The forex market is one of the most dynamic and liquid in the world. Millions of people participate in it every day, some without even knowing about it.
For example, assume you are traveling to country A with $100. At the border, you exchange the dollars for the currency of country A. One dollar is equal to 10 shillings of that country. Therefore, you will receive 1000 shillings of country A.
After spending three days in that country, you go back to the border with the money, but the exchange rate has moved to 15. As such, you will receive $66.
In a nutshell, that is how the world of forex trading happens, but today, you can do all that from the comfort of your living room or through your smartphone. You can also do this as a full-time job or a part-time gig.
To get started, you need to have a lot of interest in the financial industry. By this, you need to be ready to spend your times reading financial news and watching financial television. If you don’t have such interest, it will be impossible to succeed as a forex trader.
Next, you need to find a good broker. A broker, like easyMarkets, will provide you with tools to learn about trading, deposit money, and start trading. You need a broker that is regulated by the leading regulators like FCA and CySEC. Using an unregulated one will only expose you to huge risks. In the past, many traders have lost millions of dollars in those schemes.
Then, you need to spend a few months learning how to trade while at the same time using the demo account to create and test your strategy. Fortunately, there are hundreds of books that will guide you on how to start trading and how to develop a strategy. In all this, we advise people to spend a few months learning and testing the different market conditions.
After perfecting your strategy, you can now open a live account, deposit money, and start trading. However, it will not always be a straight path. Just like everyone else, you will lose money often.
To protect yourself from extreme losses, there are a few things you should do. First, in every trade you start, you should only risk a tiny percentage of your money. We recommend that you start risking less than three percent of your total capital.
Second, we recommend that you do a thorough analysis before you open any trade. This should involve you doing the technical and fundamental analysis. By doing this analysis, you will be at a good place to mitigate the risk of impulse trading.
Finally, you should always have a stop loss in all trades you do. A stop loss is simply the point where you are ready to take the maximum losses. Always, the stop loss should be at a place where you are comfortable enough to take the risks.
By incorporating deep studying and analysis, together with proper risk management strategies, you will be at a good position to succeed in forex trading. It will not always be a straight path, but you will not be alone. Even the best traders and hedge fund managers find themselves losing money in the market.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.