If you think you have the skills and the mindset to trade online, . Compared to trading stocks and other commodities, foreign exchange is actually much simpler. You can also do it all on your own, just by trading online.
But despite the promises made by various “experts” that you can start trading immediately, you first need to make some preparations. You have to be really ready before going into forex trading.
Do you remember when you were still in school and you had to take exams and pass them? It’s the same thing with Forex trading. You have to read a lot of materials, you have to study, and you really have to understand how it works. Keep in mind that trading in foreign exchange can be a lot more serious than just any test, and you have to do it right unless you want to suffer huge losses.
So how do you study forex trading? You can go around this website for many informational and instructional articles and videos, for example. But in all honesty, you can’t rely on just a single website for information. You may also want to visit objective financial news magazine sites. At the very least, when you visit such sites, you can confirm what you’ve read here.
First, you have to get a firm grasp on the basics. You’ll need to “memorize” (know by heart) the terminology so that you’ll know whatever it is any article is talking about. Then you have to hunker down and study the various methods on how to analyze the Forex markets. You’d be surprised at how many there are.
In general, there are fundamental analysis methods, and there are technical analysis methods. Each of these categories has many different analysis methods, and it may seem that there are many distinctive methods as there are Forex traders. That’s not surprising, because you really have to customize your method according to your particular situation.
You’ll have to customize your method based on what type of risk is comfortable for you, and then of course you are also limited to the methods which you actually understand.
Limit Your Participation to What You Can Afford
While many websites may promise huge profits (millions of dollars) as long as you invest heavily, that’s not exactly a prudent strategy especially for a newbie like yourself. As a general rule, the money you risk in Forex trading should be money you can afford to lose. You can’t bet your entire life’s savings on it, regardless of how much potential profit you stand to make.
Consider it this way—it’s not a bank account that comes with federal insurance. If you can make money, then it stands to reason that you can lose money. And when you’re new, there’s a chance that you can lose all your money. So do not even think about putting up your home as collateral for a loan which you will use to invest in foreign exchange.
Use Your Demo Account
So now that you have readied your money and you have read up and formulated your trading strategy, it’s time for you to practice. It’s like learning how to drive—reading can only get you up to a point. You need some hands on experience.
Most trading platforms allow you to use a demo account so that you can invest virtual money. You can then see how the trading strategy you formulated works out in the real world. It’s like the best virtual reality driving simulator. You can practice to your heart’s content without getting killed financially.
With the demo account, you can then see patterns and trends, and then you can make corrections to your trading strategy so that you actually make some money on a fairly regular basis.
Remember, you can’t be right all the time but you want to make sure that in a span of 3 to 6 months, you actually are right more often than you’re wrong, and that your profits are greater than your losses.
Learn from Others
The really great about Forex trading is that you don’t have to go into battle without help. For example, you may want to consider an expert advisor program. You just set your conditions on buying and selling, and you won’t have to monitor your trades continuously. The software does it for you.
Then there are platforms which allow you to mirror the trades of proven performers. The concept is simple: some traders are really good at making a profit, so you just do what they do. It’s not cheating at all, and it just further highlights the fact that foreign exchange is simpler than other forms of online trading.