With the increasing popularity of online Forex trading you may have considered investing in this field. But before you start, you need to understand all the risks in order to get the expected results. There is no doubt that practical experience is much more valuable than just theoretical knowledge that you acquire by reading, researching and discussing with other investors.
First of all, you must be familiar with all the basic terms that are relevant to FOREX trading. Make sure you know what is meant by terms like blocked currency, adjustment, commodity pairing etc.
Here are some simple tips following which you will be able to do it smoothly!
Once you understand the basic concepts, start with a “Demo” account that has real spreads between bid and ask. You can lose a lot of money simply on the spread so if the demo account doesn’t take them into account it isn’t giving you a true picture of your results. Also be sure the demo account uses real time quotes so it actually simulates trading in the real world. And even if you can make money with a demo account you may still lose money in a real account because you are more emotionally attached to real money than play money.- Try out different investment strategies – Once you develop a working strategy even making a minor change can result in turning a winning system into a losing system. So be sure to test any changes in your demo account.
- You have to take risks, but then you must be alert as well! – It is well known to all the traders that trading FOREX is not much different from gambling and therefore you need to be extremely cautious about each of your movements. You need a tested system with a method of limiting risk. Do not “swing for the fences” instead you need to limit your risk to no more than 2% of your capital so that it would take a string of 50 loses to wipe you out. The key successful trading is to live to fight another day.
- Stay updated – Make sure you stay thoroughly updated about all the latest trends of the market. Andrew Carnegie said, “Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket.” This doesn’t negate the advice to limit your risk but it is another way to reduce your risk by being vigilant and not expecting Forex trading to be a “buy and hold” proposition.
- Practice, practice practice– Once you are fairly familiar with the basics of online trading, start practicing those. Because it’s not really possible to master all the tricks and techniques of the business, from every corner without practicing them. Creating a demo account, to get a feel for the actual risks and techniques.
See Also:
- Choosing the Best Forex Broker for You
- Forex Basic Terminology
- What is Forex News Trading?
- 3 Common Trading Pitfalls — Plus 6 Free Lessons
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