Have you ever considered getting started investing in the world’s currency market? Forex, which stands for foreign exchange market is the “place” where currencies are traded. Currencies are very important to most people around the world. Currencies need to be exchanged in order to conduct foreign trade and business.
If you’re thinking about getting started with Forex trading, here are some essential tips to help you get started. Remember with all types of investments there is a presence of risk, seek expert advice when needed.
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Use Your Demo Account
Most platforms have a demo account that allows you to make dummy trades without spending any money. This lets you get up to speed with the software and learn the ins and outs of the platform before you risk real money. You should use this account until you feel totally comfortable with what you are doing. It is important to remember that strategies which work in your demo account will likely need some modification to be successful in live trading.
Understand the Risk Involved with Forex Trading
Forex trading is inherently risky. There are large profits to be made, but equally, large sums of money can be lost quickly. You should understand the nature of the markets you are trading in, and avoid betting money you cannot afford to lose.
Know Your Currencies
There are eight major currencies which are traded in Forex. These are the Euro, the pound sterling, the Australian dollar, the Japanese yen, the US dollar, the Canadian dollar and the Swiss franc.
Find a Good Broker
Choosing the right broker with the right trading platform is very important. They offer different software packages, charts and often have varying policies which can all impact your trading. You should aim for a broker with a high degree of trust, good reviews online and solid customer service. A reputable broker, such as CMC Markets, will offer a good start to your trading experience.
Start Small when Forex Trading
Most successful traders start with a small amount of money and refine their strategies and ways of thinking before scaling up to a larger cash injection. Make your mistakes on a small scale before moving up the ladder. You might look at the possible returns and think you should put everything on the line at the beginning, but if you don’t get a chance to learn from your errors, it will be difficult to survive in the long-term.
Learn to Think for Yourself
It can be very tempting to look at blogs and articles and think that all you have to do is plug someone else’s strategy into yours, and you will be onto a winner. The market has already taken into account many of the common trading plans and they are reflected in the currency prices. It is only by gaining your own understanding of how to trade and why a particular trade worked at a certain time that you will be successful yourself.
Learn to Deal With Losses
If you develop a successful trading strategy, it will still only win fifty-five or sixty percent of the time. This is enough to give you a solid edge, but it means you will be making losses in more than forty percent of your trades. This is an inevitable aspect of trading, and you must be psychologically prepared to accept the losses when they happen and see them in the overall context of a larger strategy that will bring you solid returns.
Consider Automated Trading
Automated trading rules can allow you to set hard limits on what is to be done in certain circumstances. These can be defined ahead of time so that you are making decisions without being unduly influenced by emotion or stress. It’s important, however, not to become overly reliant on these rules and allow them to be a crutch to your thinking. They are there to assist you.
Keep a Trading Journal
In order to grow as a trader, you must keep a record of the trades you made and the reasons and strategies behind them. Over time, you can look back and examine the performance of your trades and understand which were successful and which were not. By continuously refining your strategy and knowing how and why something worked for you in the past, you can learn faster and make fewer mistakes.
Accept the Hard Work
If it were easy everyone would be doing it. Learning to trade well, to understand the markets and the risk factors, to spot trends and capitalize on them – this takes hard work. Trading successfully is a complex task and you will be giving yourself an education in the currency markets and the tools and strategies you need to tackle them.
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