The foreign exchange market capped at around $5.1 trillion. It’s the largest market in the world, so if you want to make money, forex is a good place to start. Because the forex market has such high liquidity, you can buy and sell instantly. It’s perfect for traders and you don’t a job at an investment bank to get started.
Understanding how the forex market works is crucial. They say fools rush in. Nowhere is this more evident than in forex trading. It is possible to make serious money trading in forex, but if you are not careful, it’s also possible to lose all your trading capital; and a lot more besides. In this article, we are going to give you some useful safety tips for trading forex.
Is Forex Investing Safe?
Trading on the Forex markets is not, an “investment,” like you would invest in ETFs or bonds. Traditionally an investment is usually held “long-term” to increase in value over time due compounding interesting. Forex investing doesn’t follow this logic, as most trades are completed in minutes or hours. Therefore, trading Forex shouldn’t be in your long-term investment strategy and is very risky.
Legendary investor Warren Buffett defines investing as “… the process of laying out money now to receive more money in the future.” The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time.
When you trade forex, you’re actively putting your money at risk. However, if you learn how Forex works and tried and tested trading strategies you can come out ahead.
Learn How Forex Works
Want free money?
Inexperienced forex traders are far more likely to be burned than those who know what they are doing. Before you open a trading account, spend some time learning more about how forex works. Familiarise yourself with the terminology, such as stop losses, pips, going short and long, and more.
There is a ton of stuff to learn. Pick a currency pair and see how economic conditions affect it. Read the financial and political news, watch what happens in the forex markets, and get used to the way currencies fluctuate according to world events. Everything you learn will help you make smart decisions when you eventually begin trading.
While Forex may not be for all, if you’re can bare the risks involved in Forex trading then you should do the following:
1. Open a Demo Account
Open a demo account with a reputable forex broker, for example, forex broker easyMarkets. A demo account lets you practice your trading strategy without risking any money. Use the time to get used to the trading platform, the tools, and how it all works. There is no pressure on you to open a ‘live’ account, so take your time and develop a trading strategy that is consistently profitable.
When you feel confident that you know what you’re doing, you can upgrade to a full account. However, it is best to wait at least four months before you take that step.
2. Use the Right Forex Trading Tools
You will likely have a whole host of different trading tools at your disposal. Don’t go crazy and use all of them. It’s confusing and you won’t gain anything. Stick to the bare minimum at first. The basics include an economic calendar, a volatility indicator, and tools that protect your trading accounts, such as a stop loss and trailing stop.
Know how these tools work before you use them. This is where a practice account comes in useful. Trailing stops and stop losses will protect your forex trading account from huge losses, but only if you use them correctly.
3. Be Wary of Leverage
Leverage helps forex traders make big profits on a relatively small investment, but it also exposes you to big losses. Only open small positions, as this helps control the amount of leverage you’re using. Again, you can practice this with a demo account.
Lastly, keep a trading journal and record your activities. It will help you spot any positive trends or bad habits.
Start Trading Forex!
If you have come to the conclusion that you would like to invest your money. Then you should look into trading Forex from home.
You know that there are numerous ways to make money from home, but some will be more profitable than others.
Forex can be a very profitable venture. At the same time, you must understand that the risks can vary significantly. Many people prefer trading Forex and it is true that Forex offers a wealth of benefits that aren’t available with the alternatives.
If you wanted to start trading Forex from home, you can learn how to make money trading Forex by using this start trading Forex guide.
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It’s for beginning to advanced traders, Eremenko wants to show investors proof that trading on the Forex Markets can truly make you a profit.
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