If you want to explore the financial markets through FX trading, there are essential basics that you should familiarise yourself with. Getting the proper foundation is crucial to your trading success as a beginner. Trading forex successfully requires a combination of appropriate trading skills, using the right broker, and developing your trading strategy. Going from beginner to confident and successful trader also requires patience and constant learning. This article explores five easy steps for you as a beginner to become a forex trader.
Choose the right broker
Choosing the right broker is an important task that you should take seriously. Brokers offer trading platforms, acting as the “go-between” traders and securities exchanges and allowing traders to explore the forex market. Hundreds of brokers offer unique features, trading conditions, and services. You should consider these factors when choosing a broker:
Licence and regulation
Your ideal broker should be licenced to operate and regulated by the country where you reside. Unregulated brokers may cause losses through unethical practices.
Every broker has trading conditions such as minimum lot size, number of positions, spread, etc. Choose the broker with trading conditions that you prefer.
Most brokers offer major forex pairs and some exotics, but others do not. If you want access to all currencies, find a broker that covers all.
Look for a broker with a functional but simple trading platform. Also, check for speed and delivery.
Your ideal broker should prioritise customer service so you can have issues resolved effectively and on time.
Ease of deposit and withdrawal
Check for various deposit and withdrawal platforms and simple conditions to perform either.
Your ideal broker should provide a demo trading platform where you can develop trading skills and test strategies.
Learn all that you can
Learning is the first step that never ends. You should condition your mind to a long period of learning even when you become a confident and successful trader. In forex, you learn the basics and then move to advanced trader education, developing your skills as you complete each stage. You’ll also have to learn to read and analyse world events and how they impact finance and the forex market. One challenge that beginners encounter is knowledge overload. Beginners are faced with vast sources of trader education that could effectively confuse them. The best way to overcome this is to follow a well-structured forex trading program that takes you through the stages in the proper order. You can learn from popular websites such as Investopedia. You can also search YouTube for specific videos that better illustrate trading topics. Focus on learning one thing at a time and only move on when you have grasped the concept. Go at a steady pace and avoid information overload at all costs.
Begin with demo trading
Demo trading is a feature that allows traders to explore the forex market using virtual, demo, or “fake” funds. Most brokers offer trading platforms so traders can practise what they have learned and test trading strategies. Here’s what to do with a demo trading account:
Practise what you learn
You can practice setting up your trading area, including technical tools such as charts, indicators, etc. You can also track price changes and take notes. Demo trading allows you to progress by doing and not just learning theory.
Practise and tweak strategies
There are dozens of FX trading strategies, but you’ll probably become comfortable with only a couple. You can practise different techniques on demo trading to hone your trading skills and find the most suitable. Demo trading allows you to tweak and test strategies without drawdowns safely.
When you begin learning to trade forex, you could get an overwhelming urge to start trading the real market. Do all you can to demo trade as you build your skills. Leverage demo trading to build other non-technical skills such as patience, asset management, and, more importantly, become familiar with the brokers’ platform.
Use micro accounts
Asset management should be your priority if you have developed your trading skills and want to start trading on live accounts. One way to safely manage your assets is to use micro accounts. Micro accounts limit the lot size you can open per trade, effectively reducing your exposure and promoting safe asset management. You should opt for micro account trading as it gives you the chance to trade live and confidently explore your skills. Confirm the account features with your broker before you start trading. You can use micro accounts to develop an effective trading strategy that suits you best. The best part of using micro-accounts is that you have a way to take live trades while keeping complete control of your assets.
Research forex instruments
Forex instruments are currency pairs that are traded on the market. There are dozens of forex pairs, and you’d possibly never trade all of them. It is best to carefully research forex pairs and find the ones that suit your trading strategy the most. As you develop your skills and learn more about trading, you should identify the pairs that you are comfortable with and stick with them. You should also consider what pairs your broker offers. Specific forex pairs may be unavailable on your broker trading platform. It is best to choose a broker that offers all or most forex pairs and provides unrestricted access to trading.
As a beginner, your forex trading path is direct; choose the right broker, learn to trade, hone your skills with demo trading, and start trading micro-accounts. Finally, you have to research currency pairs. You should never stop learning, researching, testing, and adapting to changes. Remember that FX trading is a process, a journey, and never a sprint. Keep a steady pace and keep a trading journal and checklist. Documenting your trading journey helps you become a better trader as you have a written version of past mistakes and opportunities from which you can always draw new lessons.