Estimated reading time: 5 mins
If you spend a lot of time on the internet, then you are almost certainly aware of how much of a big deal online forex trading has become in the past decade or so. Exchanging foreign currencies was, prior to the online age, something that only banks were able to do, and even then, not with anywhere near the convenience and analysis resources that anybody with a smartphone can access today. Since fastinternet and mobile broadband has made it possible for people to access real-timeprices and make instant, reliable trades on the go, forex trading has become a popular alternative to other types of trading and investing, and for a few good reasons.
For one thing, forex can be easier to fit around your life than trading on major stock exchanges. This is because, due to its international nature, there are very few times in the week when no markets are open, allowing you to schedule your trading sessions whenever you are available, even if it is in the middle of the night. Another good thing about forex is that you can trade fairly effectively while only focusing on a couple of currency pairs. This means you don’t have to keep up with the news and economic calendars affecting a whole industry’s worth of companies, but just the political and economic events affecting countries that use your chosen currencies. This can make tracking things a lot easier for busy people.
If you are reading this and have been considering giving forex trading a go, then you may be wondering just what kind of work and research you will need to do to be in a good position to start making real trades. Here, we are going to take a look at what you should concentrate on learning, and how to get yourself well prepared to become a rookie trader:
Learn the Lingo
Naturally, you are going to need to do a lot of research to understand the concepts around forex trading, and the strategies you could consider. Before you can really get started with this though, there are a lot of forex specific terms you will need to be comfortable with, as well as broader economics-relatedterms. We won’t describe the entire lexicon of trading here, as there are so many terms to know and you do need a good, detailed explanation of them, however, a good forex glossary like this one can be the best place to start. Don’t worry if you don’t remember or understand concepts like support and resistance, pips, or bull and bear markets after your first review of a forex glossary – some things will become clearer as you get deeper into the theory. Do, however, keep a good reference site like this around when you are researching, so you can keep refreshing yourself on the terms until they become words and ideas you are totally comfortable with reading about.
Learn the Theory
Once you are beginning to become more familiar with forex ideas, it is a good plan to look into the theory behind different strategies. There are lots of resources online that can help you understand how people set up their trading strategies and why, and these can help you get a feel for different ways of approaching trading.
Understanding the motivations for trading within certain parameters using things like support and resistance is crucial for two reasons. Firstly, you will not be able to really analyze how well you are progressing as a trader if all you do is copy a popular strategy without really knowing why it is seen as a logical thing to do, and secondly, when you believe in the theory behind your strategy, you are far less likely to succumb to the urge to trade emotionally. Emotional trading is trading that deviates from your strategy but seems like a good idea inthe moment. It is something that creates an unnecessaryrisk and can be the downfall of even veteran traders.
Learn the Analysis Approaches and Tools
Once you’ve learned about strategies and have the background to understand how forex works in practice, you next need to learn how to actually make trading decisions based on analysis of the market. This can be a good time to get a free demo account with a forex broker, as you will be able to see what analysis tools their platform gives you and learn how to access and use them while trying out some trades with fake money. Many people find it easier to learn about analysis while using real current data, and making ‘real’ demo trades without risking any money can be the best way to start putting what you learn into practice and seeing what it feels like to analyze the market and make decisions.
There are lots of resources outside of trading platforms that traders use, and people tend to favor different styles of charts and data visualizations, so be prepared to experiment a little to find what works best for you. This can also be a good time, as you get closer to starting to really trade, so do a full forex trading course where you can learn analysis from experts and make sure you haven’t missed anything important in your own earlier research.
Getting Set Up
Once you have done all of this learning and have been playing with your demo account long enough to feel comfortable with how to make real trades, all you need to do is set up a real money account and you will be able to get started. You will probably, by now, have also found which currency pairs you are most interested in starting out withand have a strategy and trading plan you can use.
You are now basically ready to start trading but do remember that you should only trade with money that you can afford to lose some of. Even the best traders don’t make a constant profit, so make sure your plan includes a healthy idea of how much capital you are going to use.