How to Become a Forex Trader – What you Need to Know

How to Become a Forex Trader – What you Need to Know

Trading is obviously a risky business and as far as a trader is concerned, risk management strategies are crucial and they are an important aspect of trading. If you are thinking of getting into trading foreign currencies, there is a lot to take on board and in this short article, we offer valuable information to assist you in getting started.

Currency Pairs

In order to trade foreign currencies, you first have to choose a currency pair, which might be;

  • USD/EUR
  • GBP/USD
  • USD/JPY
  • AUSD/CHF

The first currency in the pair is called base currency, while the second currency is the quote currency and once you have decided which currencies you are going to trade. We advise you to choose well-known currencies as your pairs, especially if you are a novice.

Practice with a demo account

This is the best way to start trading and with a demo account, everything is real except the money you are playing with. At very least, you need to be fully versed as to how your interface works and the best way to learn that is by opening a demo account; a few months should be enough for you to have the confidence to open a live trading account.

Partner up with an expert

Most newcomers opt to use an FX trading broker, which brings with it many benefits, not least access to a huge library of resources to help you become a proficient Forex trader. Starting out on your lonesome is a bit daunting at the best of times; when you have acquired some hands-on experience, you can use your broker to advise you.

Trading with CFDs

CFDs enable you to trade without taking physical possession of the currency; you are agreeing to exchange the difference in the price of a currency pair from the time you open until you close. If you want to open a position, a deposit must be paid and you can use leverage to strengthen your position.

Spot trading

This is when you buy or sell currency based on the current position; short-term players like spot trading; get in at the right time and sell short when you see a return. It is a simple, yet risky way to trade currencies

The increased risk of leverage

When you open a position and you want to strengthen that, you can add to your position using leverage (up to 30 times the deposit sum). New traders should stay away from leverage and stick to spot trading selected pairs and choosing various times in the day (or night) to see what difference that makes. Of course, you need to be securely connected to major Forex marketplaces and you have to make quick decisions to open or close, which means having access to up-to-date data.

Google is your best buddy and can take you to many great learning resources to help prepare you for your very first position.

About the author

Leave a Reply

Your email address will not be published. Required fields are marked *