Forex trading can be one of the best home based business, but unfortunately a lot of beginning traders loose their money on the currency exchange. Trading can be profitable, but it has numerous risks.
Currency trading can be dangerous for someone with no experience in the Forex market. Without proper education, forex trading is gambling. There are a number of things a beginning trader needs to keep in mind, but by following a few simple tips, you can give yourself a better chance at becoming a successful Forex trader.
Choose a good broker
There are many brokerage firms available on the Internet, some of them are more reputable and offer better services than others. Which Forex brokerage firm should you choose?
- Try and find a well-established company.
- Ties to a bank or other financial institution are always welcome.
- Registration with the Commodity Futures Trading Commission.
- A wide range of research tools such as real-time quotes, graphs for technical analyses and research reports help traders make better decisions.
- A tight spread (the difference between the buying price and the selling price, the amount that the brokerage earns from each trade) makes your trading more profitable.
Practice and learn a lot
Open a demo account - A beginner needs a lot of practice. You must first learn how to make profitable trades before you risk your own hard earned money. The difference between the winners and losers is that the winners took the time to learn what Forex is about.
The best way to practice is to open a free demo trading account and trade on this dummy account until you make a constant profit. Several brokerages offer a free dummy account. This allows the beginning trader to practice Forex trading without risk and get a general feel for trading. You can gain experience how to research a currency pair before taking a position and learn how the software works.
It is important to take your time to learn. After a while you will know if currency trading is for you or not. Even the best traders make loosing trades. You only have to make more winning trades than loosing trades. Once you make more winning trades on your Forex demo account you can open a live account with your real money.
Trade with a small amount first - You should start trading with a small amount of money. After you know what you are doing you can grow this to a higher amount. First place trades using the minimum possible amount. This way trading with small lots will be an extension of your learning process. Do not use a lot of leverage right away. Most beginning traders take some losses while learning Forex, losing a significant amount of money can put an end to your career as a trader.
Prepare a money management plan - Always use money you can afford to lose, and have only a pre-defined amount at risk.
Learn to handle your emotions - On the live account you can loose your own money. That is a huge difference compared to the demo account. Different emotions will be involved in the trading process and frustrations may affect your trading success. Successful traders learn how to avoid these frustrations and how to deal with these emotions.
Keep up practicing - If you keep your demo account open, you can test alternative strategies with it. That gives you the opportunity to test and learn.
Stay informed - Current political events and economic factors influence currency rates. Currency fluctuations impact your trading, therefore it is always useful to listen to the news.
If you learn the art of currency trading you can earn a significant amount of money by working just a few hours per day. Numerous auto trading systems are also available today that trade for you.