We will not discuss technical and fundamental analysis. Instead, we will discuss the steps before starting forex trading. Forex market is a global marketplace of currencies of different countries where national currencies are traded in the form of currency pairs. It is one of the most liquid-able markets in the world. According to BIS, the daily turnover of FX and OTC in April 2022 was 7.5 Trillion USD. Everybody wants to book a share of the profit from such a vast market. Traditional forex trading was not accessible to every individual, but with the advent of digital brokerages, it is pretty easy to access this marketplace. Many individuals, without any preparation and understanding, nose-dive into the forex market, ending up losing money and hope as well. Before diving in, ensure these five must-dos before forex trading.
Identify the Most Suitable Broker for Forex Trading
There are hundreds of brokers available for online forex trading. It is imperative to identify which platform is best suitable as per your requirements and area. Brokers come with different features, and the following points should be kept in mind while choosing a broker.
1. Choose a broker that offers an easy deposit and withdrawal mechanism. Making deposits is generally easy for all brokers, but some brokers have made withdrawals complex and lengthy. So before depositing your trading money, check by depositing and withdrawing a small amount.
2. Check the broker’s regulations. It is 1st sign of trustworthiness and reliability. You cannot put your money in an unregulated broker, which is the guarantor and safeguard of your money.
3. The active customer service of the broker will answer many of your questions and help you a lot in the journey of forex trading. Responding and active customer service should be on your priority checklist before starting your journey.
4. The reputation of a forex broker matters a lot; check online reviews and consult other people who are already doing well in this field. Do research by yourself to identify reputable and reliable brokers. A good reputation as a broker guarantees ease in your journey.
5. Lastly, check some technical aspects and commission of the broker. Check how much leverage and margin the broker offers. It is recommended to go for lower leverage and lower margin as you are new to this field. Moreover, the spread is also significant, so choose a broker that offers low spreads.
First, Learn Then Earn
Learning is the second most important among the five must-dos before forex trading. If you’re interested in trading, it’s important to remember that technical and fundamental analysis of charts is essential for forecasting the future. However, it’s important not to rush into trading without fully understanding these concepts. It’s highly recommended to read at least one good book on technical analysis and one good book on fundamental analysis before starting to trade. Additionally, it’s crucial to stay updated on current global events that may impact the forex market. One way to stay informed is by bookmarking reputable websites that provide regular updates on global news. Some brokers also offer reports that can have a significant impact on the forex market.
When starting, it’s best to focus on a single currency pair or a maximum of two pairs. This will allow you to learn as much as possible about these pairs and to gain a deeper understanding of how they interact with each other. By taking the time to learn about technical and fundamental analysis, staying informed on global current events, and starting with a limited number of currency pairs, you can set yourself up for success in the world of forex trading.
Understand Trading Strategies
Forex trading is a highly profitable investment if it is done with a proper strategy. However, many people fail to make profits because they lack a clear mindset and a precise target. It is essential to devise a strategy that is best suitable for your personality, risk tolerance, and financial goals. For instance, if you are an aggressive trader, you may prefer a high-risk, high-reward strategy, while if you are a conservative trader, you may opt for a low-risk, low-reward strategy.
Remember, there is no one-size-fits-all strategy in forex trading. A strategy that works for one trader may not work for another trader. Therefore, it is crucial to devise a customized strategy according to your trading style and goals. Once you have a clear strategy in place, it is equally important to stick to it and avoid making any impulsive decisions based on emotions or market noise.
Get Right Mentorship
Learning to trade is a complex process that requires dedication, patience, and hard work. While it may be tempting to rely on signals from a mentor or other sources, it is essential to develop your understanding of the market and trading strategies. Through learning from a mentor, you can gain valuable insights and guidance, but it is equally important to apply that knowledge to your analysis and decision-making.
To truly become a successful trader, it is essential to develop your skills and expertise rather than relying solely on the signals of others. This means taking the time to learn the basics of trading and then practicing and refining your skills through trial and error. By comparing your analysis with that of your mentor, you can identify areas where you need to improve and continue to build on your strengths.
The More You Practice, The More You Learn
One important thing to keep in mind while starting your trading journey is to practice with a demo account before you start actual trading. Almost every broker offers the facility to create a demo account, which allows you to test your strategy without risking any real money.
When you start practicing with a demo account, it’s essential to try your strategy with different leverages, assign a target, and try to achieve it. However, it’s important to remember that achieving your target in the first go doesn’t mean you should immediately start actual trading. It’s recommended to repeat your success at least five times before leaping into actual trading.
Furthermore, it’s important to approach the demo account as if you are trading with your own money. This means avoiding the mistake of trading on demo accounts with much higher amounts than what you have, as this can create unrealistic expectations and lead to reckless decision-making. Remember, demo accounts are there not to get yourself fake success but to help you practice and learn. Take advantage of this opportunity to learn and refine your strategy so you can trade with confidence when you start actual trading.
Bottom Line
Forex market is a vast and complex marketplace. It is one of the most liquid markets in the world, with a daily trading volume exceeding 7.5 trillion dollars. While the market offers opportunities for significant financial gains, it can also be a source of losses for those who are unprepared. With the advent of individualized brokers, more and more people are trying their luck in this market without having a proper understanding of the basics. Therefore, before jumping into the market, follow above mentioned five must-dos before forex trading.
