1. Money
You can opt-out at any time. Please refer to our privacy policy for contact information.

The Best Way to Learn Forex Trading

By

If you've looked into trading forex online and you've seen the all the opportunity to make money, you are probably wondering what the best way to learn forex trading might be. First of all, let me say that I'm an advocate of getting a forex education. You can find a lot of information on forex here on this site. You should definitely spend some time reading up on how forex trading works, making forex trades, active forex trading times, etc. The second thing I'll say is nothing beats experience, if you want to learn forex trading, it's the best way. When you first start out, you should definitely open a forex demo account and try out some demo trading. This will give you a good technical foundation on the mechanics of making forex trades and get used to using a trading platform.

The downfall of learning forex trading by demo account alone, is that you don't get to experience what it's like to have your hard earned money on the line. What I recommend for this, is that you open a micro forex trading account, or an account with a variable trade size broker that will allow you to make small trades.

Trading small will allow you to put your money on the line, but be at little risk if you make mistakes or lose money. This will teach you far more than anything that you can read on a site, book, or forex trading forum and gives a completely new angle to anything that you'll learn while trading on a demo account.

Along with that of course, comes the need to understand what you're trading. New traders tend to jump in and start trading anything the looks like it moves. They usually will use high leverage and trade randomly in both directions, usually leading to loss of money.

Understanding the currencies that you buy and sell makes a big difference. For example, a currency may be bouncing upward after a large fall and encourage inexperienced traders to "try to catch the bottom". The currency itself may have been falling due to bad employment reports for multiple months. Would you buy something like that? Probably not, this is why you need to know and understand what you buy and sell.

Currency trading is great because you can use leverage, and there are so many different currency pairs to trade. This doesn't mean however, that you need to trade them all. It's better to pick a few that have no relation, and focus on those. Having only a few, will make it easy to keep up with economic news for the countries involved and you'll be able to get a sense of the rhythm of the currencies involved.

After you've been trading with a small live account for awhile and you have a sense for what you're doing, it's ok to deposit more money and make your account bigger. Knowing what you're doing boils down to getting rid of your bad habits and gaining some control over your emotions. If you can do that, you can be successful trading forex.

Managing risk and managing your emotions goes hand in hand. When we feel emotional, greedy or fearful, that is when we make mistakes with risk and it's what causes failure. When you look at a trading chart, you should only see potential, or see nothing, it shouldn't be a matter of excitement. If pulling the trigger on a trade feels emotional in anyway, you should re-evaluate what you're doing to trade.

If you've found this article helpful, or you have any comments, please send me an email at forextrading@aboutguide.com or follow me on facebook.

  1. About.com
  2. Money
  3. Forex Trading
  4. Forex Basics
  5. Learning Forex
  6. The Best Way to Learn Forex Trading

©2014 About.com. All rights reserved.