How to Start Forex Trading in 4 Steps
With a daily trading volume of over 6.5 trillion dollars, the Foreign Exchange Market (Forex) is the largest financial market in the world, by far. Hence, it should come as no surprise that forex trading is a massively popular pastime around the globe.
Even though there are thousands of forex traders that live off their trading – called day traders – most traders are hobby traders and a lot of them are beginners. Now, getting started with forex trading can be nerve-wracking, to say the least. Therefore, we’ve made a quick and easy list of factors to consider before you get started with forex trading.
Also, don’t forget that all forms of trading, forex included, are associated with risk. So please be careful.
1. Make a Shortlist of Potential Brokers
The first task is to find a reputable forex broker that you can use. Since the forex market is decentralized, you need a broker to provide you access to the currency pairs that you want to trade.
In order to be considered “reputable and safe”, a broker has to be licensed and regulated in the jurisdiction where you reside, for example by the CFTC (U.S) or the FCA (UK). But that is only the most basic requirement, there are a lot of other things to consider as well. Read more about licensed trading platforms here.
2. Test and Evaluate the Brokers
With a list of 3-4 different brokers that seem like a good fit, it’s time to try them out. Today, all top-tier forex brokers provide a demo account that you can use to test the platform and tools offered.
These demo accounts are also the perfect tool to practice trading before you start risking your own funds. This is because you use virtual funds to trade, instead of your hard-earned cash.
3. Set a Budget and Deposit Funds
It is crucial to always have a budget when trading and/or investing, and the sooner you get comfortable with this, the better. Do this following the golden rule: “never invest money you cannot afford to lose”.
Therefore, we recommend that you set a budget even before you’ve registered your forex account and make your first deposit. That way you will minimize the financial risks later on.
Most brokers have a minimum deposit requirement that you have to fulfill, so ensure you pick a broker with a requirement that suits your budget.
4. Study the Ins and Outs of Forex Trading
As you probably know, forex trading is not easy. Not by any stretch of the imagination.
To master all the necessary skills, you have to start studying forex trading, preferably before you start trading. By combining a demo account, online guides, trading books, and videos, you’ll soon be on your way.
Many of the best forex brokers have extensive educational material on their platforms that you can use to fine-tune your skills.
Lastly, we want to emphasize the importance of “starting small”, ie. start trading with very small amounts until you feel comfortable with your strategy. Then, slowly, add to the amounts until you reach a level where you can make a decent profit. This process can take months or even years, depending on how fast you improve your knowledge and level of comfort.