Everything you need to get started in Forex
With the amount of information that’s available on the internet on currency trading it is understandable if new traders get overwhelmed, which they tend to, when looking to get started.
This article is meant to offer some clarity to aspiring traders and hopefully help them launch their trading careers.
So if you are thinking about switching careers or starting a part-time currency trading business, this is for you.
Altogether there are five things you will need to start your trading career.
It might not look like much but the key here is research, a lot of research.
Let’s get right into it.
1. Basic education
Education here of course refers to forex education.
There are a lot of free and some paid resources available online. These formats involve:
⦁ Articles and blogs
The good thing about having all these options is that you can go for one which is best suited to your learning style.
We all have our unique strengths and weaknesses and you should make it a point right off the bat to let your natural disposition guide your trading method.
There are as many styles and strategies of trading as there are traders. So, don’t get distracted by what others are doing.
See how you find it easiest to learn something new and then use that same method here.
If you want to get started using a comprehensive course, you can take a look at this one.
Aside from reading about how forex trading works and what are the main processes involved you should also get yourself acquainted with the most popular trading strategies and risk management measures.
Finding the right broker for yourself is incredibly important. In trading, a broker is the one connecting you to the market.
They serve as the link. They carry out all your trades for you. It is, therefore, important that there is a good level of trust between you.
All the horrible things you’ve heard about scams and frauds in the forex market, are usually carried out by services. Brokers are one such service.
A few giveaways of a good brokerage service are:
⦁ They offer a tight spread. A spread is the difference between the ask and bid prices.
⦁ They offer a reasonable level of leverage, which is not too high. Check the legitimacy of such a service before signing up with them. The reason why you should do this is because such offers are precisely made to attract new traders. They know a 500:1 leverage ratio will lure unsuspecting people.
⦁ The commissions they charge are not too high.
The best thing to do is to go by word of mouth. If you know someone who has been in the market for a long time ask them if they have broker recommendations.
Do your research and read testimonials on third party websites if they are available.
You can also take a look at this article to know what to look out for when hiring any kind of service in forex.
A strategy that works for YOU
As mentioned above, you should make decisions because they are the best for you.
A lot of traders, especially those who are just starting out, get swayed by what they see others doing.
One thing that you should always keep in mind is that if trading at support and resistance works for trader A then it might be that trader A is good at identifying these levels. Trader A has probably had a lot of experience and they recognize market patterns. If you are just entering the market, there is every chance that you might not be able to get the hang of it at first.
It is, therefore, incredibly important that you pick a trading strategy that is most suited to your skill set and temperament.
You can take a look at some of the most commonly used one here.
Two tips that we can offer you are:
⦁ Start with a demo account. A demo account provides the trader with a chance to understand the market a little with virtual money. So there is no risk involved. This is the best time to implement your strategy and see if it works.
⦁ When you eventually move on to real money, start with lesser leverage. This is because in the beginning the chances of winning are slim. When you take leverage, you are not only maximizing your profits but also losses. So if you lose when you are leveraging 100:1, it can be very harmful to your account.
Risk management measures
A new trader should never step into the market without a solid risk management plan.
In trading there will always be risk. There is no trader in the world who has never faced a loss. So this has to be accepted as part of the process.
Having said that, accepting risk does not mean that you walk into the market unprepared.
Risk management helps control the level to which your account is exposed. In other words, it allows you some control over how much you lose. In this way you can make sure that you are not jeopardizing your account for a trade.
Here are some quick tips for risk management:
⦁ Use orders such as stop loss.
⦁ Don’t get emotionally involved in trades.
⦁ Don’t stick around for longer than you had planned to. Accept a smaller loss instead of hoping for a shift and ending up with a much heavier loss.
Learn more about risk management measures and strategies here.
This is not a necessity to trade, but if you want to do it long term and eventually get better, then you must maintain a trade journal. In this journal you should record all the trades you make in a date and update it every day. In addition to the entry exit points etc. also include a brief analysis of your performance at the end of every day.
The benefits of maintaining one are given below:
⦁ Helps you keep track of your daily performance.
⦁ You can see how you’ve improved over time.
⦁ You can see what went wrong and where.
⦁ You can better analyze your performance.
We hope that after reading all this you will be able to make a practical plan for launching your trading career.