How to Start Trading Forex?
Forex market also known as currency market is very lucrative, dynamic and liquid financial market compared to other financial markets. Any entrepreneur can join the business at will thanks to the internet but anyone willing to join the Forex should learn the basics of the market to avoid incurring substantial losses. Foreign exchange market has no central exchange or physical location.
The trade continues through 24 hours and the prices keep fluctuating constantly which means you have endless opportunity to trade at any time. As long as you have some little money and of course some patience you can become a successful Forex trader. Getting into trading hastily, however, can lead to loses. Here is a step by step guide on how to start trading Forex the right way.
Starting forex trading as a newbie
Set Aside a Fair Trading Amount
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You don’t necessarily need a huge amount to get into Forex trading but a fair amount of about $2000 would be a great start. This might seem like a huge amount especially to beginners but it’s a good amount that will let you trade with a buffer in case you experience some loses. You get a little cushion to stay in the market longer. Lower amount would still grant you entry into trading but in case of consistent loss you’ll soon be out of trading.
Select a Currency Pair
This is a very important step and you have enough options of over 67 different currencies to choose from. Make sure you put some time in to learn the price volatility associated with the pair of currency of your choice. This will help you manage the risks involved.
Start off with a Demo Account
Before trading with your real money it’s best to start off with tutorials. A demo account is an account with monopoly money, and it’s connected to the live market. You can trade in real time and you’ll get to see what losses or gains would have been if the money you were trading with would have been real. This gives you an idea of how certain currency and market behaves. It’s also a great way to create and test strategies.
A great way to get into Forex trading is copy trading. This means joining an expert group of trading whereby you view the operations and performance of several experts, choose your favorites and follow their lead. This enables you as a beginner to capitalize on expert’s traders. You can easily copy their trade and mirror their performance. Take a look here…
Understand the Basic Language/Terminology of Trading like Bid, Ask and Spread
A bid is a price which a buyer is willing to pay, ask is a price at which a buyer is willing to buy while spread is the difference between the lowest ask value and the highest bid value.
Choose a Reputable Broker
Today, there are thousands if not millions of brokers and choosing the right fit can be a challenge. Here are some factors to consider when choosing a broker;
- Make sure the broker is regulated
- Enquire the leverage offered by the broker
- Study their terms and possible bonuses offered
- Trading methods that the broker allows
- Minimum deposit required by the broker
- Spread and margins- you must go for a broker offering competitive spreads as well as low margins
Study a couple of brokers and choose the one with the best terms to offer.
Start trading with real cash
Once you’ve done all the above, it’s time to deposit real cash and start trading. Take risk with an amount you can afford to lose. After you’re ready to trade, you can start trading through CFDs, spread betting or spot. Your broker should provide you with a range of powerful platform. The pair of currencies available differs from one broker to another.
Open a position by buying or selling
You can open a position in the market by taking a long or a short position through trading platform of your choice. A short position is a situation where a trader decides to sell, while a long position means a trader intends to buy a currency pair. After opening a new position in FX market, either through buying or selling, you get to see your unrealized loss or profit in real market. Once you open/start a trade by buying a currency pair, you have to sell that currency pair in order to close the trade.
Closing a trade
Only after closing a trade will your net loss or profit reflect in your account based on the outcome of the trade. Depending on your level of prowess in FX trade, you should choose an account that best suits your experience there are different types of account namely; standard account, mini and micro accounts. When you’re just starting out, it’s best to start small. A mini account is perfect because you can gain trading experience while risking low amount of money at each trade.
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