Before you start trading the forex market, there are a couple of questions that need to be answered. How to chose a boker? Should I use a demo account? What do I need to know before I make my first trade? Let’s talk about this things.
1. Choosing a broker
This is a personal decision for every trader. Some forex brokers offer different options and different benefits that can be very attractive for some traders while at the same time other traders may consider them useless. It is very important that you compare and analyze carefully every forex brokers options and to chose the one that you feel comfortable with.
2. Opening a demo account
After you have chosen your forex broker, it is time to open a demo account. Most of forex brokers offer a 30 day demo account, allowing you to trade the forex market with play money. Using a demo account is a good opportunity to make sure that you feel comfortable using the instruments that the forex broker provides. You would not want to trade in the forex market unless you are completely confident.
3. Learn about Leverage
Forex trades are made usually using leverage. Leverage is a useful instrument but can also be very dangerous if it is not used properly. Forex broker offer usually a leverage between 50:1 and 500:1. The bigger the leverage is the less money/capital you need for a trade. But the bigger the leverage is the bigger the risk that you lose you money is.
4. Practice Chart reading
Before you start trading the forex market you should get familiar with chart/graphics and how to read them. It is a good idea to get familiar with different time scales and different chart types. Short term chats show you an idea of the price changes from a minute to an other. Bigger time scales can show you the price movement on a bigger period and major trends. Most of the chart software offer bar chart, line chart and (japanese) candlesticks chart. Give them some time, and try different time scales and different chart types, so that you can accommodate with the one that you consider that fits you the best.
5. First trade
The first trade is one that makes you very nervous and enthusiastic. The demo account prepares you for al the technical aspects of a trade, but when real money is at stake, emotions will come into play. It is important that you let them aside and trade after the same methods that you practiced on the demo account. It might prove to be difficult, but if you can control your emotions and use a good money management system, anything is possible. If your first trade is a losing one, don’t give up, just try to understand where you made a mistake and correct it, and then try again.
Forex trading is an experience that constantly teaches you. Mistakes made can be very expensive. If you learn from those mistakes and avoid them in the future you can become a very succesfull forex trader.
Tags: Beginners, Foreign Exchange, Forex, FX, Leverage, Trade, Trader