Trading forex online can be a life-changing endeavour. Forex experiences average daily trading volumes in excess of $6 trillion, and there are few barriers to entry into the most liquid financial market in the world. The 24-hour market also allows for maximum flexibility for literally any type of investor. Forex trading can be a lucrative source of income if you get it right.
Despite the many benefits, the fact is, there are also risks involved, so it is very important to be smart about how to start your online trading journey. Here are the key steps to follow:
- Education
The are many reasons why people fail in trading, but one of the major ones is a lack of proper education. Starting your trading career without proper education will almost always guarantee your failure. It is important to understand the basics of the forex market, market structure, what moves prices, money management, and even trading psychology. Having proper knowledge provides you with a good foundation upon which you can build a successful trading career.
- Build Your Trading Plan
You must consider forex trading as a business if you will be successful. As such, every serious business has to have a business plan. A trading plan is a detailed framework that will guide your decision-making when you are trading online. Trading always involves making decisions, and you must have a reliable framework upon which to rely so as to consistently make the best decisions in the markets. Your trading plan will constitute your trading strategy, which is simply a method you will use to determine when to enter and exit trades in the market in a manner that maximizes potential profits while simultaneously reducing risks. There are many types of strategies you can use, such as fundamental strategies or technical strategies that utilize different mathematical indicators or chart patterns. Based on your education, you should be able to find a strategy that suits your trading style and will help you realize your investment goals in a realistic manner.
A trading plan, however, goes beyond your trading strategies. It will also detail your overall investment goals and motivations; your approach to risk management; how to build your mental edge in the markets; journaling your trading activity; as well as when to tweak, improve, or even abandon some of your strategies. Overall, a good trading plan will ensure that you stay objective in your trading activity, as well as build the discipline required to sustain a successful trading career.
- Open a Demo Account with a Regulated Broker
After laying out a solid trading plan, it is time to implement it in a real market scenario. It is vital to first get started on a demo account where there is no risk of losing real money. However, most important is to open an account with a regulated broker because the long-term plan is to transition to a real account where you can trade for real profits. Demo accounts have full capabilities of live trading accounts, with the exception that they are funded with virtual funds.
Trading on a demo account is very important for beginners because it helps them understand all the detailed features of a platform. Some of the common forex platforms are MT4 and MT5. If you sign up with a broker, you can go to the MT5 download page, install the software, and choose the demo option. You can then navigate the app and understand the layout, order types, charting options, timeframes, indicator types, expert advisors, order types, and all other trading platform capabilities on desktop and mobile devices. A demo account will also give you the chance to develop, test, tweak and optimize different trading strategies without putting any money on the line. While a demo account is essentially a practice arena, it is prudent to trade as if it were a real one so as to properly understand the risks and rewards you are exposed to in the forex market.
- Deposit Funds and Start Trading
After practising on a demo account, you can transition into a real account and start trading for real profits. No matter your performance on a demo account, this will not be an easy move. Emotions will now creep in because real money will always be on the line whenever you open a trade. It is, therefore, recommended that you start with a minimal reasonable capital amount. Additionally, it is advisable that this transition is made only when you are certain that you have developed a working trading plan that will generate more profits than losses in the market. It is also important to ensure that you have understood how to maintain objectivity in the markets and not allow your subjective emotions to interfere with your trading activity.
Final Word
There are boundless opportunities in the forex market, but ultimate success can only be achieved when you approach trading the right way. Trading is a performance skill that requires continuous time and effort to build and sustain. There is no holy grail formula, but with discipline, dedication, and consistency, you can build a very successful long-term trading career.
