Forex trading is something anyone can do. To a beginner, trading on the foreign currency market might seem a bit scary, but the reality is you do it every time you head off on an overseas vacation. Buying foreign currency and then selling what you don’t use is forex trading!
In this guide, we are going to look at the fundamentals of trading forex from home. Read on for some helpful tips.
Don’t Have Unrealistic Expectations
It bears saying that forex trading is not a get-rich-quick scheme. If you approach forex trading with unrealistic expectations, you are likely to end up disappointed. There are plenty of experienced forex traders who make a lot of money speculating on the foreign currency markets, but they have spent many years perfecting their trading strategies.
Your best bet is to start forex trading with a view to having fun with some disposable income, and if you do break even, great.
Photo Credit: Unsplash
To trade forex from home, you need a fast, reliable internet connection. Trying to make trades on dial-up or over an internet connection that continually drops out is not going to work out for you. Check your internet speed and, if possible, use a wired connection, not wireless.
The faster your internet connection is, the easier it will be to profit from tiny price movements.
Open an Account with a Forex Broker
You need to open an account with a forex broker if you want to trade online. Look for a reputable forex broker such as easyMarkets. Read reviews and make sure that the forex broker you use is regulated in your jurisdiction. Ideally, go with a forex broker that offers demo accounts, so you can get to grips with forex trading without risking your money.
Choosing a Forex Pair
Forex traders work with currency pairs. One currency is measured against another. For example, if you work with GBPUSD, the value of your pair increases when GBP rises against USD. Forex traders make money by speculating which way a currency pair will go.
There are dozens of currency pairs to choose from, but the most popular are the majors, which include EURUSD, GBP/USD, EURGBP. You are free to pick any currency pair you like, including exotics such as cryptocurrencies. However, beginners are better off sticking to a currency they are familiar with, which is invariably their own currency paired with a major one such as the USD.
Learn the Terminology
There is a lot to understand when trading forex. Terms such as pips, spreads, margins, and leverage are all important. Spend some time learning the basics before you even think about making a trade.
Have a Strategy
To be successful, you need a trading strategy. Beginners often find it easier to learn the ropes via social trading, whereby you copy the trades of a successful forex trader. This lets you see how they do things, which in turn helps you figure out your own strategy.
Keep a trading diary and write down everything you do, good and bad. In time, you should spot the patterns.
Practice, Practice, Practice
Finally, practice for as long as it takes for you to get the hang of how forex trading works. Stick with your demo account until you are consistently making a profit.