In 2021, Forex is still a buzzword. Individuals started working in this market as far back as the 90s, but trading has seized to be more accessible than now. You may connect to the largest financial marketplace from a phone or tablet; success, however, is not guaranteed. Beginners should build a solid strategy before opening live trades. Discover 5 crucial aspects of Forex for dummies.
1. Brokers Are Not Created Equal
Dozens of companies may advertise these services in your region. Licensing is paramount. Trusted brands are not shy about their status – usually, you can find these details in the website footer. For instance, users who login to the Expert Option platform have peace of mind, as the broker is authorized by the FMRC and licensed by VFSC, the world-famous regulator.
2. You Need a Demo
Test the waters before putting your capital at stake. All reliable companies allow newbies to practice at no cost. Usually, a demo account is opened within minutes – just fill in a basic form online and check your email for the login and password. Enter them in your trading terminal to explore it free of charge – as long as necessary.
3. Risk is Part of the Game
Fundamental market forces are beyond anyone’s control. You cannot influence interest rates, oil prices, or diplomatic relations. What you can do is predict and react. This makes risk inherent. Fortunately, there is more than one way to limit it.
A wise strategy is always a combination of meticulous analysis (technical, fundamental, or both) and risk management. Successful traders always protect what they have first. They calibrate the position size (no more than 1% of overall capital) and use automatic triggers (Stop Loss and Take Profit).
4. There is No Magic Strategy
None of the popular methods work for everyone by default. Do not expect guaranteed results, as the market may always move against you. Choose a style that fits your current situation. For instance, scalpers monitor the market throughout the day while swing traders make a few trades per week.
5. Incredible Profits Require Investment
Top brokers allow users to begin with modest deposits – sometimes, even $10. You can start small and build the right skillset gradually. On the downside, the low investment makes high profits next to impossible – at least, in the short term. In Forex, you can win big in two situations:
- when the volume is large, or
- when the volatility is high.
High volatility ramps up the risk: overall, you are more likely to benefit from a string of small profits than a single windfall. Exposing yourself to excessive volatility is dangerous – particularly when the broker does not offer negative balance protection.
Mistakes are inevitable, no matter how skilled you are. This market is not 100% predictable. If it were, every trader would be a millionaire. Success relies on a combination of foresight, skills, and trends. Start small, develop your acumen and be aware of the risks at all times.