3 Things You Need To Do Before You Start Trading Forex
- Choose a Reliable Forex Broker
Your first priority is to choose a reliable broker. There are several things you need to research before you find a broker that’s right for you. Here is a list of the main points to look at when making your choice:
- Trading conditions: find out what are the spreads, commissions if any, and swap rates for the currency pairs you want to trade.
- Minimum deposit requirement: find out what is the minimum deposit requirement and what is the margin/leverage that can be used.
- Currency pairs available for trading: most Forex brokers offer a wide range of currency pairs and CFDs on stocks, precious metals, indices, oil, etc. Make sure the broker offers the currency pairs and CFDs you want to trade.
- Dedicated customer support: find out how you can contact your broker when you have questions (ex: via email, phone or live chat) and in what languages they offer support.
- Bonuses and contests: many brokers offer welcome bonuses to new clients. Check out what bonuses are given by the broker and if there are any contests that will keep you motivated throughout your trading.
It’s important to have a good partner by your side, so choose carefully and look for a broker with a long history on the Forex market.
- Learn about Forex and what moves the markets
All major Forex brokers have an education section with lots of resources you can use to learn about Forex and the basics. For example you may read a Forex trading tutorial, watch videos or sign up for a webinar online.
Knowing the Forex basics is one thing, but spotting market opportunities is totally different. That’s why you should do your homework and analyze the markets that you will be trading. To help you understand what affects market prices you can monitor: an economic calendar, daily Forex technical analysis, technical indicators, trading signals, data releases and economic news. Don’t rely on a single source of information because this will give you a rather narrow view on the market and you may miss important details.
- Open a Demo Account
Forex demo accounts are free, and all brokers offer them. All you have to do is register at the broker’s website and download the trading platform. The most popular platforms are MetaTrader 4 and MetaTrader 5. Once you have a demo account you can start placing orders in real time without risking your own money. Here are some reasons why a Demo Account is beneficial to traders:
- Get familiar with the platform: the MT4 and MT5 platforms have many useful features, and you have to know them well in order to take full advantage of the software. You should test out things like: the charts, economic indicators, and expert advisors.
- Different order types: there are several order types available in the MT4 and MT5 platform and it’s important to understand them. The most common orders are: market order, stop loss, take profit, and limit and stop orders. Using these orders correctly will help you maximize your profit and minimize your losses.
- Develop a strategy: since Demo accounts use virtual money, you can analyze how the market moves and test out different trading strategies. You can place as many orders as you want and evaluate your trading performance over time. The important thing is to keep improving your strategy and to adapt it to changing market movements.
- Choose the currency pairs and CFDs you want to trade: The most traded currency pair is EUR/USD and many beginners choose it for their first trades. Other major currency pairs include USD/JPY (“The Gopher”), GBP/USD (“The Cable”), USD/CAD, USD/CHF (“The Swissie”) and AUD/USD (“The Aussie”).
Once you’ve done the above things and acquired the skills needed, you can proceed with opening a live account with the broker you’ve chosen. Remember that it takes time for a Forex trader to develop a long-term winning strategy. But once this strategy is mastered, traders can enjoy all the benefits of the Forex market.
This post was provided by LiteForex, a leading Forex and CFD Broker.