The forex market is a huge financial entity, and one that sees an estimated $6.6 trillion traded globally every single day. The characteristics of Forex trading make it easier for you to earn big profits by investing very little amounts of money. Another one of the best advantages of Forex trading is the fact that you don’t need to meet any formal requirements to start your own career.
While the size and liquidity of this market may be appealing to aspiring traders, its innate volatility and complexity makes it hard to master (particularly within a short period of time). That’s why, in this post, we’ll offer some much-needed advice to help you launch your own forex career and lay the foundations for sustainable success over time.
1. Getting Started
Before you even begin to trade for real money in the forex market, you’ll need to develop a broad base of theoretical knowledge. The reason for this is simple; the more you know about Forex trading the easier it’ll be for you to develop a broad understanding of the market’s mechanisms while building a sense of determinism that can underpin disciplined and patient trading.
You’ll also have the opportunity to hone your skills and gain practical experience of the sector by using a demo account when starting out (more on this later), with this capable of simulating a real-time marketplace where you can trade freely without risking your hard-earned capital. This will help you bridge the often cavernous gap between theoretical learning and practical market experience.
2. How Real World Economics Impact on Forex
By this point you should already be aware of the volatility of the forex market, which remains incredibly susceptible to geopolitical and macroeconomic events. Macroeconomic factors such as interest rates and inflation can be particularly influential, and this has been borne out throughout the coronavirus pandemic in 2020.
For example, most developed economies have sought to introduce various stimulus measures and cap their base interest rates as a way of combating the impact of the virus. However, this makes foreign currency investments less appealing and reduces capital inflows, lowering the value of fiat currencies in the process.
Understanding this type of impact is key as a novice trader, particularly as you come to understand the volatility that underpins this marketplace.
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3. Open Your Demo Account and Get a Reliable Broker
Most Forex brokers make their platforms available online so you can access the market and start trading on your own. Before you even pick a broker, read carefully the terms of trading and compare all of the features offered by several brokers so you can make the right choice. Some of the features to play close attention to are the trading options, terms and conditions as well as other users reviews. The best broker must fit your specific needs and help you achieve your financial goals.
Once you decide on a Forex broker you can proceed to open your demo account. This account will work for a limited time of period, but it’s important that you take advantage of this time to get you an idea of how it’ll be trading in the real thing. At this point you won’t be using real money but you’ll get to test the platform.
4. Use Trading Platforms to Your Advantage
During the process of using a demo account, you can also get to grips with contemporary online trading platforms and come to understand the wide range of analytical tools and technical indicators that they have at their disposal.
One important example is provided by the so-called “economic or forex calendar”, which details upcoming events and data releases that are likely to impact on currency performance and sentiment across the globe. By utilizing this type of tool, you can gain real-time insight into the forex market performance and forecast potential price movements before they happen.
You can also learn to use stop-loss measures, which automatically close positions once they’ve incurred a predetermined level of loss. This can help you to safeguard your capital effectively, even in instances where you’re targeting markets and trading sessions on the other side of the world.
Related: Essential Trading Differences Stocks vs. Forex You Need to Know
5. Set and Organize Your Trading Capital
One of the best things about Forex trading is that you don’t need a huge amount og money to start trading. This happens because of the margin trading featured offered by each broker. Setting up a real account on a Forex trading platform can cost as little as $10 and you can even make use of no-deposit bonuses. You should always set aside some money that will be destined for your trading activities, and of course this money shouldn’t come from your savings or emergency money.
As for the ideal amount of money, it can be anything really, but experts do recommend to start trading with at least USD$1,000 in order to give you some buffer if a loss suddenly happens, and in order to make your earnings look more appealing than just a few dollars.
6. Practice then Start Trading with Real Money
Once you get a hang on the Forex platform and you feel like you’re ready for the real deal, you can move on and open a live trading account with the same Forex broker. This is essential because now you know exactly how that platform works and you’re confident enough in it. If you want to switch platforms you should practice on it again before starting the real one. Most trading platforms let you convert your demo account into live accounts with just one click. Once you create the live account you’ll have to deposit the minimum amount specified by the platform and you can get to trading with real money.
Remember that, in Forex trading, there are plenty of trading strategies you can try out that’ll get you big profits, while others might not work as you planned. The real secret of increasing your profits is repeating what worked for you in the past and avoiding at all costs what didn’t work.