Do you want to become successful with trading foreign currency pairs, referred to as forex? Over the past decade, this form of trading has become very popular, specifically after the Covid 19 pandemic and need for people to look for alternative ways to earn money while staying at home. However, it is important to note that forex trading is high-risk, complex, and not for everyone. Many people who are just starting off tend to give up after the first six months due to losing their account’s balance. That being said, we are here to make sure you don’t become one of those people.
The process of trading forex online as a beginner can be challenging, but there is a defined process that will lead to success. Read on to learn what forex trading is and how to trade it. We will discuss forex trading strategies, pros and cons, and how to choose your business partner, your forex broker, who will provide safe access to the forex market. Finally, we will list forex brokers that are known for their beginner-friendliness.
Forex Trading: What is it?
In the world’s largest foreign exchange market, nearly $6.6 trillion is traded daily. Retail forex trading makes up a small portion of this figure, but you get the picture – this market is enormous.
Foreign exchange rate fluctuations require corporate treasury staff to hedge their risk due to the market’s support for international trade. As a result of swings in valuations, the majority of volume comes from speculation, creating the opportunity for gain as well as loss. Among the currency pairs involved in Forex trading, the Euro versus the US Dollar is the largest market sector.
For example, interest rates, geopolitical risk, economic strength, or trade flows can all affect foreign exchange rates. There is also a difference in opinion on how these factors can shape the future direction of valuations, creating volatility in the market. Where volatility occurs, traders can profit.
Forex Trading: How to Get Started
How often are forex traders killed? Would the military send you into battle without proper training and preparation? Forex trading is similar to war. You will fight in the world’s largest and most fluid market, and to survive, you need the best weapons and training, but you also need the time upfront to improve your odds. Experience is key. Having a lack of patience and inexperience can lead to your demise.
Putting it simply, you would be wise to follow the “3 P’s” – Preparation, Planning, and Practice:
Preparation: As with any activity, forex trading has its own language and tools. In order to build a solid foundation for future trading, you need to be aware of these terms. There are several articles and links on our site to help you gain an understanding of forex trading basics. Accept your amateur status, and let the experts guide you.
When it comes to the forex market, you must devise a well-thought-out plan of action. It’s easy to get overwhelmed with its volatility and let your feelings influence your decision-making. A systematic approach can help you resist this mistake and keep your mind calm. We are here to help build that strategy, control risk, and remove emotion from the equation.
Practicing: Many forex brokers offer free demo trading systems, even before opening an account. By trading virtual money on this practice platform, you can gain experience on how the market works and how to make money in the forex market. Develop your own plan of attack. Learn how to open and close a position, place a stop-loss order, and use charts. Traders who succeed attribute their success to practice.
At this stage, you should become familiar with and confident in how you approach this very volatile market before you start investing real money. As a beginner, it is also best to focus on a single heavily traded pair like the “EUR/USD”. You can start with a $500 deposit in real-time and work your way up until you feel comfortable.
What are the best Forex trading strategies?
It is important to choose a trading method that aligns with your personality when trading forex pairs. The traditional forex trading strategy involves longing or shorting a particular currency pair based on fundamentals, technical indicators, levels of support and resistance, and repeating patterns of price behaviour. All of these aspects of the trade can be educated by us.
Forex trading can be approached from a variety of perspectives. A position trader can trade long-term, a swing trader can trade short-term, or even a scalper can trade day or scalp. As an alternative to trading in specific pairs, you can deal in options, or you can trade with Contract-for-Differences (CFDs), which allow you to speculate on price direction without owning the assets. For beginners, CFDs are an important part of forex trading.
There are still other methods available to you if your nerves don’t allow you to trade directly on the forex. You can select a money manager who specializes in forex pairs or invest in funds that specialize in forex pairs. Also, you can opt to follow the trades of chosen experts with your portfolio, subject to your adjustments at any time. This type of trading genre has been explicitly focused on by some brokers.
Forex Trading: Pros and Cons
A management team can make grave mistakes when trading stocks, which can lead to the share price plummeting to zero. Currency pairs fluctuate over time depending on how each supporting nation’s economy performs. Forex trading has other Pros and Cons, but returns are often small, but free leverage can magnify these gains or losses, whereas margin trading with stocks is often limited and costly.
The pros are:
A low-cost and small-investment market that is easily accessible 24X5
Positions can be bought and sold quickly and easily in this highly liquid market
You can go long or short on your chosen currency pair easily
When volatility is moderate, quick returns are possible
In major trading pairs, price manipulation is very rare
The cons are:
There is a high risk associated with high volatility
Major institutions compete with retail traders
It may be necessary to have knowledge of global events
There is a portion of the broker community that is unregulated and prone to fraud
Forex Brokers: How to Choose a Safe One
We live in a society where scams are inevitable anywhere there is a financial website and an unsuspecting public. There are dozens, if not hundreds, of forex brokers available across the globe, and it is imperative that you take great care when choosing one of these brokers. We will help you find one that is safe, but the final decision is up to you.
Making this decision requires consideration of several factors:
A rule of thumb is to choose a broker that complies with strict regulatory rules and regulations, and to avoid brokers in far-off locales without regulation. It will be nearly impossible to press your legal rights in a foreign jurisdiction.
Is it easy to deposit and withdraw money? Does it offer leverage? Are spreads competitive? Does it offer copy trading?
Would I be able to trade the currency pairs I want? Would I be able to trade stocks and indices? Would I be able to trade cryptocurrencies?
How responsive are they? Do they have live chat? Do they speak my language? What are their business hours?
To test out a trading platform, most brokers offer a free demo account. Try it out.