Just as you need to follow some simple rules and strategies when you're betting on sports, the same is true in the forex world. So, before we leave you to set up your first forex trading account and make some cash, here are four tips you need to keep in mind before you ante up:
1. Focus on the Short Term and Don't Get Distracted by the Bigger Picture
If you are an intraday trader trying to make money, the long-term position of a currency doesn't really matter to you. When you're speculating on the value of a currency pair on day-to-day basis, it's a fact that the market will fluctuate several times in the course of the day. With this in mind, your job is to pick a point in time when it is more likely to go up or down and leave it at that.
Basically, you just have to be involved in the action for long enough to make a profit. Being "right" in the overall outcome of any market can be an expensive luxury. If you can stay active and dip in and out enough times throughout the day, all you have to do is be right more times than you're wrong to carve out a daily profit.
2. Why Are You Picking that Pair?
The reality of forex trading is that people are attracted to movement. When you see a currency pair moving, it's tempting to think "that's an active market and one I should get involved in". While this isn't a mistake, you need to ask yourself the question: why is this pair moving?
To answer this question, look at the news and current events; think about what is moving the markets. Take Donald Trump's presidency, for example, How has the media portrayed it, how are people reacting to it? These things will affect the price of a currency and you need to understand these factors before you ante up. Movement is great, but you have to know why something is moving so you can decide whether it's worth investing in and, more importantly, whether you should buy or sell.
3. What Are You Trying to Achieve?
The goal of online FX trading is to make money, but exactly how much do you want to make? How much time do you want to invest in the process? Is the time spent trading worth the return you're making? Yes, you want to make money, but how do you get to that point and is it worth it? If you don't know what you're really trying to achieve in terms of the grand scheme of things, you need to get this in order before you start trading.
4. What Floats Your Boat?
Forex trading online is like marmite: you either love it or love to hate it. To really get the most out of it, you need to put in the hours and learn all you can about it. From the basics of trading to the daily movements of the markets, you need to look at everything in detail to ensure you get the most out of your time online.
Indeed, you wouldn't load up a sports betting site and start placing wagers on random football teams without looking at some stats. The same is true in the FX world. Simply choosing a currency pair because it's moving won't get your bankroll moving in the right direction. To really profit from the process you need to get involved in it and, importantly, find out what makes you tick.
Maybe you love analysing the hardcore data such as previous market movements and prices. Maybe you're someone that enjoys reading the news and making predictions based on these facts. The method you prefer is the one you should use to inform your decisions. At the end of the day, online FX trading can be tricky. However, if you put the time in and use your own skills to your advantage, you should find that turning a profit is not only possible, but highly enjoyable.