Before you can get started with forex trading, there are so many questions to answer. How do I choose a broker? Should I use a demo account? What do I need to know before making my first trade?Letâs answer these questions one at a time, in order of importance.
1. Choose a broker
Making a decision on which broker to use is personal for each trader. Some brokers offer certain options that some traders will thrive on, while other traders will hate the broker for those same options. It is important to review and compare the options of each broker closely and choose the one that makes you feel most comfortable.
2. Open a Demo Account
Once you have made your decision on which broker you like the best, it is time to open a demo account. Most brokers will offer at least a 30 day trial of their trading platform giving you a chance to trade on the platform using play money. Using a demo account is a good opportunity to make sure that you feel comfortable using the brokerâs trading tools. You would not want to trade real money without being fully comfortable with the trading platform. A demo account will not only help you get a grip on how to use the brokerâs trading platform, but also trading the market in real time.
3. Learn About Leverage
Forex trading is typically carried out using leverage, or trading on margin. Margin is a useful tool, but it can be very dangerous if it isnât used correctly. Forex brokers typically offer anywhere from 50:1 leverage up to 400:1 leverage. The higher the number, the less money required to put on a large trade. The use of leverage is something that needs to be taken with a lot of care.
Before you start making trades you should get familiar with charts and how they work. It is a good idea to get familiar with the different time frames and the different types of charts. The shorter time frames will give you an idea of how the market is moving minute to minute. The longer time frames can show you how the market moves over longer periods and will show the larger trends. Most charting software will offer charts as lines, candlesticks, or bars. Take plenty of time to try out different looks and time frames to find the style that you are comfortable with.
5. Making the first live trade
The first trade is a nervous and exciting experience. The demo account prepares you for the technical aspects of trading, but when real money is on the line, emotions will come into play. It is important that you keep a level head and do your best to trade with the same methods that you practiced on the demo account. It may prove to be difficult, but if you master your emotions and use sound money management, anything is possible after this step. If your first trade loses money, do not give up, just piece together where you think you went wrong, and try again.
Forex trading is a constant learning experience. Trading mistakes can be expensive. If you learn from those mistakes and do your best to avoid them in the future, you can become a very successful forex trader.