If you've looked into trading forex online and you've seen an opportunity to make money, you are probably wondering what the best way to learn forex trading might be.
First of all, let me say that I'm an advocate of getting a forex education. You can find a lot of information on forex here on this site. You should spend some time reading up on how forex trading works, making forex trades , active forex trading times , etc. The second thing I'll say is nothing beats experience, if you want to learn forex trading, it's the best way. When you first start out, you should open a forex demo account and try out some demo trading. It will give you a good technical foundation on the mechanics of making forex trades and get used to using a trading platform.
A fundamental thing I have learned through experience, and no amount of books or talking to other traders could teach me this, was the value of getting out of the market when your reason for getting into a trade was invalidated. It is very easy for traders to think the market will come back around in their favor.
You would be surprised how many traders fall prey to this trap and are amazed and heartbroken when the market only presses further against the direction of the original trade. The famous and painfully true statement from John Maynard Keynes states, "The market can stay irrational, longer than you can stay solvent.
The downfall of learning forex trading by demo account alone is that you don't get to experience what it's like to have your hard earned money on the line. What I recommend for this, is that you open a micro forex trading account or an account with a variable trade size broker that will allow you to make small trades. Trading small will allow you to put your money on the line, but be of little risk if you make mistakes or lose money.
This will teach you far more than anything that you can read on a site, book, or forex trading forum and gives an entirely new angle to anything that you'll learn while trading on a demo account. Along with that of course, comes the need to understand what you're trading.
They usually will use high leverage and trade randomly in both directions, usually leading to loss of money. Understanding the currencies that you buy and sell makes a big difference. For example, a currency may be bouncing upward after a large fall and encourage inexperienced traders to "try to catch the bottom.
Would you buy something like that? Probably not, this is why you need to know and understand what you buy and sell. Currency trading is great because you can use leverage, and there are so many different currency pairs to trade. It doesn't mean, however, that you need to trade them all. It's better to pick a few that have no relation and focus on those. Having only a few will make it easy to keep up with economic news for the countries involved, and you'll be able to get a sense of the rhythm of the currencies involved.
After you've been trading with a small live account for awhile and you have a sense of what you're doing, it's ok to deposit more money and make your account bigger.
Knowing what you're doing boils down to getting rid of your bad habits and gaining some control over your emotions. If you can do that, you can be successful trading forex. Managing risk and managing your emotions goes hand in hand. When we feel emotional, greedy or fearful, that is when we make mistakes with risk, and it's what causes failure. When you look at a trading chart, you should only see potential, or see nothing; it shouldn't be a matter of excitement.
If pulling the trigger on a trade feels emotional in any way, you should re-evaluate what you're doing to trade. If you've found this article helpful, or you have any comments you can follow me on Facebook. Updated November 17, The Importance of Getting Educated First of all, let me say that I'm an advocate of getting a forex education.More...