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Trading foreign currencies have become one of the most prominent ways of earning money online. The availability of the market, high liquidity, and all-around-the-clock trading hours are just some of the advantages. Here are the basics to know about the market and the trading process on Forex.
Before starting trading on Forex
The first step requires finding a good brokerage platform where you are going to open your trading account. But before even opening the account, you need to make your trading plan. It consists of choosing the currency pairs, determining initial capital for trading, and ensuring the broker’s fees fit your budget. As a newbie, you should try trading on a demo account before entrusting the real money to the broker. Also, at the very beginning, as a way to ease your first steps to the market, brokers offer starting bonuses enabling you to perform trade and make a profit without spending any money. Check broker reviews which offer you great insight into its services, regulation compliance, fees, and bonuses.
How to trade on Forex – Trading for beginners
Before starting carrying out trading operations, you need to know the essential steps to monitor the trading positions according to the various events that may occur during the transaction.
Step 1: Choose the currency pair
Beginner traders should focus on a maximum of two or three currency pairs. Go for the most common pairs, with the high liquidity and less prone to volatility, such as EUR/USD, USD /CAD, USD/ HKD., AUD /USD. These are most suitable for a long-term strategy which is the best way to start and learn how the market works. Once you have mastered these pairs and long-term investment, switch to the exotic pairs and maybe try some short-term strategies and start day trading.
Step 2: Market analysis
Depending on their profile, each trader will spend more or less time there. Market analysis is available in several forms:
- technical analysis: this is the study of charts by identifying any resistance and support, trends, buy and sell signals, as well as optimal entry points and output;
- fundamental analysis: this is an essential step in learning about the economic figures published today. These figures are available in economic calendars and generally broadcast continuously on most online platforms;
- reading daily analyses published by specialists in the sector can also be found on the platforms or on many websites.
These different analyzes can give you viable trading leads. However, in trading as elsewhere, there is no certainty. It is, therefore, preferable to leave some part to your intuition which, with practice and experience, can only become more precise.
Step 3: Take positions in the market
With this information in mind, you are now ready to take a position on the market! Trading is above all about finding good entry points. It means you need to determine the proper moment to enter the market, meaning to perform a selling or buying order for the currency pair of your choice. You make your decision taking into account above mentioned ways of acquiring relevant information. As you develop toward the higher trading level, you will rely more on your inner sense of the market. However, technical analysis remains the optimal tool for the entry points decision.
Every time you log in, check your liquidity status and the progress of your open positions. The most important thing to watch out for is the use of your margin. Remember, it should never exceed 50% to allow you to hold your positions. Although this first step may seem relatively obvious, it allows you to assess the investments that can be made for the day and any profit taking or the need to cut losses.
By Sudip Mazumdar
who is a Mechanical Engineer as well as a professional SEO Executive. SEO Professional with experience for more than 15 brands. He is a regular contributor of entrepreneur, hackernoon, theinnovationenterprise and many more sites. His experience includes the full range of Digital Marketing including SEO, SMM, Content marketing, PPC Management and so on. He has a particular expertisation for branding a company’s marketing message, and delivers optimum impact and maximum results.
Member since April, 2021
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