Public interest has steadily grown in the forex market since the relatively recent advent of online forex trading for retail clients. Most online forex brokers offer their proprietary trading software free of charge to their clients, as do some independent trading platform developers.
As a result, getting started trading forex can now be as easy as getting access to a trading platform from your computer and funding an online forex trading account with a retail forex broker. View our top forex brokers list.
This is a very basic introduction to forex trading and in the end of the article we give you extensive information on how to excel in forex trading.
Get Educated About Forex Trading
Nevertheless, learning how to trade forex profitably usually takes some time to accumulate the experience necessary to make the most out of trading the huge currency market.
This process can be sped up considerably by getting a good basic education in how the forex market operates, technical and fundamental analysis, money management and how to make money trading forex.
Accumulate Sufficient Funds to Trade With
Of course, all of your forex trading education will be pointless if you do not have access to some liquid funds that you can put at risk without fear of hurting your self or your family by not being able to meet essential obligations. In other words, do not plan on betting your house or your rent payments in the forex market.
You will need to accumulate sufficient funds to place on deposit with your chosen retail forex broker to allow you to take the sort of positions that will be worth your time involved in analyzing, initiating and watching them.
This money will be used as collateral against possible losses you might incur when trading forex on margin. Although you can often open an account with less than $100, be aware that this will probably not be enough to be meaningful when trading forex, although it may be useful for practicing trading.
Also, you will probably want to have enough funding in your account to avoid margin calls or automatic closeouts of trading positions by your broker prior to your preferred stop loss level.
Come up With a Trading Plan
Just about every consistently profitable forex trader uses a trade plan and follows it in a disciplined way. Accordingly, this successful trading mindset represents a key forex trading guide post that you will want to emulate as you learn to trade forex.
Many such traders use relatively simple technical analysis techniques that they incorporate into their trading plan. Perhaps they might observe classic chart patterns in the process of forming, or they might look for trading signals on various technical indicators.
The main characteristic that you will want to achieve with your trade plan will be an objective way to trade the forex market that will help you remove the emotional element from your trading activities.
Learn How to Manage Your Risk
This simple math shows how digging your way out of a hole in terms of your trading portfolio can be both difficult and ultimately unrewarding. As a result, it is usually far better to avoid getting into that hole in the first place, and managing your risk wisely can help you do this.
Even if you have already taken the time to develop a trading plan, if you have not included a sound trading risk management component in your plan this will usually expose your account to considerable potential losses that can be readily avoided.
Risk management usually involves the process of identifying trading and business risks and putting suitable safeguards in place to prevent them from putting you out of business.
When trading forex, this usually means having a stop loss order level on each position, and then trailing those stops to protect accumulated profits in case of a market reversal.