If you’ve looked into forex trading for a while and decided it may be a good investment opportunity, you are probably wondering where to start. The best way to determine if forex trading is suited for you is by learning as much as you can about the market before opening an account with a broker.
Forex is short for ‘foreign exchange’ and is the process of trading one currency for another in the form of currency pairs. The foreign exchange market is the largest financial market in the world, meaning there is a lot of money at stake.
What makes the forex market unique is the fact that there is no central marketplace to govern it. To keep things from getting out of control, there are, however, regulatory bodies that operate in certain jurisdictions and ensure no fraudulent activity jeopardizes the financial security of brokers and traders.
There is much to be said about the forex market, but if you are considering becoming a trader, you probably know these things by now, so we are not going to reiterate them. What we are here to do, however, is provide you with a series of tips to help you get your feet wet and learn how to start trading currencies. So, without further ado, here’s what to keep in mind before opening your first trader account.
Choose your broker wisely
Choosing the right broker is paramount for a safe journey into the forex market. Set aside plenty of time to review brokers and only select the one that suits your needs best.
Look for a broker that is trustworthy and, most importantly, regulated by at least one of the main regulatory bodies in the world. You should be able to check if they are licensed on their website, as the majority of brokers make this information very visible.
To check if the broker complements your trading style, open up a demo account and play around for a while. This way, with nothing to lose at stake, you will be more keen to try things out and make a decision.
Develop a trading strategy
Don’t rush in to place your first trade the moment you find a reliable broker. Take some time, play around with the demo account, and try to develop a trading strategy. There are many popular strategies you can choose, which you can then tailor to suit your trading style, but there is no way to know for sure which one fits best without experimenting.
To develop a strategy, you need to first set up a goal, and then try out multiple options and decide on the one that has the highest potential of helping you reach that goal. Draw out your plan of action, test out strategies, and, most importantly, factor in your trading style before making any decision.
Don’t bite off more than you can chew
The forex market is a very complex environment, which makes it a little overwhelming at first. Start small and work your way up as you gain more experience, because if you dive in too deep from the start, your finances may suffer a lot.
Just as any new skill that you learn, trading takes time to master. Start with the basics, learn the jargon, find out what every button on the platform app does and begin with small investments. Use your demo account as much as you can and move to a real account when you feel ready. Remember that learning how to be a forex trader is not a race. The only person you are competing against is yourself.
Learn to control your emotions
We are only humans, it’s true, but if there is one piece of advice any experienced trader will give you, that is to learn how to get emotions and feelings out of the way when trading. Stress can cloud your judgment and leave you prone to mistakes, especially when there are high sums at stake, so don’t let it get the best of you.
To become a successful trader, you need to make rational decisions based on facts, but that’s often easier said than done. If you know you risk making impulsive decisions, make it a rule not to trade when you are angry or too emotional. Take a step back, reassess your situation, and return with a fresh perspective once you have cooled down.
Analyse, analyse, analyse
Forex is not a gamble, or it shouldn’t be for anyone who calls themselves an experienced trader. Trading forex is about analysing every piece of information that may influence the market and learning how to act based on your findings.
Don’t just analyse trades and trading patterns, bur also what influenced you to make those decisions. Take a good look at trading indicators and learn how to spot the best moments to enter or exit a position. If you’ve read discussions and are wondering how reliable trading indicators are, you will be pleased to hear they can be a very powerful tool when used correctly, despite the surrounding controversy.
Set realistic goals
We’d all like to get rich overnight, but forex trading is not for those hoping to grow their wealth in a week. No matter how many tips and tutorials you read, there is no secret to ensure constant success. The only way to make fewer mistakes and get accurate with your predictions as many times as possible is by setting realistic goals that can be tracked to monitor your journey.
Not every decision you make is going to be profitable, and you will have to accept that if you want a career in trading. Break your main goal into small, realistic milestones, so that you can analyse your evolution constantly and make improvements when needed.
Never stop learning
The forex market is a very dynamic environment that never stops evolving, so there will be new challenges thrown your way every day. The best way to overcome these challenges is to educate yourself about the market constantly.
Keep reading, join communities for traders, share some of your experiences with others, and take every challenge as a lesson that needs to be learned.