4 Things You Must Know Before Starting to Trade Forex

Richard Parker  |

Forex trading is a serious investment vehicle, much like stocks and bonds, that shouldn't be taken lightly. But, a lot of people go into Forex trading without a first understanding of what its implications and how it should be done.

It’s a dangerous move to jump head-on without first testing the waters. Getting properly educated by delving on Forex news is the first step of your success as a Forex trader.

Here are four important things to understand before starting to trade foreign currencies.

1.Performing a daily/weekly analysis - the key to success

During the weekend, the markets are closed. It may be a great time for you to read guides, keep up to date with the latest news and follow interesting posts published by market analysts and financial influencers on the social media. These can help you understand the behaviour of the markets better.

These 2 recommended websites will help you follow the latest Forex news:

  • FX Leaders’ Forex news - an excellent website for Forex news, market analysis and trade ideas, offering rich content for Forex news with timely coverage, live coverage of economic events and more.
  • Investopedia is a great site for the beginner broker, provides a comprehensive Forex dictionary with clear definitions of the important terms and vocabulary in Forex.

2.Creating instant wealth is unrealistic

Forex trading is a worthwhile endeavor which can bring you wealth, but it won’t happen in an instant. The most successful traders in the world gained substantial wealth after decades of learning and hard work.Just like every legitimate and legal wealth-building activity, it takes wisdom, determination, and diligence for you to succeed in foreign exchange trading.

Even if there are rare overnight success stories in this industry, it’s no easy feat to turn large amounts of profit in such a short amount of time. Traders who just had beginner’s luck often fall into an illusion that they have mastered the game. They become aggressive, then end up with great losses because the game they thought they’ve unlocked has changed rapidly.

People who aim for instant wealth are usually those who fall into a scam. So, quit the get-rich-quick mentality to avoid getting swindled.

3.You need a starting capital

How much you need to initially invest varies depending on every broker. But one thing is certain, you need a starting capital. The amount of money you invest depends on several factors, like how long you’re willing to wait for profit, how much you’re capable of losing, and how much you’re expecting to gain. Forex brokers generally accept a minimum of $100 initial investment for trading. More investment means a bigger chance for higher returns. But, it also means more risk.

With the inevitable risk, it’s advisable for you to invest what’s safe for you to lose. As the famous adage goes, “Don’t put all your eggs in one basket.”

There are different trading units in Forex, namely micro, mini, and started. For beginners, we recommend that you start with a micro lot unit. It’s more flexible and the risk will stay at less than 1% of the unit for each trade. So, if you decide to initially invest $100, your risk for every trade will not go above $1.

4.You win some, you lose some

Forex trading is a cycle of wins and losses. The market is volatile, so you should prepare to be humble during your wins and stay sane during your losses. You should never think that you’ve broken the secret code after a win because this is a perilous assumption.

Winning in this endeavor requires a combination of experience, knowledge, skill, and even luck. If you’re winning, keep your feet on the ground and prepare for winter. And if you’re losing, know that it won’t stay that way forever. Trading is more of a marathon than a sprint so you should aim for a long-term win.

Conclusion:

Congratulations on reading this article! You are on the right track towards becoming a bit wiser Forex trader. But we barely scraped the tip of the iceberg so keep digging in for more information. Before bringing out any dollar in Forex trading, do proper research and stay alert with Forex news 24/7.

DISCLOSURE: N/A.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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