The Forex market is typically seen as one of two things – either a source of easy money where you can get rich quick, or a dangerous world of complex high finance that the wise amateur should not touch with a barge pole. It probably comes as no surprise to learn that it is neither of those things.
Conduct a Google search and you will find 10, 20, maybe 100 articles telling you how to trade Forex. That’s fine, but you are asking the wrong question. Trading Forex is the easy bit. Making money from doing so – now that’s the secret. Here, we will run through some tips on how anyone can make money out of trading money. It won’t make you into and expert trader or an overnight millionaire – anyone who claims they can do that is not living in the real world. It will, however, set you off on what could turn into a very lucrative road.
Learn about the money markets
Have you ever noticed that all the best advice seems really obvious, whether it is related to life, finance or anything else. Marry in haste, repent at leisure, or don’t gamble what you can’t afford or choose a job you enjoy doing. Despite that, how many people end up rushing into bad marriages, or jobs they hate or, indeed, lose all their money at the casino or the racecourse?
The first step in successful Forex trading is a similar statement of the obvious. You need to learn about the Forex market. There are a million and one resources out there covering everything from the mechanics of trading to the most important indicators to the best currency pairs to concentrate on. You might not be able to read them all, but you need to dedicate some serious time to really understanding how the markets work before you so much as install a trading app on your smart phone. In Forex, education is everything, and you’ll never stop learning.
Practice in a safe environment
It’s just as easy to lose money trading Forex as it is to gain it. That’s why some people will suggest it is not a place for amateurs to dabble. To some extent they are right.
If you want to do anything successfully, you need to practice. Imagine someone who sets out to become a car mechanic – do you suppose they read a few books and then offer up their services to repair someone’s brakes or change their clutch? Of course, that will end in disaster, and so will leaping in to Forex trading with only theoretical knowledge.
Most trading apps allow you to open a demo account, and this is what you need to do. You’ll be using real market data, and will have the opportunity to start using trading tools. Analyse the trends using those indicators you read about. Now you can find out if you really understand how to use the RSI indicator in Forex trading, for example, or whether you need to keep studying a little longer.
Gently does it to the next level
You can contnue using that demo account for as long as you like, and ideally, the longer the better. If you’re not in this for the long game, it’s better not to start at all. But once you start making the right calls more than you are making the wrong ones, you’re ready to start using some real money. This is where it can all start falling into place, but it is also the stage at which your own worst enemy can be yourself.
When you were using your demo account, you will have come up with a simple basic trading strategy, and the fact that you are ready to move to the next stage means it was more or less working. So stick to it. That doesn’t mean you can’t make some refinements – in fact, you will certainly want to do so as you develop your skills, learn about new indicators and generally become more knowledgeable about the market. But there is a big difference between making continuous improvement style tweaks to a strategy and completely abandoning it because things are not going your way.
Roll with the punches and emerge victorious
The boxing analogy might be a hackneyed one, but it is completely appropriate. With any sort of trading activity, there will be ups and downs. The objective is not to eliminate the downs – that’s impossible. That being the case, they need to be as much a part of your strategy as the ups. In other words, you have to plan to absorb them, and to minimise their impact.
It all comes down to simple risk management, which needs to be an underlying principle in all your trading activity. Or as we put in other words earlier, don’t stake what you can’t afford to lose.
Remember those golden rules – they really are completely obvious and very simple – and there is nothing to stop you making money trading Forex.