These days many people all over the world are well aware of the profitable trading opportunities in the global currency market. However, they are hesitant to pursue trading as they think that only pro traders can earn money in the volatile forex market. They are not ready to take the risk and some are not sure if they can deal with the stress and complexities. This kind of self-doubt might be stopping many of you from stepping into the lucrative forex world. But you need to remember the fact that all the successful traders you see today were also in the same spot as you in the past.
They were able to cover the distance between self-doubt and success by staying committed to their goals and preparing to trade forex with a cautious approach. Thus, you should not have any doubt about your ability before you start learning about trading. Once you start gaining knowledge and grasp the basic concepts, you can open a demo account to practise and enhance your skills in a risk-free space.
In this beginner’s guide, I will be explaining the basics of forex trading in a comprehensive manner and will also share 4 tips that you can follow to taste success at the end of your trading journey.
Forex Trading Basics That Beginners Should Know
Forex is an abbreviation for foreign exchange which is the exchange of one currency for another. For example, if you are exchanging one USD for a Euro, the amount of Euro that you get in exchange for $1 depends on the value of the Euro when it is quoted against USD. This will be the price of the currency pair EUR/USD which keeps changing due to the volatile nature of the forex market. Traders buy and sell these currency pairs or in other words, open long and short trade positions based on the type of price change they anticipate.
Those who expect the price to rise will buy the pair and those who think the price will fall soon will sell it instead. The first one is a long position and the second one is a short position. The potential price fluctuation is predicted by analysing the market situation as the price tends to move in a specific repetitive pattern. This is done by interpreting the price charts and this is known as technical analysis. Even economic events and geo-political factors influence the currency pair prices and fundamental analysis is done to forecast it.
If your analysis, calculation and logic are correct, you will make a profit at the end of the trade when it is properly executed. If anything goes wrong, you will encounter a loss and this is the risk that you have to manage as a trader. It does take a lot of time and effort to crack the code of forex trading. Those who are unable to do that due to limitations of time can also get some market exposure by finding a skilled professional to manage your funds and trade on your behalf.
I am talking about the managed forex accounts for investors interested in generating passive income. They not only simplify trading for amateurs but also provide high profit potential and you can mitigate the risk through diversification. The MAM/PAMM accounts are secure and convenient options for forex investors as they are offered by many brokers. You don’t need to have in-depth market knowledge or experience for investing in managed accounts as you will not be playing an active role. All trading decisions will be made by the top trader you choose allowing you to earn without trading yourself.
It is possible to learn self-trading simultaneously while you are investing in managed accounts. I will share 4 tips that you can follow to ensure success in your trading career.
- Take Your Time To Tailor Your Strategy
There are a lot of popular forex strategies that you can choose from as a newbie trader. But you need to modify it to suit your requirements better as you cannot expect to get desired results by blindly following a ready-made strategy. It should be personalised based on your trading style, profit targets and risk tolerance. Hence, you should take your time to tailor your strategy and backtest it to detect any flaws or shortcomings. You can minimise the risk by fixing these issues in time.
For trading style, swing trading or position trading would be easier for a beginner as scalping and day trading are way too intense and complex with shorter timeframes. But many tend to run after quick gains which often leads to losses as you become restless and give in to your emotions while trading. Thus, you need to build trading discipline and manage your emotions, regardless of the strategy you select in the end.
- Choose A Regulated Forex broker
A secure and seamless trading experience is essential to ensure success in the forex market. When you choose a regulated forex broker, you won’t have to worry about security and quality of services as they are being monitored by the regulatory body to protect the interests of traders and investors. Another thing to consider while picking a broker is the pricing which has to be transparent without any hidden costs. Your potential profits will be higher with a low-cost broker as they charge less.
You need to check the trading platforms and tools they offer along with the trading conditions. The order execution has to be fast at the best bid and ask prices, promising minimal slippage. Some brokers even offer commission-free accounts if you want to get rid of them. There are also raw ECN accounts that have tighter spreads and low commissions. Don’t forget to check the customer support system as you should be able to get timely support from the broker as and when needed.
- Open A Demo Account First
Like I said in the beginning, demo trading is an unskippable step as you cannot study the market without being exposed to real-time market conditions. The demo account is a replica of a real account without any real risk, making it ideal for beginners. This account can be used freely by anyone to test a new strategy or just sharpen their trading skills through continuous practice. The results you get on the demo account is like a preview and you can do better in live trading after gaining some demo account experience.
- Keep Learning New Things
The 4th and last tip that I want to share here is to keep learning new things no matter how much progress you attain or the amount of profits you make while moving forward in your trading career. This also applies to those who feel discouraged and stuck when they don’t get the expected results in the beginning. You should not give up when you encounter losses, rather see it as an opportunity to learn more and grow.
Sum Up
In the end, I’d like to say that success in the forex market is not about being a perfect trader from the very first day. Profits belong to those who are patient and strive for improvement while staying focused.
