The promise of quick riches is drawing more and more people to the forex market, and for good reason – big profits are possible on the forex market. However, the forex market can also be highly risky to the new trader, especially one that hasn’t familiarized themselves with the fundamentals of currency trading.
The first thing to understand is that forex trading isn’t as easy as some make it out to be. Professional traders may be making piles of money now, but you can bet that they also blew an account or two when they first started. The difference between then and now is that they educated themselves on how the market works, and they’ve also learned to remove all emotion from their trading.
Even if it’s your intent as a new forex trader to simply purchase one of the many forex robots on the market and let it place trades for you, it’s critical that you understand how the robot makes its trades and why it makes the decisions it makes. Only then will you be able to determine if the software is ultimately going to be a good fit for you.
A good place to start is with some of the basic terminology. You’ll soon see words like ‘pip’, ‘base currency’, ‘volatility’, and so on being tossed around. The currency market is huge and has technical and fundamental elements to it. You’ll find that you’ll need to start paying more attention to changes in interest rates and unemployment reports, as these are major drivers in the forex market. Start watching some of the daily business reports on the news, and start browsing some of the popular financial websites to become acquainted with some of the more popular terms.
Once you feel you’re ready to dip your toes into the forex market, open a demo account with your preferred broker. These accounts behave exactly the same way a live account would behave, and it gives you a chance to test your trading strategy without having to risk any of your own capital. Use your demo account wisely, and only start trading with real money when you’ve created a system that generates consistent profits.
The forex market is an opportunity like no other, but it can be ruthless to the novice trader. It’s essential that you arm yourself with the right knowledge before you begin trading with your hard earned cash.