The process of trading currencies has become a lot more accessible than it used to be. Thanks to online trading platforms, mobile connectivity, and AI-driven software solutions, anyone with a desire to trade can now do so with relative ease.
Foreign exchange trading, commonly referred to as forex trading, is one of the most popular forms of trade. But how do you get started with forex? Which tools and strategies are most effective? To help you become a forex trader, let’s take a look at five tips for forex trade beginners.
Pick a trading style
Which type of trading personality do you have? This is the most important aspect of trading, as it will dictate your trading strategy, risk tolerance, and many other aspects of forex trade. Figuring out your plan for trading is the first step on your journey to becoming a proficient foreign exchange trader.
No matter how many tools you have at your disposal, and regardless of whether or not your trades are profitable, not having a concrete idea of your personality profile will end up being to your detriment in the long run.
Once you’ve figured out a strategy that suits your personality, the next step is to establish a detailed trading plan. You can create a plan for as many currency pairs as you wish, but it’s best to stick to one or two pairs if you’re just starting out. After planning out your maiden trading run, it’s time to find a broker who can facilitate those trades.
Choose the right broker
Nowadays, traders are spoilt for choice when it comes to selecting a broker, but not all stand out as the best. Ideally, you want to find the one that best suits your needs.
Ensure that you take the time to perform due diligence, evaluating each broker that interests you with equal scrutiny. When in doubt, look for one that offers a competitive spread, a range of leverage options, and different trading accounts.
Most reputable brokers will offer their clients a trial account. Demo accounts are the ideal way to experiment with FX. Instead of putting your own funds at risk, you can use these accounts to fund your first experiences of trading forex.
Get the right tools
Ideally, your chosen broker should have multiple trading platforms to choose from, each with its own real-time data analysis, live news feeds, and other technical analysis tools. The more platforms a broker supports, the greater the options for trade.
Reliable brokers offer all the tools you will need for success, but there are also plenty of third-party software applications that can augment your knowledge base. Doing research on market trends and geopolitical influences is a practice you’ll have to master by yourself.
Request trials of different trading platforms if a broker makes the option available. Combined with the aforementioned demo accounts, this is the most risk-free method of introducing yourself to the ups and downs of the forex market.
Avoid the wrong influences
Because forex trading is based on margin agreements, your profits from it predominantly rely on the efficiency of your broker. Some brokers will take advantage of this dynamic, indulging in the unsavory tactic of hunting, for example.
Hunting, or sniping as it’s also known, is when a broker prematurely buys or sells your trades. The aim is to increase their own profit, even if it means that you lose out on your profit in the process. This is a prominent example of why it’s imperative to perform due diligence when choosing brokers and trading platforms.
If you’ve created a trading strategy, performed your research, and found a broker, the only thing left to do is to begin your trading diary. Make sure to keep a record of every trade you make. This will protect you from a legal perspective and provide you with all the critical data you need for accurate self-analysis.
Accept the nature of speculation
If you prefer having a steady return on your investments, forex trading may prove too risky for your liking. Currency pairs are constantly in a state of flux, and the market is well-known for its high volatility. At the end of the day, every trade has the potential to be profitable or lose you money, and all the deciding influences are out of your hands.
The ability to handle losing trades is a characteristic shared by all successful traders. If you want to become an expert trader, be sure that you’re willing to scrutinize your transactions analytically, recognize and learn from your mistakes, and make your financial decisions without bringing emotion into the equation.
Understanding that trades can go either way is a fundamental lesson that must be learned as early as possible. The sooner you go through the experience of a losing trade, the quicker you’ll realize how difficult profitable trading can be, and you’ll be better equipped to speculate on future trades.
