While the prevailing direction of the markets and the outcome of our trades is never certain, here’s one thing that is: Every year, countless thousands will “find their edge” and achieve newfound trading success, while thousands still will see their trading come to an unfortunate end. Even more traders than that, though, will look to get started in forex trading, and so what follows is some simply stated advice intended to help them—or perhaps help you—do just that.
Test Your Initial Forex Knowledge
Everyone from artists, to athletes, to musicians, and yes, traders, too, have to start somewhere, and it’s usually by “learning the basics.” So as you get started in forex trading, it’s important to have—or at least acquire—some advance knowledge.
- Do you know how forex transactions work, and that you’re essentially buying one currency while simultaneously selling another?
- Do you know the different currencies and their abbreviations and symbols, plus the mainstream currency pairs and how they tend to behave?
- If you aspire to trade using technical analysis, can you read candle charts, identify any pertinent chart patterns, and read support and resistance?
- Are you aware of the known correlations between the equity and currency markets, as well as the currencies most closely tied to oil price volatility?
- Do you know what leverage, or margin, is, and the implications for traders who use it?
All this is crucial baseline knowledge that will ultimately enable you to choose which currencies and/or currency pairs you’ll trade, and most importantly, how you’ll trade them, perhaps using technical indicators, pure price action, or your own, proven methodology.
You’ll find introductory forex trading information in heavy supply on the Internet, and can also read about it in countless trading books. However, as you get started in forex trading, there’s a lesser-known educational option that might be way better: To ask more experienced and/or professional traders yourself!
Try attending a trader conference or networking events to build knowledge, find out what works for veteran traders (and what doesn’t), and gain invaluable knowledge and experience without risking even a single unit of hard-earned capital in the markets. Some conferences are even free to attend!
Your Forex Strategy: Get Good at One Thing First
Here’s the #1 idea and piece of perspective I wish I had back when I started trading: For all the trading strategies, methods, indicators, and set-ups out there, you should always strive to first become an expert in one thing, and don’t be a student of everything! To get started in forex trading is like entering a vast, new universe, and while it’s tempting to try to soak up every pattern, market, time frame, and methodology, that quickly becomes overwhelming and only serves to slow your learning curve.
Instead, make it your business to identify just one pattern, analysis technique, and/or set-up that fits your specific risk profile and your unique personality, and then pour your entire focus into learning how to trade in that manner. Know going in, though, that you’re looking at committing hundreds or even thousands of hours of reading, research, and practice to gaining knowledge and experience and honing your craft.
See related: Which Chart Pattern Is Your “Bread and Butter?”
New traders simply can’t get started in forex trading with high expectations for swift profits, or even that they’ll place real-money trades right away (see below). Often times, working with a mentor or trading coach can help speed up the learning curve, but perhaps to the disappointment of new traders, there’s an important step to undergo before they ever place their first trade….
Always Get Started in Forex Trading with a Demo Account Only
It’s not the “sexiest” part of trading, but believe me, whatever demo trading lacks in glamour, it more than makes up for in practicality! And for those looking to get started in forex trading, it’s one of the smartest decisions of all: Hone your skills and strategy by trading a demo account for as long as it takes to develop consistency and profitability. Only then do you know you’re ready to start trading real money.
When you really think of it, demo trading is just good business! You can trade real market conditions without any risk, and closely simulate the look—and to a lesser extent, the feel—of real-money forex trading. Plus, you can develop a routine and healthy habits, see how you’re doing at all points along the way, and learn some practical and maybe hard lessons in the process, all without sustaining any financial loss. It’s the best example there is of “Try it before you buy it;” and you may well identify your favorite broker platform, and most favorable currency pair(s) and/or time frame(s) to trade while you’re at it!
See also: When Do You Trade Your Best?
For new and aspiring traders, initial expectations always tend to differ from reality, so perhaps these few guidelines will be helpful for anyone looking to get started in forex trading. One last piece of advice would be this, though: Make sure the trading process, not money and end results, is your primary focus, and the reason for taking on trading in the first place. Trading is a long-term commitment, afterall, not a means for making fast money.
In a world where opinions, information, and “trading education” seem to be everywhere, maintaining simplicity and a keen focus is paramount. So as you get started in forex trading, do your part to cut down the “noise,” be purposeful and selective with what you’re learning, and use demo trading as a stepping stone before making the transition to trading with real money.
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