Top 5 Things A Beginner Forex Trader Should Know – UrbanMatter
The foreign exchange market (forex market) is the biggest financial market in the world, with a daily turnover of more than $6.6 trillion USD according to 2019 data. In order to be a successful forex trader, you must examine a number of essential factors before participating in the foreign exchange market. These considerations include market risks, trader safety, risk management, and so on.
The most successful traders develop their abilities via repetition and dedication. They also do self-analysis to see what motivates their transactions and learn how to take fear and greed out of the equation when they are involved in them. Here are the most important pointers to remember when you get started in FX trading.
Trade With a Regulated FX Broker
It is important to trade with reputable forex brokers that can safeguard your money from cyber threats and insure them in the event of a loss.
Brokers must provide a fair trading environment for their customers, and financial authorities must safeguard traders from broker scams and fraud. Brokers who are licensed must be open and honest with authorities about their operations, making it more difficult for them to commit fraud.
In order to be licensed by a Top-Tier Regulator, a broker needs to pass numerous credibility tests, technical evaluations and exceed the minimum requirements for the security of traders. The authorities also keep a close eye on the registered brokers’ actions via the reporting system and discipline them if they engage in any wrongdoing or poor conduct.
Regulators from across the globe demand various degrees of security from brokers and dealers.
Use a Demo Account
Almost all brokers provide no-risk practice accounts. It is possible to place practice orders at real-market similar pricing and circumstances by setting up a virtual demo account. Inexperienced traders should spend at least six months practicing on a demo account before moving to the real thing. If you want to learn more about how a demo account works you should see forex trading for beginners explained by Axiory, where there is additional information about demo account specifics and the way newcomers should use it as a practice tool. Also, it is worth noting that you should never trade with real money unless you are sure you understand the market and are confident in your abilities.
Demo accounts may also be used to test your trading strategy before opening a real money account.
Learn More About FX Market
It’s hazardous to engage in forex trading if you don’t have any previous expertise or understanding of the market.
To comprehend forex and CFD trading’s technical and basic aspects, you must educate yourself about trading. Also, while trading, you must learn to manage your emotions well. To understand how to trade in the Live market, you must first deposit a modest amount of money if you are a novice investor.
Recognize how the foreign exchange market works by being familiar with its trends. Consult a specialist if you need assistance. To learn more about trading, you may also read trading blogs, eBooks, and financial market news.
Keep in mind that 60 to 70 percent of all forex traders experience a loss. Avoiding frequent errors and making an educated transaction is made easier with education and experience.
Take Into Account The Risks
Approximately 10-20% of professional traders succeed long-term, while the other 50%-70% lose money. Some brokers have a greater percentage of losing traders than others.
This is due to the fact that Forex trading is very hazardous, especially if you have no prior experience. One approach to reducing that risk is to avoid making poor transactions or suffering large losses on a few trades in a row.
High leverage and high volatility are two variables that increase the dangers of FX trading even more.
It’s the same as borrowing money from your broker to start a transaction when you leverage Enter trades based on the possible losses, not the likely profits, with appropriate risk management and a good Risk to Reward ratio. As a result, your investment portfolio’s overall risk profile may be reduced substantially.
Also, until you get more experience, stay away from trades with a maximum loss of 3% of your money.
Political, social, economic, or natural unrest inside a nation may cause its currency’s value to fluctuate.
Use a Stop-Loss Order
The danger of losing more than you planned or even your real invested money if the market swings against you are always there if you trade without using a Stop loss. If you’re heavily indebted, this danger will be amplified.
As a result, placing a Stop Loss order and adhering to it is very essential while trading. Set your stop-loss order such that you don’t lose more than 3% of your initial investment.
A guaranteed stop-loss option from your broker will ensure that you can get out of your trading position at the predetermined price you have chosen, even if the market suddenly moves against you.
You should ask your broker whether they provide a risk management option like guaranteed Stop Loss execution that you don’t have to pay for.