The Foreign Exchange market is a complex one that rewards knowledge and patience, these tips will help you get started
The forex market is forever growing, with global trade averaging at $6.6 trillion (£4.697 trillion) per day in April 2019, according to the Bank for International Settlements. Because of this huge trading volume, geographical dispersion, and relatively longer operating hours, the popularity of forex trading continues to rise. But while the forex market offers plenty of opportunities to invest and earn, it does not provide 100% assurance for success. Financial analyst Robert Stammers notes that often, traders are expecting greater return on investments, or they trade without developing strategy. To avoid common forex trading pitfalls, beginners should do their research and plan their moves accordingly. Here are some tips to help build your success as a forex trader.
Define your goals and trading style
Before you begin trading, you must be aware first of why you are doing it and what you seek to achieve. Answer these questions first, and draw out a plan of action. That way, you can determine what trading style is best for your personality and goals. The Balance notes that you can choose among day trading (closing forex trades within the same day), swing trading (holding on to trades longer in hopes of higher returns), and position trading (holding on to currencies for years). But while choosing a trading style asks you to be flexible when it is no longer working for you, you should also be faithful and consistent even at times of suboptimal performance. Once you become comfortable with your trading style, your loyalty will be rewarded in the long run.
Choose a reputable broker
As you take your first steps in the forex market, working with a broker increases your chances of earning while reducing risks. That is why it is important to make sure that the broker you choose is licensed, regulated, trustworthy, and suitable to your trading style. You can successfully do that by spending time researching for brokers, their policies, and trading platforms. Regulated brokers are less likely to make fraudulent activities and are often divided based on the region they cater to. Here in the UK, you should only trade with brokers regulated by the Financial Conduct Authority, but this varies as most of the EU countries have their local regulators.
Use a demo account
No amount of reading and scouring for information will fully prepare you for the actual experience of trading. Most beginners start their journey by practising their trading strategy using a demo account. FXCM highlights how forex demo accounts let you view currency prices in real time alongside market-direct data and technical indicators you can apply based on your trading goals. Here, you can place mock orders with up to £50,000 of virtual currency, and test your trading strategies safely. After at least six months of demo trading, you would have already gained enough familiarity with the trading platforms and tools, and you can ease into the real thing with small amounts. Once you start trading with even a few hundred GBP, the experience, and hopefully, your earnings become real!
Keep an eye out for current events
There will always be a new lesson to learn in forex trading, no matter where you are in your journey. It is imperative that you continue to educate yourself with global finance and economy news, but especially in Europe, because currency rates are affected by these major factors. Keep reading and educating yourself, as this is the key to deepening your understanding of the market and its movements. As you set out on your new journey, be sure that you have the necessary tools to win. Remember, trading is an art and science, and you can only become proficient by being disciplined and consistent. By following these basic tips, you are sure to become a skilled trader and succeed in your new venture. The market awaits you!