It seems like it should be fairly easy to get into trading Forex, and it really may not be as difficult as some might imagine. There are, however, a few things any novice trader should be aware of before just jumping in. Forex is about more than just ‘wagering’ on currencies. It’s like making a wager, but is so much more than gambling due to the amount of information that is needed before you trade.
Anyone can look at the daily Forex charts to see which of the majors are gaining and which are declining. But, being able to actually trade in the Forex arena means understanding the principles. As the old saying goes, practice makes perfect, and if you want to enter such a fast moving and volatile geopolitical dependent market, practice not only makes perfect, it is necessary. Here are three reasons why new traders should practice before jumping in.
1) Getting a Feel for the Volatility of Spot FX OTC Trading
OTC (Over-the-Counter) spot FX trading is different than traditional trading on the stock market, for example, and it is imperative that you understand just how quickly the market can move. Currencies can stay in stasis, or relatively so or they can gain or lose on a moment’s notice, depending on geopolitical factors that can set the market in a panic. Understanding how rapidly a currency can gain or lose is something the new trader needs to master.
2) Too Many Platforms to Master at Once
When you begin trading Forex, there are a number of platforms you really should understand. Some online brokers will give you simple daily charts to use as a guide while others give you much more in-depth market analysis to work with. Then there are platforms that also give you other information such as how much you have in your account, what your profits are in real time, losses subtracted in real time and other features which a basic platform wouldn’t give. A more in-depth trading platform may also give you a running feed on global news so you can better ‘guess’ where your pairs are going based on those geopolitical factors which absolutely do affect currencies.
3) A Chance to Get Your Feet Wet without Really Investing
Most Forex brokers online will provide various practice, or demo, accounts which new traders can work with. You are given a certain amount of ‘cash’ to play with. Much like Monopoly money, it isn’t real currency and you won’t really earn (or lose!) anything, but you can watch the markets and more or less pretend like you are really trading. For example, Forex Australia allows you to set up a practice account where you can start trading in real time, but not with real money. You get a chance to work with their platform and master it before putting your own money into play.
Because you are going to be trading in a market that moves so rapidly, it is imperative that you learn to move just as quickly. These three reasons to practice before jumping into Forex should give you enough information to understand just how important it is to learn so that you can earn. Once you feel you can move as quickly as the markets, it’s time to wager for real. Good luck and get that practice in! It is one essential element of Forex many brokers will not tell you about. Use it or you lose it. A simple formula to live by in the world of Forex.