While Forex trading might look like rocket science for many individuals, the same can’t be said for those who have had quite a few experiences trading it. In this article, I want to introduce you to the concept of forex trading and how you can start trading forex.
So what is Forex?
Forex trading is generally defined as the trading of one currency for another. Its also known as foreign exchange or FX.
It involves a global market known as Forex Market, where currencies are traded around the clock.
How to Start Trading Forex
Trading Forex is almost like equity trading. It can be risky and complex if you’re a complete amateur. However, below are some steps to get yourself started trading forex.
Step 1: Learn about Forex
While it’s not complex to learn, Forex trading is a project of its own and requires the right knowledge to execute successful trades.
You have to know when to buy, sell or close trades. On the forex platform, if you click buy or sell, you start making gains when the market moves in the direction you entered Buy (Upwards) and Sell (Downwards) and if the market moves in the opposite direction of what you entered in the forex platform you lose money. That’s it.
So to effectively trade forex, you must know the right time to close your trade either with some gains or losses added or subtracted respectively from your initial capital.
There are several online courses and tutorials on YouTube which can wrap up for you the whole concept of forex trading.
Note: Forex Trading is not a gambling or Sports Betting. If you trade the right way and at the right time, your gains will be more than your losses and that’s when the cash starts flowing in gradually.
Step 2: Set up a Brokerage Account
In order to start forex trading, you will need to set up a forex trading account at a brokerage. Forex brokers don’t charge you any commissions at all. They instead make money through spreads (also known as pips) between the buying and selling prices.
If you’re a beginner, It’s always wise to set up a demo account (demonstration account). A demo account will help you become more comfortable with forex trading and determine your trading style.
Thereafter, you can set up a real account when ready and begin trading currencies.
I highly recommend DERIV if you want to start forex trading.
Step 3: Develop a Trading Strategy
While you cannot always predict and time market movement, having a good trading strategy will allow you to minimize risks and act as a road map for trading. A good forex trading strategy relies on the reality of your situation and finances in general.
It takes into account the amount of cash that you’re willing to put up for trading and also the amount of risk that you can tolerate without blowing your account.
Step 4: Always Be On Top of Your Numbers
Once you begin trading, always check your trading positions at the end of the day. A lot of trading software these days provides the daily accounting of trades automatically. Ensure that you do not have any pending positions to be filled out and that you have sufficient balance in your account to make future trades.
Step 5: Keep Your Emotions In Check
Beginner traders are often overwhelmed by emotions across trading positions with profits and losses. They become nervous and fail to hold a bit longer for more profits.
Be disciplined enough about closing out your positions when necessary by cultivating emotional equilibrium as a virtue.
Forex trading is generally a high-leverage environment and offers more rewards to those who are willing to take the risk. I hope this article provides you with insight into forex trading.