How to Start Forex Trading?
The largest and most liquid market on the planet, with an average daily trading volume that exceeds $5 trillion, the foreign exchange market is a modern day wonder. When it comes to profitability, no other exchange comes even close. Hence, it is not surprising that many people take interest in forex at one point or another.
It is very common though, for people to come to the exchange in hopes of making money without knowing anything about trading. The result is predictable. People drain their account in a matter of days, if not hours, and burn through their entire investments without a clue of what is going on. Rookies may confuse this with some type of gambling, which it isn’t. While luck certainly helps here, it should not be relied upon.
How to Get Into Currency Trading?
Beginner investors are always curious about how much money they should invest in their first deposit. It is important to clarify something here. Forex trading is carried out with standard lots of $100,000, which means that with a deposit of $10, even an order of 0.01 lots will have to be opened with significant leverage. This forbids the trader from making even the slightest of mistakes. If the price moves a mere fraction against his position, Margin Call and Stop Out orders may follow almost instantly.
The point being, the more money in a deposit, the lower the risk. Therefore, anyone interested in taking the first steps towards trading should start with at least $250. Experienced traders advise newcomers not to trust stories about traders starting from scratch, and to instead open accounts that are $500 and higher. For example, having $3,000 and risking no more than 2% of the total amount for each transaction, you can safely earn about $60+ each day. With deposits of $250-500, if you risk no more than 1% on each transaction, on average, you can earn $5-10 daily. At this rate, if you maintain this kind of income, you can increase your profits to several thousand dollars within a year, after which, things can get really serious.
For standard currency pairs like EUR/USD, USD/JPY, USD/CHF that have small to medium volatility levels (price movement amplitude), $100-300 will be enough for the beginning. For high volatility pairs, like USD/ZAR, USD/NOK, USD/RUB, USD/MXN, and others, at least $500 is recommended. Even better – $1000.
Once you have decided on a sum you are willing to commit, the next logical step is to select a broker. Choosing a broker is a subjective matter, so do not blindly listen to other people’s suggestions. The general consensus and best advice is to choose a broker that has been operating for a few years. The longer, the better. Ideally, the period of operation should not be any less than 5 years, since fraudsters and generally bad brokers will not be able to hold out for that long.
Strategies are paramount to succeeding in forex. They represent a set of rules that should be strictly followed in order to increase your capital. Having mastered them, a trader is able to better understand the market, signals, and when to open and close deals. You can use the popular well-known strategies, or develop some on your own. As long as you find what suits your trading style and stick with it, without changing your approach after every failure, you will be able to maintain consistent profits.
The main criteria for choosing a strategy:
- The duration of the transaction;
- Type of analysis you will be conducting (fundamental or technical);
- Type of graphical analysis you will be conducting (figure, indicator, candlestick).
The chosen strategies must always be tested on demo accounts first. This is done not only by beginners, but by experts as well. You can also go the easy way and use an automated advisor – an automatic computer program that will open and close transactions by itself.
By their length of time, trading strategies are divided into:
- Short term;
- Medium term;
- Long term.
Statistics show that most beginners use short term strategies and fail. The reason being that they do not require a large starting capital and promise quick profits. This kind of strategy is actually best suited for experienced traders, since it assumes intense levels of activity. Hundreds of deals can be opened and closed in a day, and instant reaction is paramount throughout them all. If you want to earn more, and risk less, open medium and long-term positions.
Forex Trading Requirements
A financially-related education will come in incredibly useful. Beginners are correct to assume that forex is an extremely complex and incomprehensible process for people to learn from ground zero. While the presence of such an education is a huge plus, and it can serve as a pillar to jump-start you on the path to financial success, you don’t need one. It is enough to have an analytical mindset, to study the main factors affecting exchange rates, to learn the basics of trading on Forex, and to know the basics of technical and fundamental analysis. Nowadays, almost all legitimate brokerage companies offer their clients educational materials, including courses and seminars, e-books, video tutorials, and articles.
Practice and experience are also highly beneficial, but not necessary. If you don’t have any yet, no worries. Everyone has to start somewhere. If the opportunity exists, start with a demo account first and learn all the ropes. Without the risk of losing real money, you can apply the knowledge that you learned in practice. Doing so will help you understand the principles behind Forex, and choose the most appropriate strategy for you. Many of the best traders are people that have completely different educations. For one reason or another, they all come to forex in their quest for financial freedom and independence, and many find it. The key to their success is hard work, patience, the desire to learn, and faith in their own strength.
Forex Exchange Trading for Beginners
- Find a reliable broker;
- Register and verify your documents;
- Open a trading account and make a deposit. Preferably at least $250;
- Install the trading platform;
- Select an asset and analyze it;
- Choose a strategy that suits you and follow it;
- Open a deal, wait for changes and fluctuations in the market and close the deal with a profit;
- Withdraw profits via your preferred method.
The foreign exchange market presents people with great opportunities to change their lives forever.
This is not only an opportunity to make a living from trading, but also the ability to work from virtually any place on earth where there is Internet.
As a forex trader, you will experience freedom that is otherwise unattainable to people working regular 9-5 type jobs.
Remember though, that visions of a better life will remain as dreams unless you take the necessary steps, approach the subject seriously, and persevere.