Forex, short for Foreign Exchange, is currently a hot topic in the market. Millions of people are trading forex daily and profiting from it. The market of forex is huge and filled with opportunities. But it is also filled with risks. The risk of losing your investment in forex trading is over 50%. But if you know the basics and have enough experience, you can significantly reduce this risk and make a good amount of money from it. But how would a newcomer learn about forex trading? Today we will show you how to learn forex trading. So, without any further ado, let’s dive in!
Steps in learning forex trade
Getting your mind ready to learn forex trading
The first and foremost step in forex trading is to make your mind ready. Forex trading is not to be taken lightly. It requires your commitment and consistency. If you are thinking of learning forex trading for fun, you better not go for it.
When you start to learn Forex trading involves real money. So, you should be committed. How committed are we talking? Dedicate time daily. Take a moment to think everything through. You need to match your forex trading style with your regular life. Are you a job holder or a business owner? How much time can you give behind forex trading? Can you do it regularly? If you can, fix the time of the day or night. Treat that the way you would a professional meeting. If you can do that, then you are ready for learning forex trading.
Learn from the beginning
Forex trading in real life is very different from what you usually read in books. So, to completely understand it, you need to learn from scratch. You should start with the basics. What are pips and leverage? What factors affect the market? What are brokers? What is stop-loss? Which indicator helps in which situations? Should I use ECN brokers? etc.
If you skip these basics and learn the other steps, it won’t turn out well. You will waste your time and you will be embarrassed to ask questions about it at that stage. So, it’s better to learn all the basics first and then learn the other functionalities.
Know your risks
As we said earlier, Forex trading is very risky. The forex market is affected by many economical and technical factors. Unpredicted news like the US imposing a ban on Chinese products can significantly affect the market. Seasonal changes can also cause a dramatic shift in the forex price curve. You have to be highly knowledgeable and understandable to deal with these risks.
The risk of losing money in forex trading is over 50%. Some may think that it can be avoided with stop-loss. But it is not that easy. Suppose, you have applied a 50% stop-loss on your trade. If things went wrong and the market rates fell, your loss will stop at 50%. But to make up for that 50% loss, you need to work hard and invest more time. It may take a year or two to cover up that loss and reach breakeven.
These risks are no child’s play. So, you should have a full understanding of what you are getting into with forex trading.
Select your time frame
To learn Forex trading can be done in days or months and even years, You need to pick the right time frame. If you are a busy person and can only check the forex chart once or twice a day, you should go for the four-hour trading period. If you can afford to check it more frequently, you should then look for more short-term trading periods. It all depends on your time availability. Based on your time frame, you will have to pick the right trading strategy.
Pick and learn a strategy
After learning all the basics and determining your planning period, it is time for picking the perfect strategy. If you have selected a short-term plan, then you should pick a day to learn forex trading strategy, like swing trading or trend trading. If you are a free person and can dedicate up to 8 hours continuously to forex trading every day, you can go with forex scalping. But if you have decided on a long-term plan, you can try a position trading strategy. It will let you throw off all the heavy loads of price noise.
Whichever strategy you pick, start with only one and develop it for the next few months. Then if you think you are mature enough, try a different strategy. Maybe you will come up with your own trading strategy by mashing up a few strategies.
Test and verify your strategies
After practicing and developing your skills with a strategy, it is time to test it. The safest and effective way to test your skills is with a demo account. Sign up in a forex broker that allows demo accounts and start testing your skills. If you have come up with your own trade strategy, test them. Not everything will turn out well. So, if there are any errors in your strategy, you will find them with the demo account.
Take notes of them and come up with solutions for fixing them. After fixing your strategy, it’s time to recheck and verify if they work well or not. Repeat this circle to perfect your strategy and eliminate all potential mistakes.
Structure/ Organize everything
Learning forex trading is a long journey. It is very easy to get lost in this journey and mess up everything you learned. To avoid that, keep a diary/ journal. Note everything you learned and go through them regularly to keep yourself on track. That is basically how you will learn and develop yourself in forex trading.
Final Verdict in learning forex trading
So, these are the basic steps of learning forex trading. Needless to say, commitment is the most important thing. If you want to learn forex trading, you have to give your 100% commitment and see it to the end. It is a long journey. It can take up to 8-12 months or even more to completely learn and master forex trading.