Thinking about getting into forex trading but not sure where to start? Forex trading is all about buying and selling currencies to profit from the ups and downs in exchange rates. It’s a massive market with trillions of dollars traded daily. Here’s a simple guide to help you take your first steps
What is Forex trading?
In simple terms, forex trading is buying and selling of different currencies to make a profit off of the exchange rate fluctuations. It is one of the most actively traded markets, which earns about trillions of dollars every day. To understand this better, let’s take an example if you feel that if you feel that the pound will increase in value against the dollar then you, then you can buy pounds with dollars. When the pound’s value rises on a relative basis, you sell the euros back for more dollars than you initially spent buying the euros, earning you a profit.
How do you start Forex trading?
Although forex trading might seem quite challenging at the beginning since you have to completely depend on the fluctuation of the currency and your research, as you start trading you will gain more experience and will be able to trade better. The following is a list of measures you must take when you start your forex trading journey.
- Learn about forex trading:
You need to be aware of the basic concepts of forex trading before you start trading. Learning the basic terminology used in forex trading is a great place to start. You need to also learn about the forex global markets, learning currency pairs, market patterns, and about the different factors that affect and influence the value of currencies and more.
- Develop a trading plan:
Create a trading plan, this is going to be different from your usual online trading plan. This plan must include your goals, any criterias, risk tolerance that you will use to assess your trade. It is also important to stick to this plan even when the exchange rate isn’t moving as you were hoping it would move. Always remember, it is the most disciplined traders who become the most successful traders. Patience is key
- Develop a trading strategy:
Study and review the different trading strategies such as various technical analysis strategies, news trading, and fundamental analysis. Choose a strategy that aligns with your trading plan, trading strategy and risk tolerance.
- Set up a brokerage account:
The next step is to look for a good broker for your forex trading. Before you choose a broker, ensure that your broker has a user friendly platform or forex trading app, brokerage fees that suit you, and good customer support. Again choose a broker who fits your needs and aligns with your trading strategy and trading plan
- Practice forex trading with a demo account:
There are a few forex platforms that allow you to paper trade before you start the actual forex trading. This will help you simulate and test your trading strategies. With this, you will be able to identify your weaknesses and faults before you put your money on the line.
- Start slowly:
It is always better to start off slow when you start trading, like you would with algo trading. What we mean by start off slow is make less risky trades and gradually increase your trading size as you gain more and more experience.
- Monitor and adapt:
Stay up to date with the market news, geopolitical events that might affect the currency prices, and economic indicators. You will have to adjust your strategies as per the market conditions and changes.
Starting with forex trading can be challenging, but with the right strategy and patience, you can trade successfully over time.
