With income opportunities drying up in many countries around the world a lot of people have become interested in forex trading. If done correctly, forex trading can be a highly rewarding business.
On the other hand if done carelessly can be a very quick way to lose money. I’m so happy you have landed on this article because here we are going to discuss how you can correctly start the journey to becoming a profitable forex trader.
The forex market is the biggest market in the world with over $5 trillion exchanging hands every day. Most of this volume is because of the big banks and hedge funds. If you are not trading for a big bank or hedge fund then you are called a retail trader. Most retail traders lose money so it is very important for you to go about this the right way.
So what exactly is forex trading?
Most countries around the world have their own currency or they use a currency from another country. The major currencies are the United States Dollar (USD), British Pound (GBP), Euro (EUR) and Japanese Yen (JPY). Because of various economic factors the price of each currency relative to another keeps changing. Forex traders, therefore, try to take advantage of the price changes between the different currencies. I often say it should actually be called “forex predicting” because in essence your aim is to predict if the price will go up or go down. If your prediction is correct then you gain a profit if you’re wrong then you lose some of your money.
What’s the most important thing I should know about forex trading?
The most important thing to know about forex trading is how to do proper RISK MANAGEMENT. There are 4 possible outcomes from any trade which you take:-
- Big win
- Small win
- Big loss
- Small loss
All of the above outcomes are ok except number 3. Big losses should be avoided for you to survive as a forex trader.
How do I avoid big losses?
The general rule when starting to trade forex is to never risk more than 1% of your account on a single trade. This can be achieved by correctly setting your stop loss for each and every trade. Also, always start trading with a 0.01 lot size. You may not yet know what a lot size is yet but for now just keep this in mind. A good leverage to start with is 1:500
What else do I need to know?
Actually there are two more things.
- Forex trading is not a get rich quick scheme. Like with any new skill you need to invest a lot of time and effort to become good at it.
- You need a mentor. The best way to learn any new skill is by learning from someone who already knows what you want to learn. Forex trading is the same.
Where can I get a forex trading mentor?
The best free forex trading course we have found online is by a company called Trading Fanatic.
This course will be enough to hold your hand right from the beginning so you can decide if this is something you want to go ahead with.
The best part about forex trading is that you can (and should) always start trading with a demo account to get a feel of how it works. NEVER start trading with real money until you are able to get consistent profits with a demo account.