FOREX TRADING STARTER PACK - THINGS EVERY ASPIRING TRADER NEEDS TO KNOW
So what is forex? How does it work?
Basically, the FX market is considered as the most fluid market in the world. This financial market involves exchanging a world currency against another. To gain profit, a trader needs to speculate when to make a currency exchange.
With enough background, knowledge, and practical experience, even newbies can take advantage of the forex market.
Unlike other financial markets like stock trading, you can trade any time of the day as long as there's an available trade counter.
You should take note however that the forex trade market is highly volatile. The exchange rate for each world currency can fluctuate quite quickly, so it pays to know when to hit buy or sell.
If you want to improve your chances of making a profit, you need to learn your way around the FX market. Taking forex trading courses will definitely provide you with an in-depth discussion. But, if you’re a newbie and you want to know how a forex trade works and how you can benefit from it, this guide is the perfect starting material for you.
FOREX TRADING FUNDAMENTALS
Before deep diving into the nitty-gritty details of FX trade and forex trading strategies, it’s crucial to understand what it takes for you to become a successful forex trader.
If you want to succeed in FX trading, you need to understand that there's more to it than just taking chances.
You need to have a comprehensive game plan. More importantly, you must analyze your transactions plus the market trends. Make it a habit of keeping track of all the transactions you make. Take note of all your wins and losses and determine how you can improve your profit.
See to it that you also assess and manage your risks. Determine how much money you're willing to risk and stick to this threshold. This will help you avoid blowing your budget and keeping your loses to a minimum.
Also, see to it that you find time to practice using the demo account and read relevant materials to help you understand more about trading.
HOW LONG DOES IT TAKE TO BECOME A FOREX TRADING GURU?
The best part about forex trading is that you can venture into this market even with zero experience. The length of time you need to spend in order to learn how to trade depends on several factors which include:
Your goals - How soon do you want to start trading foreign currencies? How much money are you willing to risk? How long do you want to stay in the FX trade market? Do you want to be a short-term trader? a medium-term trader? Do you want to do trade foreign currency full-time?
Your availability - How much time can you dedicate to learn the basic steps? Do you have enough spare time to check out the market trends? Can you allocate a few hours of your time each day to read materials about forex trading for beginners?
Your learning capability - Some individuals have a knack for learning new things quickly while others require a longer time to understand everything. Take time to understand everything. Learn at your own pace.
Your trading discipline - One of the major reasons why a lot of folks end up losing too much money is their lack of discipline. Without having the right mindset and trading discipline, it would be harder for you to learn the ropes.
CAN YOU GET RICH USING FOREX TRADING?
A large fraction of newbie forex traders thinks that the FX market is the quickest scheme to get rich. In truth, it doesn’t work this way.
Regardless of the years of experience of a trader, he/she can still lose money.
Baby Pips explains that around 90% of FX traders lose a significant amount of money because they fail to plan, train, manage risks, and implement the right strategy.
As such, it’s not an ideal path for those who owe a lot of money, recently unemployed and even low-income earners. In order to earn a larger sum of profit, you also need to risk a large sum of money. Additionally, it takes time to fully understand how this financial market works.
So, if you’re aiming to use the foreign currency trade market to make it big, then you need to carefully reconsider your goals. Instead, refocus your goals into fully understanding how you can fully maximize this market as your source of passive income.
To help you start, you should familiarise yourself with the common terms used in forex trading.
KEY TERMS YOU NEED TO LEARN
Pip - Forex.com defines pips as the small increments used to quote the currency price changes. In most cases, traders make use of the fractional pips or the superscript numbers found right after the last digit of the currency price.
Spread - The difference you would get between the offer prices and bid. The bid tells you how much you will get if you sell the base foreign currency while the offer price is the amount of money you need to pay to buy it.
Leverage - It tells you the likelihood of gearing your FX account into a higher position compared to your existing account margin. Let's say you have a $1,000 account margin in your account, and you open a $200,000 account position. This will result in an increase in your leverage by 200 times. This means you can magnify both your losses and gains.
Margins - The margin defines your minimum deposit or collateral. To compute your margin, you need to use the lot size and leverage amount.
Slippage - The difference between the expected and execution price. This often results from execution speed and the market's volatility.
Aside from understanding of some common terms, you also need to know which trading account you should use. This will help you create the appropriate forex trading strategies.
FOREX TRADING ACCOUNTS YOU CAN CHOOSE FROM
Traders can choose from various forex accounts. These mostly vary in terms of their specification, funding requirements, and usage. Let’s check out each type of account and see which one best suits your goals, needs, and personal preference.
Micro accounts
Micro accounts allow first-time traders to participate even with very small funding. You can start trading in a micro account with just $100. Some FX brokers even accept traders who can only cash in $20.
It’s probably the safest choice if you have zero trading skills or background. It provides you with the perfect opportunity to hone your skills and learn to trade the right way.
However, take note that because of the small funding, micro account holders usually do not receive benefits from their chosen FX broker.
Intermediate accounts
Some brokers refer to this type of FX account as Classic, Gold or Standard account. Most of the time, brokers require traders to deposit at least $500 to open an intermediate account. Others only accept at least $1000 initial deposit.
Intermediate account holders usually receive bonuses worth 50-100% of their initial deposit. Other brokers even provide more bonuses and rewards to their traders.
VIP accounts
Some traders and brokers refer to VIP account as Platinum or Premium account. These are offered to VIP traders who can risk at least $10,000 for their account capital.
Compared to the first two types of accounts, the VIP account comes with bigger and sweeter bonuses.
Account holders get access to a debit card, receive travel benefits and get access to analysis reports and technical support. They can also trade as many Standard Lots as they want.
BEYOND KNOWING THE BASIC - LEARNING THE RIGHT WAY
Now that you’re equipped with the essentials, it’s time to take a few more steps forward so you can finally begin trading and earning money.
Your next priority should be expanding your knowledge and exploring other educational platforms such as FX trading books, informational videos, forums, and seminars.
It will also benefit you greatly if you start following content-rich forex blogs. Check out famous names in the industry and check out their social media pages or websites.
You should also enroll in an online trading academy. Learn the necessary skills and techniques needed in order for you to maximise your winnings and reduce your chances of losing money.
With an experienced mentor guiding you all the way, you can pick up tried and tested techniques. You can identify the forex signals you need to look out for in order to reduce your slippage.
Make use of every credible source of FX trading information. This way, you can obtain valuable insights that you can use once you’re viewing a live forex trading room or start practising using your demo account.
START LEARNING FOREX TRADING STRATEGIES TODAY!
The forex trade market will continue to prosper in the next few years.
It’s high time for you to start learning how to trade so you can reap the benefits of this booming financial market.
Now that you have a brief background about trading world currencies work, you should consider digging deeper and learning the technicalities involved. This way, once your funding is ready, you can begin trading and fulfilling your FX trading goals one step at a time.
Want to learn how to build a solid career in Forex trading? We offer textbook training to help you learn the ropes. Enroll in our Forex market course today!
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Nisha Patel
Live from the Platinum Trading Floor.