Forex Market Trading – Its Not So Difficult After All
Forex markets have evolved over time. From being a hedge fund and institutional investor driven market, FX trading desks have now landed on the computer screens of retail investors who can work from the comfort of their home or a coffee shop or anyplace where they have access to the internet. The opportunities at generating income by making smart and timely decisions have now attracted many individuals.
However, forex trading might seem a bit intimidating initially, but don’t worry. This is all part of a learning curve which is steep to be honest, but once you get used to it, it can be addictive and as rewarding as any other investment opportunities out there.
What can I do to become an expert? If that’s your question, we have some tips that will help you get there, but mind you, this is not an overnight solution.
1. Take the Plunge
Setting up a forex trading account is really easy. Rather than procrastinating, get online, register with a trading platform and you have crossed the biggest hurdle.
2. Practice, Practice and Practice
Just as you need to get into the water to learn to swim or into a car to learn to drive, you need to log into your trading desk to learn to trade. Trading desks give you an added benefit. You get a demo platform where you can practice before you start dealing with real money. No worries such as crashing the car or drowning here.
Your understanding of various trading strategies is also vital. There is plenty of information available online on the most popular trading strategies namely value trade, carry and momentum.
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3. General Knowledge – Start Working on it
If you are somebody who hasn’t paid close attention to the business or the international sections of news sites or business channels, you will need minor adjustments in your TV viewing or online/ print reading habits. Make a deliberate effort to understand relationships between countries, the state of economy of the country, government policies, stock markets and other macro-economic indicators such as exports and imports. All this will have an effect on the exchange rates.
4. Start Small
Many people make the mistake of committing big too early in their trading career. Our advice; start small with an amount which is manageable. Understand how ‘limit orders’ or ‘stop losses’ can help you. Just like other market driven products, foreign exchange market trading has risks attached to it. Only experience can teach you how to minimize those risks while maximizing your returns.
5. Stay Rooted to Your Comfort Zone
While it might be tempting to make a quick buck on a risky currency pair, you might be better off sticking to a combination(s) of currencies that you have studied well. Factors such as currency liquidity, political stability of a country, changing dynamics in relationship with neighboring countries, natural resources all need to be part of the check boxes in your research. Have a short term and long term strategy with riskier currency combinations traded in short term.
6. Don’t Forget Your Updates Medication
If you thought that Forex trading is a once in a week activity, you might be in for a rude shock once you start trading. Things happen by the minute in the forex market, so make sure that you have a trading platform that will give you live updates.
7. Be Realistic
You cannot win always. Remember to learn from your loss. Start with reasonable monthly profit targets. Gradually bring that down to a weekly target and finally come down to daily targets once you are an expert in forex trading.