Currency Trading has been going on for years now but it still a fairly new concept to individuals who have been used to equity trading. Although both basically deal with buying and selling, the two industries are actually very different and is why stock traders might find it a bit difficult adapting to currency traders. Even more so for those who have no idea at all on how the system works.
Find a Broker
The first and most important thing to do would be to find a broker. There are currently numerous of those online – but not just any broker would be enough. Individuals are advised to find highly reputable brokers that would help them through the process of learning Forex. Good brokers are the ones who would provide good spreads, 24 hours non-interrupted service and various other perks within their site. It is perfectly possible to open several accounts with different brokers, but this should only be done later on.
Opening a Practice Account
The best way to start Currency Trading is by opening up a Practice Account. This is typically hosted by the broker, allowing individuals to start getting used to the concept. Practice accounts obviously do not deal with actual money but has all the elements of actual trading. As new traders learn how the system works and actually gain profit in the practice run, they could then gain the confidence to participate in the actual setting.
Practice, Practice, Practice
This is probably the longest and most important part. Individuals should spend some time working on their Practice Account before graduating to a real one. Note that different brokers provide different trading platforms so it is best to be familiar with them all. This can be done by opening up several Practice Accounts from different providers.
Remember that Forex is all about making the right analysis and reacting on time so learn to assess the market and how to make decisions based on the data. New traders should also take the time to learn the different terminologies utilized in the industry such as pip, selling short, selling long or currency pairs. This way, they would be able to thoroughly understand conversations. Other things that practice traders should learn about during the process include:
- Experiment with different strategies for trading.
- Use different managing positions
- Study margin trading and leverage.
- Learn to analyze charts and graphs.
Decide on How Much Capital
Once the practice trader is happy with their Practice Account, it is time to open up an actual one. The great thing about Currency Trading is that it does not require too much capital. With as little as $50, individuals could start trading and earning profit. Most starters opt to deposit as much as $500 but typically, the minimum amount would depend on the broker.
Although it might look simple at first, keep in mind that Currency Trading can be risky when not handled properly. People could literally lose thousands in this market if they plunge in without bothering to learn the basics. This is why practice – and having a mentor – is such an important aspect of the industry.