Establishing yourself in the forex trading business can be both profitable and hazardous, with risks for many traders being too great to withstand. While many don’t make it past 6 months or 2 or 4 years, those that do make it tend to share some common characteristics: being well informed of basic concepts; employing proven strategies and managing risks properly.
Forex (foreign exchange) trading involves buying one currency while simultaneously selling another currency in pairs such as EUR/USD. To trade effectively on forex markets, one must open an online broker’s forex account, choosing one with low fees, high leverage and an intuitive trading platform.
Once you have created an account, it is necessary to fund it with real money in order to begin trading. Different account types require different initial deposits; most forex accounts allow traders to start with as little as $100. As with any investment strategy, only risk a small fraction of your total capital per trade and utilize stop losses at all times.
Beginner traders must fully comprehend the fundamentals of forex trading to succeed in this marketplace. This means gaining an understanding of bid and ask prices, the pips system (which represents one unit of change in a pair’s value) and leverage. Leverage refers to using borrowed funds in order to increase returns from trades – something many traders employ extensively when trading forex markets.
Beginner forex traders should formulate a trading plan before embarking on any trade, identifying their desired currency pairs, timeframe and trading method as well as an implementation strategy including its stop loss/take profit levels.
Once you have established a plan for each trade, it is imperative that you stick to it. This is especially crucial for new traders as it can be easy to become complacent after making successful trades – resulting in poor risk management practices that could see your capital evaporated in one trade! To avoid this situation, the best strategy is to create a trading plan which is both comprehensive and user-friendly, featuring minimal lagging indicators that take your unique trading style and circumstances into consideration. For example, if your trading timeframe and risk tolerance are short and moderate respectively, a scalping strategy with lower volume trading pairs and faster execution speeds might be suitable. You might also choose one relying solely on price action/candlestick charts rather than derivative indicators to keep up with rapid market changes more nimbly.