Online trade opportunities have opened the door for trading on major stock markets, making it even juicier for forex trading enthusiasts. If this is you, this blog is a practical guide on how to become a forex trader.
The forex market can be a technical jungle if you don't have an idea on the particular currencies pairs, how to find profitable trading models with positive risk or best strategies and tactics. With a little capital and patience, everyone can effectively trade in forex.
It can be easy to enter the forex trade, but you have to take several steps. Bear in mind that a hurried trade can lead to wrong results very quickly.
How to become a forex trader
1. Learn the basics of FX Market
Learning the fundamentals is an excellent place to start as you get acquainted with the basics of technical analysis and terminologies of trading. Many new traders prefer a mentor or tutor with the right trading philosophy and skill set.
You may also use the many tools and resources your forex brokers provide, such as blogs, video guides, webinars and others. Make effective use of established trading and technical tools to develop a strategy and mitigate failures.
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2. Know how trading capital works
You don't have to break a bank to start your investment journey because you can trade on margin. Margin lets a merchant open leveraged positions which mean a better market exposure with smaller capital expenses. New merchants also consider unused margins as buyers' power, which makes their position sizing too aggressive.
Starting with a higher capital is also a better idea because you have a little more buffer in the event of a loss. You don't want to risk the whole amount; instead, you simply have a higher cushion so you're not pushed out of the market as can happen with smaller balances.
3. Get started with a demo account
An FX demo account is a monopoly capital trading account that is related to the live market. Trades can be put in real-time and show real losses and income just as actual forex trading.
Demo accounts can help you build confidence, get comfortable with a particular platform or refine a trading strategy. Before you put a single penny on the line, you need some practice.
4. Find the right currency pairs to trade
Forex trading happens 24 hours each day. Traders participate in buying and sale of a vast variety of currency pairs around the globe. The forex market still has the highest liquidity in the international financial space. Up to 180 legitimate currencies exist worldwide, but just a tiny subset of them represents a bulk of the trade volume.
It can be overwhelming to pick the best currency pair to trade. That is a critical factor in the pursuit of your long-term financial targets. Not only is there confusion because of the vast number of alternatives available, each currency pair has a trajectory and market movement of its own. The pair's personalities must be sufficient for a particular trading approach or the expected outcomes would not be possible.
The price of currency pairs is not so determined by individual traders but by professionals. VSA (Volume Spread Analysis) may be used to classify the organisation's behaviour and the costs.
In short, it helps to evaluate business news and economic trends before choosing currency pairs. Moreover, it is helpful to apply effective Risk Control Techniques before selecting any currency pairs.
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5. Pay attention to market trends
If you seek to counter market trends by attempting to determine potential markets through instinct, then you may be in for a shock. Instead, you should follow the latest trend and determine the inversion stages. In the period in which you are trading, you have to recognise the trend.
6. Plan out some strategies
Use a demo account to build your trading approach, based on your stress management skill. You can prefer to exchange more of your capital over a shorter period or choose a medium to long-term swing trade. Experienced investors anticipate their move as the price increases or falls, and unsuccessful traders attempt to guess what the market is going to do.
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7. Find a reputable Forex Broker
Forex trading is almost impossible without a forex broker. They act as intermediaries by allowing seamless access to the market and personalised support. Multinational firms represent millions of global customers. There are real financial giants with huge offers.
Brokers either charge a fee per company or reap the benefits of their spreads. The latter is the difference between buyers and sellers' rates. Market entry is highly accessible. You can begin trading these days with just £10 (with a cent account). Training will not cost you much, because so much free content is available.
8. Stay on track with proper trading
After several months of practice, a little preparation, several international teaching materials and constant profits, it is time to begin to make live trade. You will find it somewhat different from having real money on the line, but if you follow the same practice used when trading your demo account, it would be a success.
In essence, any kind of investment is risky. Unfortunately, a safe method is never going to bring significant returns. Traders mitigate risk through technical characteristics and diversification. However, it cannot be eliminated.
Risk management is essential and essential for a marginal trader. This is where positions are funded with borrowed money. The broker gives outstanding leverage. This increases purchasing power, as well as the stakes.