Posted by forex at 4:32 AM
Read our previous post
Understanding the Forex Market and Forming Realistic Expectations
1. Read articles and watch videos that train and educate new Forex traders. Consider your research as a self-study experience that will help you understand which factors affect money markets and how to interpret those factors to inform your trading and investing decisions. Some online brokers, such as Gain Capital Holdings and Global Futures & Forex, offer practice trading accounts that allow new traders to simulate live Forex trading in order to pair theoretical Forex knowledge with real-time trading experience.
2. Determine the amount of money you can afford to invest and the amount of financial risk you are willing to tolerate. Instead of just $20, forex brokers Gain Capital Holdings and Global Futures & Forex require their clients to open accounts with at least $2,500, so trade only with money you an afford to lose. When discerning your risk tolerance, Wells Fargo recommends assessing the types of investments you already make, how you react to investment losses and your comfort with uncertain investments.
3. Test yourself to ensure you understand the basic terms and concepts associated with Forex trading. After boning-up on Forex terminology and concepts -- such as currency pairs, which is the exchange rate between two currencies, and pips, which measure the percentage by which that exchange rate can change -- identify profitable Forex trades that also fit your investment style. Understanding the basics of currency market investing ensures you begin your trading endeavors on firm ground.
Putting your Knowledge to Work
4. Open a live trading account, one that invests real money on real markets, and make a few investments. Because currency pairs change in value quickly, keep a close watch on your Forex investments to avoid losing money or missing an opportunity to profit. Many online brokers offer tools, such as email notifications, applications for mobile devices and even automatic trading, to help their clients stay abreast of their Forex investments.
5. Establish your trading goals and restrictions clearly and stick to them throughout the course of executing your trades. Goals help investors stay on track and avoid making impulsive or poorly informed trading decisions. Websites, blogs and news outlets are teeming with advice to help people make money investing, but, if the advice seems too good to be true, and if it does not fit into your investing plan, it is best to ignore the hype.
6. Research current and prospective investments continually. Understand why you make one investment while avoiding another and note which factors these decisions have in common, then apply this observation to future trading decisions. Forex trading is an active investment strategy, which means traders try to outpace the market and position themselves for profit once it moves; to be well positioned, understand how market trends and your investment style can work together to create a profit.
7. Evaluate the performance of your investments, then reposition yourself to keep ahead of the curve. Stick to your goals but don't be afraid to redirect your trading activity based on the success or failure of specific strategies. In the end, you may not make millions and you may invest more than $20, but a solid grasp of currency market fundamentals will help you to begin trading wisely.