There are many people who desire to venture into forex trading, although they are held back by the belief that it is too complex, or they will lose their money. With the right amount of skill and knowledge in forex trading, it can be a great income earner. However, as it is with any new endeavor, information is key. In this article, we offer beginners who want to venture into forex trading, useful information on how to go about it.
What is Forex Trading?
Forex trading refers to the practice of trading currency in the foreign exchange market.
Having knowledge of forex trading isn’t enough. As an individual, it is important that one has some key traits, and these include; intelligence, understanding the market and mass psychology, courage to take risks, discipline, patience, and a drive to succeed. It is a bonus to further understand what drives market forces.
One key distinctive feature of forex traders is that they are always researching or reading about the market. At any one given point, they are dealing with a lot of numbers. Why is this? It is because they need that information on their fingertips. Literally, in this field, information is KEY.
Turning out to be a successful trader, therefore, requires experience, patience, and a sheer amount of effort.
Where to Start?
As a beginner, once you understand the basics of forex trading, go ahead, and study currencies. Get the basic information about the currency and the country which uses that currency and factors that affect or influence that currency. Each currency in the world is affected by various factors that may range from local regulations to the price of oil. Once you have learned about the currencies, the next step is to learn technical and fundamental analysis, since you will need to make decisions on trade execution.
Choosing a Broker
Once you have the knowledge of how the forex market works, the next step is to decide where to trade. In the forex market, you trade through a broker who provides a platform.
There are several factors that you should consider before choosing a broker and these include; account type, leverage, regulation, customer service, liquidity, and solvency. Take a look at some reviews online to make an informed decision about which broker to choose and find out how they are regulated.
Account Type
There are three types of accounts. A micro account with a one trading lot value of $1,000, a mini account with a one trading lot value of $10,000, and a full-size account with a one lot trading value of $100,000. As a beginner, it is recommended that you start out with a micro or mini account to at least understand the nature of the business and avoid making losses.
Platform
The platforms available are in the form of software. Depending on the broker you have selected, this may vary based on the features and reliability of the software. Before settling for a broker, go ahead and demo their platform for ease of use and reliability.
Regulations
With regard to regulations, it is important to first note the jurisdiction you’re trading in. There are countries where brokers may not be regulated and as a first-timer, you should be cautious when trading with such brokers.
Practice Online
There are many platforms online where you can practice (demo) trading based on simulated market data without risk or expense. This is where many beginners can greatly improve their trading skills before they trade for real. Test your knowledge and skills with the demo account, while further developing your trading strategies.
Before you venture into real-life trading, see if you can sustain profits in your demo account. At this stage, many people aren’t patient and want to jump into the next stage of trading with real money, yet there is a lot of learning that still needs to take place.
Open a Forex Account
Once you have practiced enough with the demo account, the next big step is to open a real forex account. You should do this only when you have enough knowledge and you feel confident that you can trade. At this stage, there is a real risk of losing your hard-earned cash, so be careful with your trading decisions.
More Tips
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When starting out, only use the money you can afford to lose.
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Designate a percentage of your account that you are willing to lose before you go back to the drawing board. If you lose that amount of money, go back to using the demo account and improve your skills and strategies.
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Trade cautiously and remember that forex trading is not a get-rich-quick endeavor.
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When trading, learning, and mastering a combination of fundamental and technical analysis skills is key.
Forex trading can be a good alternative to your current investment strategies, but again, make sure you understand all of the ramifications of investing in the foreign exchange markets before you use any real money.
Tycoono, LLC, and its affiliates do not provide tax, legal, financial, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial, or accounting advice. You should consult your own tax, legal, financial, and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.
