Do you know your Pips from your Spreads? Are you up with Leverage and down with Going Short? If not, chances are you’ve never had a go at Forex trading. Which raises the question: should you?
For anyone considering getting into Forex trading, the first step is to know what it actually is. The term ‘Forex’ is a catchy name for Foreign Exchange – the act of trading one currency for another. The idea behind it is to invest your money in whatever direction you think a currency will go relative to another. If it goes up, it’s called appreciation. If it goes down, it’s depreciation. And if you pick the right way, you win the trade. Simple! But of course there’s much more to it than that…
Forex is the world’s largest trading market with trillions of dollars being traded every day, in almost every part of the world. Because of the sheer volume of currencies available to trade and the myriad of factors that influence the market, currency prices are in a near-constant state of fluctuation. From politics to economics to the environment – almost anything can affect the market prices. For a well-informed investor, that means there are plenty of opportunities. And those opportunities bring us to the essence of why people take part in Forex trading: to make money.
As tends to be the case when money’s involved, everyone wants to know the winning formula. You might be tempted to think of that as some incredibly complex mathematical equation, but the winning formula in Forex trading is actually a lot simpler. The secret to being a successful trader is: make sure you don’t lose. To do that, you need to ensure you’re well educated about the Forex trading market and be absolutely clear about the risks. Traders – especially those just starting out – can get overwhelmed by a lust for profit and fail to see the potential for losses that might sit just over the horizon.
If you’re considering getting into Forex trading, making use of free online education resources and – especially – free demonstration software is a very sensible way to start your journey. The demonstration accounts, provided by established brokers, give you access to real-time trading systems and data without having to put any real money down. Perhaps the best way to think of them is as a risk-free practice account to help you learn while doing. You should find that the more time you put into educating yourself about Forex trading and refining a trading strategy that suits your own aims, you should gain the awareness to stay away from overly risky trades and ensure any potential losses are mitigated.
The other important thing to remember about Forex trading is that you’re ultimately in full control of your investments. You choose when to buy and you choose when to sell. No one is forcing you into trading and the only limits are the ones you impose on yourself.
If you keep these things in mind, you’ll find that Forex trading can be fun, rewarding and interesting. But always make sure to heed the warning on that disclaimer that every responsible broker should have on their trading site – the one that says all trading contains some element of risk. It’s there for a reason.