Forex trading seems so complicated when you take your first look at it. Currency pairs, interest rates, and leverage oh my!
If you take a little time to learn about these things, they become less intimidating. Forex trading can be as simple or as complicated as you want it to be. Some traders like to pour over financial reports and make systems based on those(fundamental forex trading), while other traders prefer to look at forex technical analysis on the chart and make their trades based on visual signals. It’s just a matter of your personal interpretation of what is comfortable.
So, how exactly do you start and learn? I’m so glad that you asked.
The first thing I always recommend is to start reading about trading forex online. Take some time to learn the lingo, check out a forex glossary, hang around a forex forum. In the beginning, just lurk around a bit and get acquainted, don’t try to do any trading yet.
Open a Demo Account
Open a forex demo account with a broker and do some playing around in the market. A demo account will let you get familiar with the forex trading platform and learn a bit about how the market flows. Experiment with some different methods, try some real-time forex trading and consider trying other methods like position trading.
Learn Risk Management
Forex risk management is one of the biggest key skills to learn for forex trading. If you don’t plan on learning to manage your risk, you can just flush your money down the toilet instead of putting it into a trading account; the result will be the same. The best time to learn risk management is when you don’t have any real money at stake. Study up on risk reward ratio and other money management methods and work out your trading plan. It can help to keep a forex trading journal during your demo days to learn where your trading weaknesses are before you put your hard-earned money on the line.
Open a Real Account
This is the part that is the most exciting. Open a real account with your chosen broker. For a first time account, I’d recommend opening a micro forex trading account. A micro account will allow you to trade very small to get the hang of live trading. Demo trading will teach you what you need to know about the mechanics of trading, how you can manage risk, how to use the trading platform, etc. Once you go live, a new factor is introduced, fear.
Trading fear creeps its way in once you put on a trade with your real money and watch it fluctuate. Usually, you feel excited and unsure, and ready to close or change your trade at any minute. This is where the trading mistakes begin. Keeping your trades small will help you to stay afloat while learning to maneuver this new issue.
So at this point, you just need to rinse and repeat. Learning forex trading is as simple as gaining some experience without blowing your account to pieces. Getting a margin call is not pretty, and it can make you want to quit if you started out with a large amount of capital. In the early days, keep it small, and do your learning on the cheap. If you feel like you should be trading larger, increase your trade size gradually and put down some success with a larger trading size before you increase again.
If you start to feel nervous about your potential losses, you are trading too large, drop back to a lower lot size.
Unfortunately, you won’t get rich in forex trading overnight. It’s a type of investing similar to many others. It takes time to get acclimated, and you have to follow some guidelines to make money at it, and it isn’t risk-free.
Keep your head clear and go slow with your trading and you’ll survive long enough to get things figured out and make some money.