades and adding a stop loss or taking profit level. How to adjust lot sizes or enter pending order levels. What are the contract sizes if you are trading CFDs? Does that 1 lot size trade mean what you think it means? These are all important questions to find out before making any decisions.
4.Tax Implications
Finally tax implications. Generally, a brokerage will not be able to discuss your individual circumstances as this will be deemed as tax advice, which is a regulated activity and brokerages are not regulated to give such advice. Therefore, it is best to speak to a financial advisor or an accountant who can ensure that your tax affairs are in order. They will also be able to advise on how you can offset previous losses against future gains. The tax you pay will also depend on where you reside and if you have other forms of income.