Forex has grown into a real financial giant in the last decade, with trillions traded daily. It is a liquid, highly lucrative, and 24 hours open market with access to anyone with an internet connection. If you consider starting trading Forex, we share five things to know before opening your first trading position.
Five things to know before start trading Forex
Find Reputable Broker
No matter which asset you choose in any trade, the choice of the broker represents a make-it-or-break-it for your trading success. Going with the right one shields you from scammers. And avoiding scammers from the very beginning means not losing money before even starting trading. To find the best brokerage company, take into account several benchmarks:
- Regulations compliance
- Efficient customer support
- Spread offered
- Trading assets
- Access to educational materials
The criteria mentioned above are the most important when checking out the forums or brokers’ reviews. Besides, pay attention to the trading platform’s software. MetaTrader 4 is the king among trading software, so a broker should have it in place.
Learn About the Market
There is no need to have a University degree in economics to start trading Forex, but you will have to commit yourself to learning how the market works. Currency pairs trading might seem easy as a pie, and it’s not so complicated, but it’s unreasonable to venture into trading without learning how it works.
Therefore, look for Forex trading tutorials, courses, and blogs. Mastering the Forex terminology, the main trading strategies, chart analysis, and the currency pairs’ features make part of every well-planned Forex trading career.
Choose Wisely Currency Pairs
The beginner usually starts with less volatile and more liquid assets such as USD, EUR, and JPY. And that’s a wise choice since you don’t want to experiment too much from the start. However, the big trading opportunities on over-the-counter foreign currency exchange are not limited to EUR USD and other major currencies.
The currencies from emerging countries with less stable economies could be very profitable if you learn to follow the economic and geopolitical events and react accordingly to make the best trading decisions.
Choosing the Proper Strategy
Choosing the right business plan includes factors such as the size of a position, currency pair you choose to trade, and entry and exit points of your trade. The most used trading strategy in Forex is scalping, which relies on ultra-frequent currency price movement. It requires constant monitoring of prices and therefore increased presence in front of the computer screen.
It would be best if you based all decisions on technical analysis since, as you know, the math never lies. So, besides technical charts, follow the market news to be up to date with price fluctuations and the events that affect them. Usually, you will find many trading strategies and tactics available online.
They are created by seasoned traders and experts and are also popular as trading signals. However, it would help if you had a keen eye on the market to develop your strategy and set up a manual trading system. Otherwise, there is always an automated trade option where the trading algorithm finds the best trading signals and executes trades.
Practice on a Demo Account
Demo accounts are a peerless way to try your trading strategies and check out your trading skills. With no money invested, you are in a position to test your knowledge by trading currencies with any money investment but in real market conditions. With enough confidence gained, you can fund your account whenever you want and start real trading.
And that’s the point when the psychological factor enters the game. Just in real trading and with the money at stake, you can test its capability of keeping your emotions under control when the market starts going against you. So keep in mind that just cool-headed, well-planned trading can lead to sustainable profits, which is your ultimate goal as a Forex trader.