So you want to try your hand at forex trading. You’ve probably read lots of books and trading guides and watched hours of videos about the subject. And now you feel ready to dip your toes in the proverbial pond. With the right mindset and know-how, you too can become a successful currency trader.
Many people see full-time traders make lots of money in a short amount of time and think that they can pull the same thing off. But seasoned traders have access to professional tools such as true ECN broker services. Now, that doesn’t mean that you can’t trade forex. All I’m saying is you shouldn’t compare yourself to a veteran.
Before making your first trade, you need to familiarize yourself with the basics of forex first.
1. Know who to work with
Unlike stocks, securities, and bonds, which are traded on dedicated exchanges, the forex market is entirely decentralized. Forex is done on the interbank market, a global network of financial institutions such as banks that trade among themselves. If you want to deal in forex, then you must work with a forex broker.
Do some research about reputable brokerage firms in your area. Read reviews and ask for feedback from other traders. You want a trustworthy broker, fits your trading style, and most importantly, is properly licensed to do brokerage work.
2. Start with a practice account
So you’ve signed up with a brokerage, and you’re ready to start trading. You might want to slow down first. Ask your broker if they have a trading practice account you can play around with. This allows you to assess their platform and services without committing real money. You can also use this opportunity to test your strategy to see if it works.
3. Negotiate the fees
You need to ask your broker whether they earn through spreads or commissions. If the broker earns by charging commissions, you have to pay a specific percentage of the price difference when you sell. Other brokers make a living from wider spreads. Ask about how each fee structure affects your bottom line.
4. Manage your emotions
Forex is notoriously risky and volatile, and there might be times that losses pound you. You must keep your stress and emotions in check when engaging in any type of trading. Do not make rash decisions based on emotion. Try to keep a clear head and prioritize data and logic.
5. Start slowly
Just like any skill or trade, you need to ease yourself into forex trading slowly. You might be tempted to make big trades right away, but if you’re not familiar with how the system works, you’re setting yourself up for a huge loss. Start with small deals and familiarize yourself with the different processes involved.
These pointers will help you get started in forex trading. Losses are entirely normal, so don’t let a bad day frighten you into giving up a potentially lucrative venture. Success in trading all boils down to preparation, mindset, and having the right risk appetite.