Forex 101: What You Need To Know Before Placing Your First Trade
Forex may seem intimidating to people, and for a good reason. It’s the largest financial market in the world, there are a lot of movements, and it combines two things that people often have trouble with: finance and risk.
While it seems like a monolithic institution that only the most determined can enter, it’s actually an extremely accessible market that can help make a lucrative career for you – if you keep your wits sharp and your eyes even sharper.
So how does one “get” forex trading? Here’s a brief guide to demystifying the puzzle that is the forex market.
Who can trade forex?
You might think that forex is exclusively in the realm of smart-suited businessmen and number-crunchers who look at spreadsheets all day, but it’s actually one of the most accessible markets in the world. Almost anyone can get into forex trading, and the barriers to entry are almost nonexistent. If you’re willing to learn how numbers work, then you can have a career in forex.
Do I need a lot of money?
Not at all! In fact, there is a way for you to participate in forex trading without investing any money at all: demo accounts. A demo account is an account your trading platform can set up for you that follows real-time changes of the market and allows you to simulate actual trading without any money involved. You’ll never make a profit (because you need to lose money to make money, after all) but you’ll get a real taste of what forex trading is like before jumping in.
When you start trading for real, you’ll get a live trading account with your broker or trading platform. Just put your starting cash in this account, choose a currency pair, and start trading! While forex isn’t done on a one-to-one basis, you can start with lots as small as $100.
Is there a “best” way to trade?
The great thing about the forex market is that because it’s huge, you have a lot of leeways to make your own trading styles and strategies. While there are certainly best practices that you can follow – for example, always minimize risk whenever you can – everything else about forex trading can be left up to your discretion. You’re always in control, and what may work well for one trader may work even better for you.
Forex trading is also largely self-directed. Because the market moves and shifts from one moment to the next, any trading strategy can be fair game. If you want to buy, buy! If you want to sell, sell! Along the way, you’ll learn the “best” way to trade depending on your goals, your style, and how you study the market.
Is it going to be a huge investment?
Some people think that forex is this giant sinkhole of time and money, but that’s far from reality. We won’t deny that you need a lot of time to get good with forex trading, but that’s no different from investing any time to get good at any activity. While you can get into forex trading and hit a financial windfall within your first couple of weeks, there will be times that you’ll have to sit down and stay on the grind, analyse the market, then trade.
But another strong point of forex trading is that you can bow out when you feel like you need to! If you get into the market, get a few good trades, then call it a day, nothing’s stopping you from doing that. If you’ve miscalculated where the market is going to go and lost some of your trades, there’s no shame in throwing in the towel for a while. The forex market is big, but it doesn’t require much of an investment on your behalf to get in and out. Whatever happens, you are always in control.
How do I learn everything about forex?
It’s a big market and there are plenty of trading platforms, brokers, resources, and tools at your disposal to help get your feet wet in the world of forex. You don’t have to enter trades not knowing what’s going on or what any of these numbers mean – all you need to do is to invest some time to study the terms, look at the market, and follow the trends. You’ll find out quickly that it’s not that hard to start. It can get even easier once you find a trading partner to work with. They can take care of automating the more complex parts of pricing, give you up-to-date reports on how the market is behaving that day, or even run your live account for you when you can’t attend to it.
Beginners in the world of forex trading have everything they need at their fingertips to get started in their professional trading career. All they have to do is dive in.