(Newswire.net — July 4, 2018) — The forex market is huge. Estimates of its value vary, but global forex market is worth somewhere in the region of $5 trillion. More money is traded in the currency markets than in futures and equities, although most of the trading is done by banks. It’s possible to make a lot of money trading forex; banks generate around 40% of their income via the forex markets. For the uninitiated, however, trading in the forex markets can be tricky, so here is a quick guide to the main points you need to be aware of.
Open a Demo Account
Anyone can have a go at forex trading. You don’t need to work for an investment bank or have tons of experience in the financial markets. All you need to do to get started is set up an online account with an online trading platform. There are dozens to choose from, so read the reviews and look for one that offers a demo account. It’s a good idea to start off with a demo account. This gives you an opportunity to test the water without financial risk.
Have a Plan
Have a plan and stick to it. Decide how much you can afford to trade – and lose – before you start forex trading. It’s easy to get sucked into a downward spiral where you think “just one more trade will get me out of this hole”. Nick Leeson made that mistake and look where it got him.
It’s best to have a goal in mind. This could be anything, from making enough money to pay for a new car to generating a reasonable part-time income. If it looks like the rewards don’t warrant the risk, get out before you lose too much money.
Stick to One Currency Pair
Forex trading is complex. It is sensible to start with just one currency pair. The most widely traded currency pairs include the USD, so start with a popular pair such as EUR/USD or GBP/USD. There is more liquidity in popular pairs, which makes them easier to master for beginners. Once you get the hang of how the forex markets work, you can move into different currency pairs, such as EUR/GBP or EUR/JPY.
Keep Your Emotions Out of the Equation
It’s very easy to get caught up in the excitement of forex trading. The highs and lows can be very addictive, but if you want to find success in forex, you need to keep a lid on your emotions. There is no room for emotions in forex trading. Use logic to inform your decision making and stick to the plan, no matter what happens.
Read the News
Much of what happens in the forex markets is influenced by macroeconomic activity. Political decisions, central bank policies, and wider economic trends all play a part in the ups and downs of the forex market. Make a point of keeping up to date with financial news headlines and keep an economic calendar handy. You can use this knowledge to tweak your trading plan.
Be willing to learn from your mistakes and don’t give up. Every forex trader has to start somewhere!