In recent years many have started Forex trading, and its popularity is rising amongst the financially savvy. As more people are inclined to make money from home or in their spare time, even inexperienced traders are now exploring one more way to earn extra income.
As a result, Forex trading for beginners is gaining momentum. However, most people are unaware of the complexity involved with forex, while others are lured in by the prospect of making a rapid and large sum of money.
Forex markets have a lot of potential, and if you are planning to get involved yourself, consider a few things which will help you to mitigate unnecessary risks.
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1. Is Forex Trading for Beginners a Good Idea?
Forex trading is complicated. Whether it is good for beginners depends upon your risk appetite. However, like any financial instrument in the market for trading, one can start by investing a little in the forex trade.
2. Choosing a Reputable Broker
Choosing a broker should not be done on an impulse but instead, be carefully researched and compared to other brokers in the market. There’s a considerable chance you’ll start spending a lot of money on the brokerage platform eventually. Consider the following factors while hunting and assessing providers:
1. Security and Credibility
Hiring a broker authorized and registered by a regulatory body is a good idea as it ensures the legitimacy of the platform and protects your investment from shady and unauthorized brokers.
2. Transaction Cost
You might want to check out the transactional and brokerage rates. Remember you might have to fit into a bargain between affordability and security.
3. Easy access to your deposits and withdrawal
You should have access to your deposits and withdrawals with ease.
4. User-friendly platform
The trading platform should be easy to use offering access to all the data related to trading made available to the user.
5. Customer Service
In case you face difficulty while trading, you can look for brokers who offer extensive support. Learning that there is a support structure to guide you in your times of need, is reassuring.
6. Additional Services
Certain benefits, such as VPS hosting for uninterrupted trading, low spreads, and negative balance protection, may be available from some brokerages.
If you make the effort in selecting your broker wisely then the chances of carrying out a smooth trade are higher.
3. Begin with a Demo Account
Many brokers also have a demo account facility. Instead of going “live,” you should practice and hone your skills on the trading platform. This will also help you understand and use various facilities of the trading platform. The best forex platform for beginners always recommends practicing off the market to get the basics out of the way.
One more advantage is that you use virtual money while dealing in a real-time environment. The trade you carry while booking a profit or a loss should be monitored. It will teach you discipline while trading. However, since you are using virtual money, you won’t take away any profits or losses incurred. The experience gained will eventually help you while trading in the “live environment.”
Treat the “demo environment” as a “live environment” and learn from your mistakes, you can formulate strategies that can help you to minimize losses. Remember you will make losses, but how you react and get back to the market solely depends upon you. You can also play around with different currency pairs to gain experience with various tools and trade types.
4. Invest Time in Learning
Make use of most of the material given by the broker. Join webinars and live seminars conducted on forex trading, and learn different strategies for trading. Utilize all that you have learned while trading. This will boost your confidence while trading in a demo account. Increase your knowledge and understanding of how the forex market works.
5. Using Micro Account
After practicing on the demo account and gaining considerable knowledge and experience, you can now enter the live environment. However, using virtual money and hard-earned money are quite different. Using a micro account is advantageous as you set a smaller trade limit. It has its benefits as you can use real money, unlike a demo account, and attain a grasp of how the market works. Once you have gained enough experience and confidence, you can then go for higher limits and highly volatile currency pairs. Forex trading for beginners, can often resort to micro account settings to enhance their skills and learn the different features of the app while incorporating them during practice.
6. Research on Currency Pairs
Understanding currency pairs before trading is vital. Research currency pairs, and check the ones that are stable and less volatile, like for instance EUR/USD. Once you have understood how the market works you can graduate to more volatile currency pairs which assure high returns on investments.
Now that you are familiarized with the market and the trading platform, one may ask the question
“What is the minimum amount of capital required to start trading?”
The amount of money you’ll need to trade forex is determined by a variety of criteria, including your estimated trade sizes, risk tolerance per trade, the broker’s available margin needs (i.e., leverage), and any minimum deposit requirements to open your account.
However, while trading you will require moderate capital. Starting with $10 is not enough because even though most forex brokers allow you to trade micro-lots, $10 would barely cover the margin requirement alone, even if you had the greatest leverage. Micro contracts and a minimal minimum deposit are available from the top forex broker for tiny accounts. Whether you have enough margin availability to open each trade or not, is a considerable point.
7. Is Trading in Forex Profitable?
Traders lose money in the vast majority of cases. To beat the odds and earn money trading forex, you’ll need a trading technique that not only identifies trading opportunities (i.e., signals when to buy or sell) but also calculates the best trade size for your balance. Furthermore, utilizing a stop-loss order and limit, the desired risk and reward levels should be defined in advance.
With this approach, you’ll know when to abandon a transaction, whether it’s a profit or a loss. Because all you have to do to be successful in trading is maintain your average losses lower than your average profit. That is more difficult than it appears, yet it is the key to profiting from forex trading.
The question one may ask is, is trading forex profitable?
The answer is that yes it can be. However, like any other work or job that pays you, there is the element of smart work involved. You don’t have to be a rocket scientist to understand the forex trade. All you need to do is understand the market sentiments. It would be advisable to understand the global economy. It will help you to identify and exploit the opportunity as and when it presents itself.
Take continuous updates on what the forex gurus have to impart, attending live seminars or webinars is quite helpful in the long run.
Last but not least. There may be times when you might make a loss and the streak of losses may continue for an outstretched duration. However, it solely depends upon you, picking yourself up, understanding where you went wrong, and making sure you don’t repeat those mistakes will surely help you.