Foreign exchange trading, also known as FX trading or forex trading, is quickly becoming one of the most popular investment strategies for individuals with liquid assets. The industry trades over 6 trillion dollars a day and there are almost 10 million traders worldwide. Furthermore, it can be an extremely lucrative investment strategy.
Below are the nine helpful ways on how to trade currency:
1. A word of advice…
Trading currency requires a strong familiarity with how the currency exchange works. If you’re just starting out the most important piece of advice is: don’t just jump in. Forex trading requires an understanding of what is going on. Yes, you may get lucky, but it is much better to be well-prepared so that whatever the outcome of your trade is, you’re ready to move forward.
2. Find a currency exchange broker
In order to trade currency, finding a good broker is a must. The first thing you’ll want to do is get a forex broker. There are many available, but you’ll want to make sure that the one you choose has a low spread – this is how they make their money, and if they are too high then you’re losing out on profit. You’ll also want to make sure they have the appropriate education, and are backed by certifications. You will be trusting your money with this person – make sure that is not a mistake. Finally, ensure that they are offering a solid platform where you can view updates on the market in real time.
A word of warning: there is no way to tell a “good” broker from a “bad” broker other than asking around and getting as much information as you can. Do your research! It could be money in your pocket.
3. Learn about currency trading
Take the time to really gain a well-rounded understanding of the forex market and how trading works. The easiest way to set yourself up for failure is to go in blind on one concept or another. If you want to play with the big guns, you have to bring the ammo. In this case, the ammo is your knowledge.
4. Open a demo account
Demo accounts are pretend forex trading accounts that can almost always be opened for free with a forex broker. These accounts have pretty much all of the capabilities that a normal account does, except that you’re not actually trading any real currency. This allows you to learn the ropes, to understand the platform the broker is using, and to get up to speed on everything you need to know about forex trading while taking on absolutely no risk.
5. Stay patient
The forex market is a waiting game, and patience is the key to success. The first thing you need to do is remain patient while you learn the ins and outs of the trading game on your demo account. Do not switch over to a real live account until you can consistently turn a profit. Be patient, it will come. However, if you switch too soon, you have just as good a chance with that money at the casino.
Your next level of patience comes when you are actually trading. You have to be patient when you are actually trading. Forex trading provides a pretty perfect breeding ground for impulsive and risky behaviour. Keep your patience in check, and stick to your trading plan to ensure success.
6. Build a trading plan
A trading plan is one of the most crucial tools in a forex trader’s toolbox. This plan allows you to set guidelines for your trading goals. It is incredibly easy to get off track, so having a firm, set-in-stone plan is crucial, otherwise you’re putting the fate of all of your money into the fate of luck.
7. Keep a straight head
Part of trading currency can involve making a profit, but you also have to be prepared to lose. When people start getting emotional about big losses and try to make it up by chasing profits, that’s when they start making mistakes and losing even more. The forex market is extremely aggressive, so there is no room for emotions or silly mistakes.
8. Trade what you are willing to lose
As you learn about the forex market and become a bit wiser to what it is like, you may feel yourself becoming a little more confident in your trades. However, don’t ever make the mistake of trading more money than you have to lose. The market is not always predictable. You may make that money back, but don’t get in a position where you lose money you couldn’t afford to lose.
9. Keep your currency trading simple
The concepts are rather complex, and do require a solid understanding of the process and the market. But your trading strategy doesn’t have to be. An overcomplicated trading strategy is only going to make things more difficult for you, as you try to trade successfully. There are many levels to forex trading. If you are a beginner, keep your profile and your trading strategy at a beginner level too.