Many people nowadays are looking for a side project to supplement their income, and for them, Forex trading has become a popular option. People can start to trade Forex with $100 and make up to $10,000 in a year with the right strategy and mindset.
It might sound enticing, right?
And you may wonder, how to start forex trading for free? This article will guide you into becoming a successful trader.
What is Forex Trading?
Forex is short for foreign exchange. To put it simply, Forex is the global marketplace where nearly all currencies are traded for one another. It is one of the most liquid and volatile financial markets globally, with more than $6.5 trillion daily trades.
Its volatile, decentralized, and accessible nature and potential for immense profits draw in the likes of banks, businesses, financial institutions and retail traders worldwide. It is open 24 hours a day, 5 days a week.
How does Forex trading work?
Forex trading occurs when a buyer and a seller exchange a currency at an agreed price. Transactions are done directly in what is known as an over-the-counter (OTC) market. This market is run by a global network of banks with their trading centers in New York, London, Sydney, and Tokyo.
Forex traders, just like stockbrokers, try to speculate on fluctuating values of a pair of currencies to make a profit.
How to Become a Forex Trader?
You don’t need to have a lot of capital to trade in the Forex market, as you can always trade on margin. A few hundred dollars is enough for the average broker to open your account and start trading.
However, you need to consider a few things before you start trading seriously:
Get educated about Forex
It is essential to learn the basics of Forex trading to be a successful trader. There are plenty of videos, websites, courses, and books to learn from. They will teach you simple strategies you can use and also how to protect yourself if a trade does not go your way.
Choose a reputable Forex broker
It is crucial to use a reputable Forex broker to trade through as many fraud sites look to steal the hard-unearned money of the unwary. Always choose a company that has positive reviews and is licensed in order to avoid scams.
Practice before you start
Experience is the best education when it comes to trading. Using demo accounts with virtual currency to hone your skills might be the best way forward as you can get accustomed to how the market works, what strategies suit your goal, or just to get acquainted with the software.
Use a micro forex account
Even though demo accounts can give you the technical knowledge required to trade, for you to be a truly successful trader, you must learn to risk your own money. The best way to do so is to ease into actual trading through micro forex trading, limiting you to smaller trades.
Once you start using your own money, every loss impacts your finances; you end up learning to be more responsible while trading, which will help you in the long run.
Learn more about the currencies you trade
It is always beneficial for you to learn as much as you can about the currencies you trade, as many new traders tend to make risky trades on currencies they know little to nothing about to make a large profit.
However, more often than not, this results in losses, and even when there is a lucky break, it is usually not sustainable.
Risks of Forex trading
Since it is a volatile market with little oversight over your trades, there is always a risk of losing money when it does not go your way. Any form of emotion when it comes to trading can lead to trouble.
The most successful traders check their feelings at the door when they start trading. They treat losses as the cost of doing business and do not get emotionally invested.
Feeling greedy, fearful, or excited when trading leads to mistakes. If you feel emotional when you are about to commit to a trade, it is best to reevaluate why you are making the trade and regain an objective mindset.
Forex trading is definitely not for the faint of heart, as there can be extreme highs and lows in fortunes. The extreme volatility and uncertainty involved may not be everyone’s cup of tea.
However, if you have sound research, follow the right trends, and have a stoic disposition, forex trading can become a profitable journey.