The foreign exchange market, or also known as forex is a global, decentralized market used for currencies trading. The main participants involved in this market are some of the biggest international banks. There are many financial centers around the world that function as anchors of trading between lots of different kinds of sellers and buyers. The benefits of the forex market are many, but the most important ones you need to know are:
However, there are many people who are interested in forex trading, but a problem occurs. First of all, they know nothing about this type of trading and they don’t know how to acquire the needed knowledge in order to start their successful forex trading career. So keep reading below in case you want to learn something.
The foreign exchange market works via lots of financial institutions, plus it operates on several levels. What actually happens behind the scenes is banks break into smaller firms which are also known as “dealers” and those dealers are involved in large proportion of the forex trading. So if we have to sum up the things so far, most forex dealers are banks and thus, the market is sometimes called interbank market.
We know that before a person starts with forex trading, there are lots of questions that have to be answered. How to choose a broker, should a person use a demo account, what are the most important things that one needs to know before fund his account, etc.
We will try to give answers to all those questions now.
1. Choose a broker
It is strictly a personal decision to decide which the best broker is, simply because there are many various offers and every person would find different tools more useful than others. This is why, it might not be a bad idea to try a couple platforms until you find the one that fits into your needs. This is the first step you have to do, but once again, test at least a couple of different brokers and platforms.
2. Open a demo account
Once you have finished with your decision regarding the broker, it is time to open a demo account. Yes, a demo account. It is always better to start with such account, because people think forex is an easy way to make money. This is not true in order to gain profits you need lots of experience and in most cases this goes hand to hand with losing at least 2-3 major sums. The good news is that most brokers offer at least 30 day trial of their trading platform, which will give you a chance to get used to the trading platform and decide whether or not this is the one that suits your needs. So once again, it is not a good idea to trade real money if you are not entirely comfortable with the platform you are using – make sure you remember this! This is one of the biggest rookie mistakes.
3. Learn Leverage
Most forex traders do not fund their accounts with millions. However, this doesn’t take you the chance to buy expensive assets and all this thanks to leverage. Usually all trades are carried out using leverage or trading on margin. Margin, on the other hand, is also a useful tool, but it can also be very dangerous if you don’t know how to trade. Typically the leverage is offered between 50:1 up to 400:1. Keep in mind – the higher the number – the less money required to put on big trade. So you have to be really careful with the whole leverage scheme.
4. Practice business plans
Another thing you need to master before you start trading with forex, you need to get familiar with the charts and how they work. As a matter of fact they will tell you lots about the movements of the market and will help you enhance your better performance. The shorter time frames will give you ideas how the market moves over longer period. It is important to take a note of all movements – short and long. Make sure that the platform you have chosen offers charts, candlesticks, bars, etc. And last but not least – take as much time as you need in order to try different looks until you find the one that you think is the best.
5. The first live trade
The first trade is always nervous and exciting at the same time. After using demo accounts for too long the whole excitement will get lost and you will want to try out “the real world. Don’t lose your mind and remember that the most important thing is to stay calm, even if you lose the first time – it is completely normal. It will definitely be difficult but with time you will master your emotions and improve your money management – anything is possible – just keep practicing. Do not give up if you start losing money, analyze your moves and try not to repeat them in future. This is the best way to learn forex trading.
The whole forex trading is a constant learning experience in which sometimes mistakes can be really expensive. The important thing here is to learn from your mistakes and do not give up. It is important not to make the same mistake a couple of times, so try avoiding such things. If you follow this advice, you will most certainly become a very successful forex trader.