January and February are always difficult months from a financial perspective, with households overspending over the festive period, the seemingly endless window between December and January paychecks and a general slowdown in B2B trading. At the same time, it is a period when we look to the future and new beginnings.
With that in mind, it is unsurprising that amateur investors are choosing now to explore the world of Forex. A range of online resources and apps have served to demystify what was formerly seen as a secret world populated only by financial trading houses and investment banks.
We have all heard the proverb that a little knowledge can be a dangerous thing, and diving in blindly can and often does lead to disaster. But follow these tips, and you can beat the odds and build a Forex account that brings in lucrative returns.
1) Build the foundations
To commence trading, you need two things: The right broker and a good online platform. You will find no shortage of options where both are concerned, so spend some time doing your homework. There are sites that help you compare the merits of different providers to help you find a trusted forex broker, and this choice will lead you on to selecting the best platform. Tools like MetaTrader are particularly popular, as they provide everything you need to assess the market, plus a direct conduit to your broker to buy and sell.
2) Get to know the markets
It is one thing having a working knowledge of how the dollar is performing against the yen because you saw it on Bloomberg, but it’s quite another to really study and understand the financial market. Learn about how different currency pairs behave, and get an understanding of indicators, trends and volatility.
We mentioned MetaTrader earlier, and this is one of several trading apps that offer a demo account. This essentially lets you perform virtual trades on the real markets, but without risking any of your actual money. Of course, you will not gain any either, but it is a worthwhile step to follow if you want to avoid getting burned.
4) Formulate a plan
If you don’t have a clear vision of what you intend to achieve and how, then you are very unlikely to achieve it. Sure, you plan to make money by forex trading, that’s a given. But there are so many approaches you can take when it comes to risk appetite, payback period and so on. Draw up a strategy, and stick to it.
5) Be ready for disaster
A fundamental axiom of forex trading is that you can’t win them all, no matter how good you are. Some trades will go south, so the prudent trader approaches every transaction with a “hope for the best but prepare for the worst” perspective. If the most you stand to lose on any individual trade amounts to no more than two percent of your total trading account, then you will never face a catastrophic loss.
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