Opening your 1st Forex Trade

Opening Your First Forex Position

Opening your first forex position, especially when it is done in the real money forex platform, can be a thing of trepidation for the new trader. No matter how long a trader has practiced on a demo account, hitting it off on the real money platform is a whole different ball game. This is when emotions come to play big time. For a trader who is opening a forex position for the first time, there are some mistakes which can occur. Some of these are:

a)    Using the wrong order

b)    Applying a wrong lot size to the trade

c)     Clicking on a wrong chart

All these mistakes were made by even the most professional of traders. So the big question should really be: how do you prevent any of these mistakes from either occurring at all, or from damaging your account if they are made?

Step By Step Guide for Opening your First Position in Forex Trading:

Here we give a few tips on how to handle the process of opening your first forex position.

Step 1

Study your trading platform. The only way to avoid mistakes in things like order placement is to study your trading platform. Know what buttons to press when executing market orders or pending orders.

If you are using the MT4 platform, this is a bit simpler than in some other retail platforms out there. It does not automatically mean you will know it straightaway. The only way to know how to do this is by practicing on demo.

fxpro mt4 premium

It pays to study several retail platforms and not just the MT4. Study that of ActForex, JForex, TradeStation, etc. The MT4 should be the starting point so you understand the principles behind order placement. Then you can move over to others.

Step 2

Understand the principle of risk management and how to apply the correct position size to your trades.

Again this can be practiced on a demo platform, but it is usually better to step up from demo to a no-deposit live account and use real money conditions to do this. Using a real money setup introduces all the emotional factors that attachment to money will produce. This will train you on how to react quickly to re-quotes and adjustments in the market, while at the same time training you on how to get a grip of your emotions while all this is going on.

Step 3

Do not be afraid of making mistakes. The only way to do this is to gain the confidence of actually pulling the trigger on the first trade. Know what it is like to win and love it. Also know what it is like to lose, and hate it, resolving to correct whatever mistakes were made in the first place.

This is the step where you should practice how to set your stop loss and take profit targets. Should this be done before or after the trade has been executed? There will be times when the trader will need to use both, with the latter being done in a fast-paced market scenario.

Entering a Stop Loss Order at GekkoMarkets

Entering a Stop Loss Order at GekkoMarkets

Step 4

While the trade is open, take time to understand how to deal with open trades. You need to be able to watch the charts to see what candlesticks are forming. You should look at the Terminal window to see what is happening to your account balance.

What is your used margin? What is your leverage? How is the position doing, and what is the effect of the position’s movement on the used margin and the account capital? How much risk have you used? This is all part of the learning process and represents those things which cannot be taught in a classroom or adequately grasped on a demo platform.

Step 5

When the trade has come to an end, x-ray what you did with your very first forex position. Was it a winner? Why do you think it ended a winner: carefully executed strategy or pure luck? Was the trade a loser, and why did it lose? Carefully analyze the trade, if possible with your forex mentor or forex teacher.

Look at the chart below:

opening forex position

The trader ended up with a losing trade. The trade was analyzed retrospectively and the cause of the loss was identified: an incorrectly placed stop loss. In this trade, the stop should have been placed above the trend line, but it was placed just below the trend line. The price rose up, and triggered the stop loss before it was rejected at the trend line and resumed its move in the direction that the trader had initially chosen; the short direction.

Two lessons were learnt here:

a)    The trade should have been opened with a SELL LIMIT order at the trend line.

b)    The stop loss should have been set above the trend line.

Is it likely that the student would repeat this mistake in future? Not very likely I can tell you, because this lesson has been engrained into his memory for life.

Conclusion

Your first position should not really be about how much you made or lost. It should be a learning course on its own. The world is littered with traders who won big in their first trade, carried on with the false sense of security, and ended up being blown out of the market in weeks. There are also those who lost hugely on their first trades, but because they realized their errors in good time, they were able to turn their fortunes around.

So do not be filled with fear on your first trade. Take it, and learn the lessons from the outcome.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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