How Can Newbies Trade Forex Successfully?
A lot of traders are foraging into the forex market as their primary source of income. Thanks to the existing competitive ecosystem. A s a result of this, many professionals and newbies alike have taken it as a great deal of inspiration to benefit from the myriad of different opportunities available through the forex market. However, the most important matter at hand is that, for the newbie traders out there, learning how to make profits via forex can be a big deal. This will help many people who are making their first attempts at forex.
As far as entering the forex market is concerned, one needs a good understanding of the market. Which means you have to understand the basics and advanced aspects of forex trading, the strategies for successful trading and the technique to deal with the different trades. At the same time, learning to bear the minimum of the loss in bad situations is paramount. Knowing this basic information can set your feet firm in the journey in the forex market.
#1 Start With A Forex Account
If you’re interested in trading foreign exchange in a similar fashion to the equity market, you have to open a trading account in order to do the required trading. Each forex account will come with a wide array of different services like the equity market. You will have to do your due diligence to figure out what suits you the best. A couple of parameters to consider are:
The Ability To Control Your Funds
High leverage always comes with a higher risk. Leverage will enable you to control your funds by using a part of your own capital. Leverage amounts will differ from one account to another and depends largely on the account itself. However, most successful brokers use a ratio of 50:1. This means, for every dollar in your account, you will be able to control up to $50. The benefit of such practice is that it makes your margin of trading very low.
In contrast to equity accounts, forex accounts don’t have any brokers, which means you will not be required to pay any commission while trading. This is because the trading occurs directly between market makers. Platforms like ETX Capital give you a decent advantage over other players in the market for forex trading.
#2 How Do You Start Trading
There are two basic ways through which you can start trading forex:
- Buying and selling currency pairs.
- Buying derivatives in order to track the change in a particular pair of currency.
Both these techniques have a lot of similarities. Usually, a trader will buy a pair of currency in hopes that it will be in a positive direction, similar to the equity market in which a trader buys the stock. Say for example a trader who is opting for a long position in EUR/GBP pair will be losing money when the pair goes down, and will make profits as soon as the value goes in the positive direction. In this example, when the EUR increases in value against the GBP, the value of the pair rises. So, this would be a bet on the Euro.
Though it’s a reliable source of income, you will have to educate yourself properly before you start investing. It’s important that you take the time to understand why things are the way they are before you jump all in and start making your first big bets.