There’s a chance that your first interaction with Forex is through an advert on social media or YouTube. Every now and then, you get someone advertising their Forex trading guides, going on about how they made loads of money. Ignore them, as they tend to be a scheme that makes the person even more money! Still, they’ve piqued your interest in Forex, and you’re kind of intrigued to see how it all works.
Generally, Forex is a great market to invest in with proven methods of success. However, there is a lot to take in as a complete beginner. You can start your journey by seeing some of the tips below:
Know what you’re investing in
The first port of call is to gain an understanding of what the Forex market actually is. You’re aware it has something to do with currency, but how does it work? A simplified definition is that the Forex market involves trading different currency pairs. A pair is two of any currency, with their exchange rate shown. For instance, you can have USD/EUR, with a value that tells you how many EUR is needed to buy one USD.
From here, the aim is to trade currencies that you think will make money. In the previous scenario, you’d use EUR to buy USD if you thought that the value of USD would go up. So, say 1 USD equals 1.5 EUR. You’d buy a dollar with 1.5 euros, hoping that it might go up in value – so, a few days or weeks down the line, 1 USD is now worth 2 EUR. So, if you sold your 1.5 euros, you’d get back more than 1 dollar!
Clearly, we can’t explain everything in this article, so do your own research to learn more about what Forex actually is.
Understand how the markets work
This is a key rule that you should take with you no matter what you’re investing in. Understanding how the markets work is essential for making money. You might know the basics of what Forex is and how you’re supposed to trade, but do you know what influences the market? Do you know which currency pairs are the best to invest in?
Questions like these need to be answered as they will help you make more informed decisions. Thankfully, you should learn about this while you are learning about Forex in general. It can save you a lot of time and help you avoid wasting money on pairs that are never ever going to yield results. You really can’t underestimate the value of this step on your journey.
Practice for free
Once you have a general idea of how everything works, you still don’t want to jump into things and spend money. Instead, you need to practice and get to grips with actually trading and knowing when to plan your trades, and so on. There’s a mobile app called The Trading Game, which is considered by many to be the best Forex trading app for beginners, and it’s ideal for practicing. Basically, you can have a go at trading on the Forex market, only using virtual currency. So, you don’t actually make any trades, but you can see what would happen if you did. There are also quizzes and educational resources to further aid your practice.
It’s well worth spending as much time as possible practicing how to trade on a free platform. You should reach a stage where you feel confident in your ability to identify trades and when to buy/sell. Then, you can move to a proper app and start trading with your own money.
Create a trading plan
As with all things in life, Forex trading is easier when you have a plan to follow. Naturally, you won’t find a plan here, as we can’t give you official trading advice. This is something you’ll have to create yourself or with the help of a Forex broker/financial advisor.
The aim of a plan is to give you a sense of direction. It tells you what you’re going to buy, and what goals you want to reach. This structure will help you avoid instances where you’re just going crazy and trading everything you can see. The key is to devise your plan, then have the patience and confidence to stick with it. Remember, all investments are more of a long-term thing. Even if you make money in the short term, you will experience times where you make a small loss. The trick is learning to recover from small losses and keep your eyes on an overall profit.
Set yourself a trading budget
The last tip for beginners is to set yourself a trading budget. This can adjust as you go on your trading journey, but it stops you from spending far too much in one go. To begin, you might want to only have a budget of $100 – $1000. Wherever you are along the scale is fine, the whole purpose is just to ease you in. Even if things go terribly wrong and you somehow lose all of your money (which you shouldn’t) it’s not a life-threateningly bad amount.
As you start making money, you can gradually increase your trading budget. It lets you put more money into your investments, thus growing your wealth. But, you always have a cap that prevents you from going overboard and spending money that you can’t afford to spend. Most trading platforms and apps have these restrictions in place for you, and you can tweak them in the settings.
Keep all of this in mind if you’re looking to get involved in Forex trading for the first time. It is a journey, which means you won’t see instant success. You’ll have to patiently grind your way through the steps until you’re in a position to start trading and making money. Honestly, the first few tips are the most important as you should never trade without knowing what you’re doing. When the knowledge is in your brain, and you have confidence in what you’re doing, everything becomes easier.