I was asked to put together a couple of tips for beginning forex traders, so I thought I might as well post it here. This is just a short list of things that came to mind. If you want a more exhaustive list have a look at these forex trading tips.
1. Preservation of principal
A beginning trader is bound to lose money. You are as unlikely to start making profits in the beginning of your trading career as you were to hit a home run the first time you swung a bat. All successful traders were beginners at one point - what sets them apart from many other aspiring traders is that they are still around to talk about it.
Impatience is your number one enemy as a beginner. I have seen so many traders enthusiastically increase the amount of leverage after their first winning streak only to end up with a blown account minutes later. While you are still figuring out the basics of fundamental and technical analysis, keep a low leveraged account and don't risk more than a small amount. Sufficient to give you a scare when the market moves against you, but not more then you can afford to lose. A days salary or two is usually what I recommend (and Bill, if you are reading, this doesn't apply to you).
2. Choose the right forex broker
With forex trading becoming increasingly popular, more and more retail brokers try to get their share of the market. Make sure that you trade with a properly regulated entity that keeps a fair spread on the pairs you trade (which shouldn't be too many) and offers mini accounts with low leverage. Our forex broker reviews are a great starting point when looking for a good service that suites your needs.
3. Learn fundamental analysis
Even if you intend on focusing your analytic efforts on technical analysis, it is essential for you to know the basics of fundamental analysis. Even the most hardcore chartist will have to keep track of the fundamental developments that might effect the pairs he is trading. News on fundamental developments can cause drastic moves in the market and if nothing else, you need to be aware of the release dates of important economic indicators to avoid getting caught in one of those big moves. If you are just starting you trading efforts I suggest you read our forex school that will get you acquainted with the basics of both technical and fundamental analysis of the currency market.
4. Don't be lazy
This is essential. If you are not prepared to work hard and spend time and energy to learn the markets then I'm afraid you might as well be going to the casino (the drinks are better there. I've heard.). Trading forex is not a way to fast riches, but if you stick with it, develop your analytic skills, and learn how to apply proper money management principles - you might just become one of the lucky few who can branch out to a full-time career as forex traders.