Updated on May 16, 2018
What You Need To Know About Forex Trading
The word forex, abbreviated from “foreign exchange”, involves using exchange rate fluctuations in making money. Here are some things you might need to know before you decide to take up forex trading.
First and foremost, you will have to look for a forex broker to trade from. There are many factors you will have to base this on such as, how easy it is to communicate with them, spreads and also if they provide any bonuses and features. One interesting bonus that is usually provided by forex trading brokers is the free start-up capital which you can use without even having to make a deposit. This capital is of course, not withdrawable, however you can withdraw the profits you make using it.
Automated vs manual
Although you can sit behind the screen and trade by yourself, there are various automated software, called “expert advisors” which can help manage forex account. Using this eliminates the need for emotion when making trades, thereby following strict discipline when it comes to making trades. This does come as a risk however, as during certain market conditions, such as major news results, the market can drastically shift and hence could make the software to behave haphazardly. Hence, some supervision is needed.
Mind over everything else
You can read countless books, watch videos on trading over and over again and even try out various different strategies, however in the end the significant factor is your mind. Having the right mind-set when it comes to trading is key to being profitable. The online currency trading world is after all unpredictable, so eventually you will take losses. What matters is how you deal with these losses and how it affects the next trade that you make. One of the common mistakes by newbie traders is to try to recover the loss they just made by making another trade which they wouldn’t take on a normal basis. This could further your losses and could be detrimental to your account.
It isn’t a get rich scheme
One of the most tempting aspects of trading the foreign exchange market, is its high liquidity. If you compare it to something like stock trading, the movement is much more significant in the currency market. This would often lead to people thinking that it is a way of generating income quickly, but bear in mind that it involves immense amount of risk, and requires a lot of experience to make those winning trades.
These points should guide you in some of the things you may need to know before you get into foreign exchange trading.