The internet is full of information about Forex trading strategies and that it’s understandable for the novice trader to feel overwhelmed with too much information. Here are some guidelines on how to get started in the Forex market.
First of all, study. Read everything you can find on the basics of the Forex market and what drives the prices. When this data makes sense to you, choose a good broker to trade. This decision should be based on your trading needs. If money is going to be tight, find a broker that offers a mini account, so you don’t blow your entire trading budget. Some brokes let you start off with as little as $100 and using proper leverage allow you to control $10,000 currency mini-lot positions.
When you’ve found the perfect brokerage, open a demo account with them. This gives you access to their live feed, with up-to-the-second price quotes and charts and your choice of indicators, and his economic calendar and knowledge base. Their trading platform is exactly the same as their live account, only difference is no money is being traded but only play money.
Of course, with all this fresh information, you’ll want to read it, too. While you’re studying, get to know the brokerage’s online trading platform. You should be able to open the chart of the currency pair that interests you, add and remove indicators, change the time frame of the chart and the parameters of the indicators, and use the graphic interface to draw trend lines. You should also be able to open market and entry orders, add and change stops and limits, manage a trailing stop, and close a trade quickly should the market be moving against you.
Then paper trade using the technique of your choice. Pick one currency pair for in-depth study; many people choose the EUR/USD or GBP/USD, because their volatility creates a lot of trading opportunities. If you are a local you might want to check out the NZD/USD or the AUD/NZD pair. But be aware that the best trading opportunities will be during the hours that market is open. Watch the chart of your selected currency pair for the parameters that signal a trade using your technique. Remember to start with the long-term charts before moving to the short-term. When it seems right to you, enter the trade.
Realize up front that paper trading doesn’t involve that “Yikes!” feeling you get when real money is involved. In that sense, it’s not realistic, but it will teach you the mechanics of working in the Forex market. Don’t quit paper trading until you reach the number of pips you’ve set as your goal more often than not. This is a very important step; if you quit paper trading too soon, you won’t know enough to trade successfully in the “real world” of the Forex market.
When you do deposit funds into your brokerage trading account and begin trading with real money, start off small to give yourself a chance to adjust to that added stress. Don’t increase the stakes by adding additional lots or by stepping up to a larger account until you’ve learned to adjust for your emotions and again become an efficient trader and have a successful track record.
When you feel comfortable with these simpler techniques, go on to study Fibonacci retracements, Bollinger bands, candlestick chart patterns, and the Elliott wave theory. Practice makes perfect.
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