Beginner Tips to Start Trading in the Forex Market

Tuesday, July 09, 2019 11:00AM / Sponsored Post / Emma Wallace / Header Image Credit: Sirius Forex

Forex is one of the best ways to generate consistent income. However, with so many strategies and opinions, it is easy to get confused. Therefore, I decided to write an article which will help any beginner to get supercharged results from their trading efforts.

Choosing the right broker

Your choice of broker can have a significant impact on your results. Here are 3 things to look out for when choosing a broker.

1) Regulation

Regulators audit brokers regularly to ensure that they are fair to customers. They also ensure that brokers adhere to laws, and are financially stable. Unfortunately, some brokers operate illegally. As a result, their customers have little protection.

You can verify the regulatory status of a broker by visiting official websites. Some brokers register under similar looking names or outright lie about their status.

2) Speed of withdrawal

You should have easy access to your profits. Therefore, look for evidence of fast payouts and multiple methods for getting your money.

3) Analysis & automated trading

Some brokers have fantastic technical analysis built into their platforms. This helps to increase the speed and accuracy of trades. Automated trading can help to reduce risk (more on that later); as a result, you make more money over time. 

Why Forex Trading?

Compared with other investment methods, you don’t need much money to trade. With interest rates so low, you lose money each year by keeping your money in savings. With the right trading strategy, you can get a significant return on investment. 

You can also trade using leverage. For instance, if a broker offers leverage of 20:1, and you have $100 in your account, it means that you can trade with $2000 on the market. As a result, you can magnify your profits. On the other hand, it also means that your losses would also be magnified. Leverage enables a skillful trader to build wealth quickly. 

Thirdly, you can fit forex around a day job. This makes it incredibly flexible. And unlike other investment types such as real estate, there is nothing to maintain or manage. Consequently, forex is a convenient way to invest. 

Some brokers offer no deposit bonuses. This means you can get ‘free money’ to trade. Any profit you make is yours to withdraw or continue trading with. 

The Truth about Forex Trading

By this point, you can appreciate the tremendous profit potential of forex. However, like with anything, there is a great deal of work involved. The truth is that you are more likely to lose money than turn a profit. Plus, there are ‘scammers’ who will try to convince you that after buying their course, riches await you. 

Like with anything in life, good things require effort. The life of a forex trader can be a lonely one. You spend hours each day implementing strategies, managing your capital and recording data. Most people give up after a few weeks or months. Due to the steep learning curve, I advise that you don’t invest more money than you can afford to lose. 

Saying this, commitment alone puts you ahead of most forex traders. 

Trading in the Forex Market

A strategy is key to becoming a successful trader. A common mistake beginners make is to trade based on guesswork or tips provided by a “guru”. Fortunately, there are many tools to help you build and implement a strategy. 

Fundamental and technical analysis is the bedrock of any trading strategy. Fundamental analysis involves measuring the intrinsic value of a currency. Some factors include interest rates, unemployment figures and political results. 

Technical analysis involves analysing currency charts to identify patterns. This can suggest the direction a currency will move in. Combining fundamental analysis and technical analysis gives you enough data to make an informed decision on your next trade. 

Traders choose a strategy based on their level of risk tolerance and skill. There is no right or wrong way to trade. For example, the martingale strategy involves doubling the investment in future trades whenever you lose. For example, you invest a dollar and lose; therefore, you invest 2 dollars on your next trade. This strategy helps to recover losses. However, it is also incredibly risky. You could wipe out your entire capital very quickly. 

I hold the viewpoint that it is better to correct the reason for consistent losses, rather than use a risky approach to hedge against it. 

No matter the strategy you choose, mentality has a significant effect. Some beginners treat forex like a casino game. Therefore, they trade with a gambler’s mentality, which involves ‘spending’ one's way out of trouble. Trading done right has nothing to do with gambling. 

Moreover, others view forex trading as their only way out of poverty. As a result, they deposit everything they have hoping to turn a profit. And when it doesn’t work out, they struggle to pay for essentials such as rent. 

Learning how to manage risk is what separates pro forex traders from everyone else. They keep a close eye on their capital and break down their wins and losses. This business-like approach to trading is rare. And this is one of the reasons why there is a small percentage of profitable traders.

Final thoughts

I hope this article has given you an overview of forex trading. I hope it helps you to avoid the many pitfalls beginners face. As you can see, top-level results require top-level actions. Just to recap, here is what was covered:

• Choosing the right broker makes a significant difference to results
• Forex has many benefits as compared to ‘traditional’ forms of investing
• The reason why people fail to make money trading is that they don’t have a strategy
• Fundamental and technical analysis is the cornerstone of an effective trading strategy
• Risk management helps you to increase wins and reduce losses
• Emotional control is what separates beginners from top-level traders

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