Kickstart Your Forex Trading Journey In 6 Simple Steps

Taking the very first step is the hardest part of doing something. Especially when you don’t have any prior experience, which makes you reluctant to start taking action. This is a phase that all beginners go through in the forex market as the risk of trading can never be underestimated. It will take a good amount of time to learn about the trading process and you need a sound strategy to stay strong amidst the atrocities and challenges in your trading journey. However, you can make an easier entry to the forex world by investing in MAM/PAMM accounts where professional traders will manage your funds to help you generate a decent income regularly.

This innovative solution is ideal for those who want to depend on an expert trader to minimise the risk and maximise the rewards with minimal effort on their part. In this article, you can read about the 6 simple steps to kickstart your forex trading journey, whether you want to indulge in self-trading or take the simple route with managed accounts.  

1. Study the Basics and meaning of the Forex Terms

Just like any other profession, forex trading also requires a profound understanding of the basics that are not known to everyone. When you start taking your very first lessons about forex, you will find a lot of new words that you haven’t heard before. You need to understand what technical terms mean to comprehend complex concepts later on. But the complexity of a subject will reduce as you expand your knowledge about it and the same thing applies to forex trading.

You might feel a bit lost when you try to grasp the theory and logic behind long and short positions. Terms like currency pairs, pips, spreads, lot size, leverage and margin are not hard to memorise but it will take a while to get familiar with them. Once you spend enough time gathering information about the forex market, you will be able to understand the relevance of these terms and use them with ease. So, make your foundation strong by educating yourself about the forex market.

2. Pick the currency pairs that you want to trade

Forex trading is done by taking a position to profit from the potential price movements in a currency pair of your choice. The pair consists of 2 different currencies and the price depends on the value of the first currency when it is compared to the second currency. The price of the EUR/USD pair is decided by looking at the exchange rate of the Euro against the USD. Here Euro is the base currency and the USD is the quoted currency. There are a lot of different currency pairs in the forex market and you must pick the ones that suit your trading goals and risk tolerance.

Major pairs that have the combination of USD with other major currencies are the most traded pairs due to low risk. Due to this, the spreads are also tighter as the liquidity is high. Minor or cross pairs are also formed of major currencies but don’t have USD. They are a little more volatile with slightly higher spreads. Exotic pairs are extremely volatile with low liquidity and highest spreads which increases the risk. So, you need to select your currency pairs after considering your trading style, strategy and risk appetite along with the trading cost.

3. Learn how to use the forex calculators

One thing that leads to losses in forex trading is miscalculations and you can avoid manual errors in the calculation process by using forex calculators. These trading calculators are similar to normal calculators but they are designed to find values that are needed for making trading decisions. Different types of automated forex calculators give instant results by performing various functions like currency conversion, pip value calculations, position size calculations, etc.

You can also find profit calculators, margin calculators and spread calculators. Besides this, some trading calculators like pivot point calculators and Fibonacci calculators can be utilised for technical analysis too. They surely boost your speed and make things easier by giving accurate data real quickly. You just need to find platforms that provide free online calculators while applying real-time exchange rates to convert the metrics into your preferred currency for convenience.

4. Select a Reliable Forex Broker

In order to get the best results from trading, you need to select a reliable broker. The broker will be there to provide technological support and market access along with real-time price data available to you for carrying out market analysis. The trading conditions will also be dependent on the broker and you should filter your options after checking the regulatory status and reviews. Fast execution of trades with 24/5 customer support is important for a seamless trading experience.

There are two types of brokers that you can find based on their mode of execution. There are market maker brokers that execute orders by acting as counterparties to the orders that you place. The second category is STP/ECN brokers that provide No Dealing Desk execution which makes them more transparent. The spread of ECN brokers tends to be tighter which makes them a popular choice among traders. So, consider all the aspects and choose a trusted broker that caters to your needs.  

5. Deciding the Type of Account

After finalising your broker, you need to decide the type of trading account that will work for you. To trade yourself, you can choose a standard or regular account, which is the most popular account type. If you want to trade with a small amount of capital, you can sign up for a micro account and trade with smaller lot sizes. Managed forex accounts can also be an option to minimise the risk as you can diversify your investments by allocating funds to different account managers.

You can consider both PAMM and MAM accounts for investing and earning without trading yourself. PAMM accounts are suitable for beginners who just want to earn passive income while MAM accounts allow you to manage your own risk by setting some conditions that the manager has to keep in mind while trading with your funds. This can be about leverage ratio or other aspects. You can invest in managed accounts while you are still learning to trade yourself.

6. Demo Trading

Demo trading is a step that you should never skip regardless of the account type you choose. Demo accounts are provided by almost all brokers and you can use it to freely practise without the fear of losing money. Because the broker gives you virtual funds the results you get on a demo account are only for keeping it realistic. This allows you to test your strategies in real-time market conditions and develop your skills in a risk-free environment.  

Final Thoughts

To summarise, there are a lot of important decisions that you need to make before venturing into forex trading. The choices you make as a trader will play a key role in your success. Being a beginner, you need to set realistic goals and take one step at a time without risking a lot.