The foreign exchange is a gigantic financial market. In fact, it is the largest in the world. The sheer size of its turnover is spectacular. Every day, between 2 and 4 trillion US dollars circulates between institutional and retail traders. This market is also the safest, as it is huge and very accessible. No single participant can sway the rates of traded currencies.
Today, the world economy is in dire straits due to COVID-19. Businesses are closing down, jobs are disappearing, and recovery will take years. This only boosts the appeal of Forex.
In times of a recession, when one currency depreciates, another one becomes stronger. As currencies are priced against one another, a shrewd trader may capitalize on the decline. They just need to identify the “correct” side of the equation.
Beginners dream of high profits. Forex gives everyone a chance to build a career or add to their income. You do not need a degree in finance to start or succeed. Still, trading can seem daunting. Where should you begin? Here is a step by step Forex trading guide.
How to Learn Forex Trading Step By Step
You should pay attention to the following:
- Read as Much as Possible
Theoretical knowledge is the basis of any subject, so do your homework. You cannot place trades at random. Delve into the inner workings of the market to see how to strategize. Start with the history of Forex, as you need to understand its logic.
Next, discover different avenues of thought and approaches to analysis. Learn about the technical and fundamental systems. Look at how ECNs and market makers compare. Which type of broker is right for you?
Now, you can move on to how trades work. Read about typical mistakes, and learn from other people’s failures. There is no shortage of advice online! Just google ‘Forex for beginners the first steps’. The internet has an infinite supply of guidance, so absorb as much information as possible. Become a voracious reader.
- Compare Trading Tools
The second stage involves applying the theory to practice. But don’t open a live account yet! Compare offers from different brokers in your region. Make sure they are all licensed. Now that you know what ‘spread’ ‘pip’ and ‘leverage’ mean, you can see which offer is the best. Begin by registering demo accounts with several candidates.
Now, you can test their trading platforms like MetaTrader 4 or MetaTrader 5 in the simulated mode. Explore your first Forex software. Practise opening, modifying, and closing positions. See how everything works. Take your time: haste makes waste. Do not switch to real trades until you have confidence in your skills and the broker’s reliability.
Bear in mind that demo trading is always different from the real thing. First, some brokers make their demos quicker and more responsive to lure clients in. Secondly, trading with real money is always more stressful than practising with virtual deposits. Even professionals have losing trades at least occasionally. You should aim to minimize failures, not eliminate them completely.
- Read A Little More
Before you open your first real trade, there is more research to do. This time, you may find the material more engrossing, as it covers the process of actual trading. How are you going to approach it?
Emotions are a common cause of mistakes. Think a bit about your own psychology. Do you tend to get anxious in stressful situations? Is it difficult to keep calm when people around are scared or panicky? As a trader, you will need to make sure your decisions are rational, not impulsive.
Read about methods like algorithmic trading, and see if automated options suit you. You may decide to do everything yourself, and choose one of the more advanced platforms. Whatever you settle on, read as much as possible on how to buy and sell in Forex.
Google customer feedback to learn about other people’s experience. Compare opinions about different brokers. Register on traders’ forums to become part of this vibrant global community. See whether feedback confirms the broker’s marketing claims.
- Start Real Trading
Finally, you can start trading with real money. Remember: caution is paramount, as missteps can be expensive. You are now armed with research and demo experience, and you have found the best broker. It is time to explore their platform in its live mode.
Popular systems come in three versions: desktop, mobile, and web-based. These products may offer similar or different functionality. Which are you going to use? Make sure you can navigate the trading environment easily.
It is advisable to keep your favourite website with finance news open on another screen. To make the right decisions, you need instant access to news of events that pertain to your currency pairs.
Start small. In the beginning, steer clear of leverage at all costs. The broker can boost your buying power, but are you ready for high risk? Margin trading could give you hundreds of thousands of dollars. This means a single mistake can wipe out your deposit.
Your progress should be gradual. Trade with modest volumes until you see consistent profits. Do not put all eggs in one basket — investing everything in a single trade is foolhardy.
- Review Your First Results
After a week of action, take a break and look back. Scrutinize your trading history (it is stored on the platform). Were the losses preventable? Did you stray away from your strategy? Did emotions mess up your judgement? Of course, a week is a tiny timeframe, but you can note down some initial impressions and learn some lessons.
During your first week, it is important to apply fundamental and technical analysis. Did you manage to combine them? Try to be objective. You may ask a friend for a second opinion.
First Forex Steps: Summary
Learn Forex trading step by step and review performance regularly. These five fundamentals can prevent typical mistakes. If you start small and follow the experts’ advice, your profits will grow and become consistent.