Negosentro | There are so many reasons why one would want to trade on the foreign exchange market (Forex), including the fact that it’s a 24-hour market with high liquidity and low transaction costs. With the help of leverage, it’s possible for one to start trading with a relatively small initial capital and amass a fortune in the nearest future. Most importantly, there’s so much potential for profit both from rising and falling prices for those who possess the knowledge of the currency pair that they’re trading with. With that in mind and without further ado, here are several tips for entering the world of forex that you should definitely consider.
Develop your trading style
The most important thing with trading is that you have your own style and that you make decisions based on it. First of all, you need to decide whether you’ll be an aggressive, moderate or conservative trader, which is something that will decide your risk profile. Another idea that you need to consider is whether you want to be a day trader or a position trader. Day traders usually wrap up all of their transactions within a single day, which means that they don’t leave any investments pending for a long time. With position traders, this is not the case. Either way, there’s no right or wrong here, due to the fact that it all comes down to your personal preference.
What are leverages?
One of the most important things you need to learn about forex is the issue of leverage. Margin-based leverage allows you to manage funds that are 20, 50 or 100 times bigger than your initial capital. Still, using all of your available margins is definitely not a good idea, especially due to the fact that the potential loss would be devastating and throw you completely off the course. Keep in mind that you’re here for the long run, which is why you should limit your losses. The general rule is that you should never lose more than 1 or 2 percent of your total trading capital.
What is the margin call and how to avoid it?
Another important issue that you need to address is the question of a margin call. This is a scenario in which you no longer have usable margin, which would mean that your account needs more funding. Top causes for a margin call are holding on to a losing trade for too long, over-leveraging your account or starting with an account that is underfunded. The simplest way to avoid this, as well as increase the security of your overall trading efforts, is to establish stop orders. By setting your stop-loss order at 1-2 percent and your stop-gain order at 6-7 percent, you’ll be able to remain profitable with as little as 25 percent of successful trades.
Online Forex platforms
In the past, the majority of investments took place with the assistance of brokers, yet, nowadays, this entire field has migrated online. This is why it’s vital that you find a suitable online forex platform to use. First of all, you need a versatile platform, one that will allow you to use it from all your devices. Ideally, you would look for a platform like Ever Forex, that supports Windows, Android and iOS. Other than this, even though you’re looking for an online trading platform, it would be a lot better if you could find a physical exchange business that has a reputation of integrity in the market. This would provide you with no small amount of reassurance.
Learn investment strategies
Another thing you need to figure out is various investment strategies. Keep in mind that these are worth knowing even if you don’t intend to use them. The first strategy worth mentioning is value investing. The way this works is relatively simple – you find an investment that you feel is undervalued and invest in it in hopes that in the future the value will stabilize. Other than this, you also have the concept of growth investing, which rests on the potential future earnings of your investment. Lastly, we need to mention the momentum investing, which usually means following the trend that is already growing.
The most important piece of advice in any field that requires investments is to be consistent. A lot of people expect to get rich overnight but try to remember what we talked about in the stop-order section. What you’ll most often deal in are minor wins and minor losses, which means that it will take you a while until you can see some serious profits. Also, if you change the direction that you’re going in too often, you’ll face a problem of another sort. For some strategies, it may take months or even a full year to pay off. By changing your plans too often, you won’t be able to check the validity of the strategy in question.
The thing you need to understand about forex is the fact that there’s so much for you to learn. This means that the sooner you start, the better. Also, for the time being, it’s worth taking it easy and taking calculated risks. In time, this might be one of the best financial decisions that you’ll ever make.