Since internet trading became accessible to just about everyone, trading between foreign currencies with a view to making a profit has become something that anybody who is interested in trading and investments can do. Prior to that, foreign exchange or forex trading was really only done by banks, and wasn’t something you could pick up and do as an individual.
Nowadays, it is very easy to start trading forex and it is something you can also start doing with only a small amount of capital, so if you are willing to accept the natural risk that comes with any kind of trading, then it can be a great way to try and get more from money you have put aside.
Here, we look at how to get started as a forex trader:
Learn What Trading Involves
As you probably already know, forex is about trading between pairs of currencies, to try and profit from the fluctuations in value between them. You can trade with one or more pairs, and can make up pairs from just about any currency you are interested in, including cryptocurrencies like Bitcoin with some brokers. The idea is to buy currencies you think are going to strengthen in value, in order to make a profit when you sell them again. You can learn more about the terminology you need to know and how trades are executed at forex.com.
Choose Currencies You Want to Work With
Because currency strengths are impacted by what are known as ‘macroeconomic’ factors – that is the ‘big picture’ stuff like government policy, economic growth and stability and international trade, you are best off starting out dealing in currencies where you can easily follow the news around them or already follow current affairs. For many people this will be things like the US dollar, British pound, Canadian dollar and euro, however depending on what you are interested in and who you know, you may prefer other currencies like the Chinese yuan, Japanese yen, Australian dollar, and so on. You can of course choose any currencies you like, but be prepared to do a lot of research if you don’t know much about current and upcoming events in the countries that use those currencies. Most people start off with just a couple of pairs, and some professionals even stick to a small number of currencies.
Choose a Trading Platform and Open an Account
Once you have a good understanding of what forex involves and have chosen your first pairs, you are ready to create an account on a trading platform. There are some great online platforms that offer some useful tools, and many also offer a free simulation version you can use to practice trading before you start using your real capital.
Create a Trading Plan
Before you start seriously trading, it is a good idea to learn how to create a trading plan that sets out your trading sessions, your entry criteria for a trade, and at what point you will stop a loss or take a profit.
Once you have an account and a plan, and have done some research, you are ready to plunge in and enjoy your first trading session!
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