Forex trading is becoming more and more popular with people wanting to get into investing and trading currencies. While it can be confusing at times, forex trading can be relatively simple to understand and start.
Before you sign up with oanda.com and begin your forex journey, there are some things you need to know before and during the time you start trading.
Understanding Your Broker
When you sign up for a forex broker service, the first thing you should do is explore the website and find out the services they offer. The most important one is which currency pairings are available.
You also need to be aware of how depositing and withdrawing your money works. Considering how quickly the markets can move at times, you want to know you can access and move your money at a moment’s notice.
Research & Study
Half of the forex game is researching and knowing what is happening in the markets. You first need to make yourself aware of what events have the most effect on a market and how they will then change your investment.
You also need to research the ins and outs of trading, as there is far more to it than just waiting to be in the green and cashing out.
Set a Budget
Whether it be buying and selling cryptos, stocks, or even trading cards, you need to set a budget. No matter what you are investing in, you should only use money and invest money that you are willing to lose in the event of something serious happening.
Investing isn’t about putting all your money in one basket but spreading it and investing it in intelligent ways, not investing it everywhere.
Use a Demo Account
Almost every forex broker will allow you to sign up and use fake money to “practice” trading. Demo accounts are better than watching any YouTube tutorials or reading any how-to guides, as you can get hands-on experience.
A demo account also allows you to make trades without risking any of your money. This allows you to see how the markets move, when to cash out and when to buy.
Choose a Strategy
When it comes to trading, there are a couple of strategies you can use whether you are a beginner trader or a seasoned veteran. The two main strategies are scalping and day trading; each has its own benefits.
Scalping is a strategy that uses small changes in currency pairs to make a small profit. These profits are often only a few cents, but when you do them dozens and dozens of times a day, the profits begin to add up. You can think of scalping as placing a $10 bet on a sure favorite, even though you will only get $11 back; a profit is still a profit.
The downside of scalping is that it is very intensive trading. You need to be watching the markets constantly, and it can even turn into a full-time job. If you can’t spend a large amount of the day trading, then scalping isn’t the strategy for you.
Day trading is the most common form of trading and also the best strategy for beginners. Day trades are as simple as putting them in the morning and then leaving them for a day or two or even a week.
This strategy doesn’t require as much time as scalping does; however, you still need to stay on top of your account and the markets every day as you need to be aware of how the markets are moving and what is happening with your investment.
Leverage is a great addition to the forex trading game and allows people with small budgets to make big trades. Brokers offer leverage, which is a multiplier on the money you put in. if you have $10 and your broker offers 50x leverage, you will have $500 to trade with.
Since profits on forex can be so small, you need a bigger investment purse to make it worth your while. This is how leverage can be used and allow people to make a profit.