Worried about losing money trading currencies? You’re not alone.
I remember my first day behind the wheels of my Dad’s car, I clinched very hard onto the steering wheels as my knees jerked underneath. I managed reversing the car out of the garage. It was a risky move for me despite my desires to learn how to drive. Now fast-forward months after, I did 70-80 miles/hour on the highway with my right arm on the armrest sipping my favorite drink.
How did I progress? Confidence built over time.
Like any other trade, learning to trade currencies require the right set of skills and most importantly, self-confidence.
“To succeed as a forex trader, you have to believe in yourself because you will be surrounded by people who don’t believe that success is possible here” Mario Urlic – CEO & Fund Manager Aureus Invest Group.
Trading currencies comes with its dose of risks, loss of capital is one factor that keeps new traders on their toes. Understanding how the market works and knowing how to read your charts would give you the required confidence to trade in the forex market.
Start with a Demo Trading Account
The first thing obviously is to open a currency trading account with a forex broker. Most of trading accounts have a demo trading features with virtual currencies form $1,000 – 10,000 to practice with. FXTM have these features to try out.
You can start off with a demo account and familiarize yourself with the software. It’s good to test every feature, see how the buy and sell button works, how to apply leverage, panic buttons, how to transfer monies from account to wallet and so on.
Initiate a few demo trades and see how you perform. keep testing with different currency pairs, rate yourself and make adjustments.
Read and Understand Currency Charts
Technical analysis still remains the bedrock of currency trading. Initiating trades without reading the charts is like sailing without a compass.
The currency chart is the trader’s best friend, this helps him map out his trading strategy (entering and exiting a position).
Reading currency charts cannot be explained totally in this article, there are short courses you can take on technical analysis which explains reading and understanding currency charts. This is one good read on currency charts for beginners.
All over the internet, you can find useful content on this subject. But be careful not to narrow yourself to a single currency trading subject, expand your horizon and know a bit of everything about trading currencies.
You can also try out these ebooks on Technical analysis and the market.
To keep on improving, read the market every morning, this gives a firsthand information and understanding of the markets. As economic and government policies change, the currency markets react to the news.
Reading charts should be a lifelong exercise, some traders shortcut this process by subscribing to Forex signal service. The services do work but the downside is that some predictions are not accurate.
Have Respect for Fundamental Analysis
It may not be so clear how to correlate market information like a Breaking News, sudden policy pronouncement in the UK, Brexit, the U.S. Shale oil, Oil prices in Saudi Arabia, Oil production levels in Russia and Iran. News from currency trading zones has impact on the currency market, some news triggers sudden rise or plunge in prices. Dwelling on technical analysis alone without keeping tabs on the news could turn your trades south.
Try to get a balanced perspective of a currency’s possible reaction to a breaking news, a simple simulation could clarify. For example: A disruption in oil production in the Saudi’s Oil fields could possibly give the U.S. Oil production and price a boost. Oil prices and the USD move along the same trajectory. Once this happen, a trader can predict the reaction of USD. The demand for USD pushes the price upwards.
As one studies the currency charts, one needs to stay abreast with news and major pronouncements. Harmonizing technical and fundamental analysis prepares traders for the long haul.
Start Small With a Live Account
This statement cannot be overemphasized. The wisdom of testing the real waters with one foot applies also to currency trading. Once you feel confident to proceed from a demo account to a live trading account, proceed with caution. These are a few tips to get started with a live trading account.
- Start with a sum you can afford to lose.
- Choose a currency pair you understand.
- Minimize your leverage per trade.
- Set your stop loss in case your trade goes south.
- Be patient and avoid panicking at every uptick of the charts.
- Take profits in phases as your progress along the curve.
- Day trade for a start.
Succeeding in currency trading is not a destination, it is a process that requires commitment, courage and some bucks to get going. Trading currencies is very profitable, a lot of traders make a living from it. Learning how to use the right set of trading tools and training will get you ahead in the game. Best of luck in your trading.