Forex trading is often hyped up because it is so easy to get started, even with a small investment amount. All you really need to get started with Forex trading is a home computer and about $2000 (even less with some brokers). However, just because you can start Forex trading so easily, it doesn’t mean you are ready! Here are the basic steps you need to follow before you start Forex trading online.
Learn as Much as You Can
It is not enough to simply read a handful of Forex trading articles if you want to start trading and actually profit. You will need to sign up for classes and seminars about Forex trading which are held by industry professionals. If you cannot find a local class, there are plenty which are offered online. It is not a bad idea to start with a basic e-course to get yourself through the initial concepts. However, you will need to move on to a more advanced course which allows you to interact with a live instructor and also has workbooks with assignments (like calculating various situations). These classes are very useful for developing a Forex trading strategy for success.
Set Up a Demo Account
Before you jump into Forex trading with real money, it is imperative that you first practice with a demo, or “paper” account. Don’t just use the paper Forex account for a week or two either! You should be actively trading on the demo account for at least a couple months. Make sure that you are always trading as though it were real money. Keep in mind that demo accounts do not always reflect the reality of Forex trading because the demos use real-time slippage and spikes. With real Forex trading, your trade may not happen in real time so you lose a few pips.
Find Your Forex Tools
Even if you devote all of your time to analyzing the fundamental and technical aspects of Forex trading, you alone will not be able to predict market trends. That is why it is so important to have a wide array of Forex tools at your disposal. Most of the top Forex brokers will give you access to these tools for free. Spend some time looking at different brokers to see what they offer. Expect to some tools which your broker may not offer.
Determine Your Risk
Don’t start Forex trading until you have carefully calculated the amount you are willing to risk on trades. For most traders, a safe risk is about 5% of the account amount. Traders must also determine their limit orders and stop orders.
Choose a Forex Broker
There are a lot of different factors which go into choosing a Forex broker. You will want to look at:
- What spread is offered?
- Is the Forex broker regulated?
- What free tools or services does the broker offer?
- What are the margin offers?
- What type of user support is available?
- What is the account minimum to start trading?
Spend Some Time in Forums
Most Forex brokers online will have forums where traders can connect with each other and share tips and strategies. It is a good idea to spend some time in the forums, especially to get a feel for the mistakes which people have made. You will learn that it is unwise to put too much faith in those Forex tip websites and also about how to manage your risk.
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