5 Tips to Get You Started in Forex Trading
The global forex market accounts for more than $5.3 trillion in average daily turnover yet, it continues to expand at an alarming rate. Over the years, it has grown from just a market where traders could trade a few currency pairs to several currencies. It has also grown to include Indices trading, commodities, and stock CFDs. And now, cryptocurrencies have also become part and parcel of the vibrant forex trading market.
One interesting thing about most of the assets that forex brokers offer to their traders is that most of them can be traded in traditional markets. Stocks, commodities, Indices, and cryptocurrencies have their own unique markets where investors can employ different investing strategies to those used in day trading.
Day trading is exciting, but can also be very tricky
With day trading, things get more interesting because of the ability to capitalize on the volatile nature of the global financial markets. This is primarily because of the high levels of liquidity provided by the wide market reach which includes both institutional investors and retail traders.
As such, this makes it easier to buy and sell various currencies and other tradable assets on a brokerage platform multiple times a day enabling traders to engage in scalping techniques, which allow them to make tiny profit margins on individual trades multiple times. This effectively covers the opportunity lost in long-term investing where profit margins are likely to be wider.
Nonetheless, due to the volatile nature of the market and the high levels of leverage offered by brokers, day trading can be a tricky customer to new traders, which makes it riskier than long-term investing. However, that does not mean that a beginner trader cannot make money in forex. Here are a few tips to get you started in forex trading, which can yield great profits virtually without a significant effort from your end.
These five tips will get you up and running in forex trading
- Choose your broker carefully: One of the biggest downfalls in forex trading are caused by making the wrong choice when selecting your forex broker. Depending on your trading experience, your risk appetite, and capital layout available for trading, there are brokers that will be more suited to your profile than others. Also, this step enables you to distinguish between scam brokers and genuine brokers. One of the ways that traders can do this is by reading online broker reviews. These can be very helpful since they basically outline the status of the broker and the broker’s online reputation. Take, for instance, Olymp trade is an unlicensed broker that joined the market a couple of years ago and now claims to have traders from all over the world. It shows just how reluctant some traders are when it comes to doing their due diligence checks and this can be perilous.
- Try employing the services of a forex account manager: If point number two does not work out for you, you can always try to engage the services of expert traders who can trade on your behalf at a small fee. Some of these forex account management service providers offer their clients an opportunity to invest in managed pools of currency funds, as well as, an opportunity to have their accounts managed separately through a separately managed forex account.
- Invest in trading software for automated forex trading: Algorithmic trading has grown to become one of the most popular avenues that traders choose to use when engaging in forex trading. Technological advancements have made it possible for software developers, market analysts and brokers to design intuitive trading tools that make trading easier for beginners. In today’s forex market, one does not have to be an expert to engage in profitable trading. These systems utilize top technical indicators like MACD, Stochastic Oscillator, and Relative Strength Index (RSI), among others in combination with custom codes to try to predict market movements while at the same time executing trades as instructed.
- Try Social Trading: This is a new form of trading that emerged just over a decade ago with the launch of eToro, the world’s leading social trading platform. Social trading, which sometimes is confused with copy trading is a form of trading that allows traders to copy the trades of expert traders over a given period. Every expert trader’s trading performance, favorite assets, trading timeframe, and risk thresholds are well displayed under their profiles thereby enabling beginner traders to choose their perfect match.
- Before you start investing with real cash, try demo trading: Many forex brokers these days provide their traders with a forex simulator to engage in risk-free trading while they try to gain some experience before going all hands in. Traders can use this period to gauge whether they will be able to do the business by themselves. If not, then continue reading to gain more insights.
In summary, anyone can make money in the forex market, yet so many who join it end up losing a bigger chunk of their investments. In most cases, these losses are caused by ignorance given the multitude of trading tools and resources available to get traders up and running. You do not have to be a victim of the forex market.
It is always good to take your time and explore the options available to you before making any financial commitments. Anyone can be profitable in the forex market, but only a few make a positive bottom line.