Anyone with a little money and patience can become a Forex trader. However, the skill and patience required to become a successful or profitable trader involve limiting losses while identifying good trade set-ups with a positive risk: reward set-up. Despite the ease of getting into the business, there are a few steps you should follow. A hasty entrance into Forex trading can lead to the poorhouse very quickly.
Let's examine the steps for becoming a Forex trader.
Forex traders do not need to have a lot of capital to trade due to being able to trade on margin. The average Forex broker requires at least $300 to open an account and start trading. One good rule of thumb is to have at least $1,000 to open a mini account, preferably $2,000.
This number might sound a little high for beginners, but this will allow you to trade with a bit of a buffer in case of losses. You're not looking to risk the entire amount but rather just have a higher cushion so that you're not forced out of a trade, which can happen with smaller balances.
Using a Demo Account
A forex trading demo account is a trading account with monopoly money in it that is connected to the live market. Trades can be placed in real time and represent what would be true losses and gains if the money were real.
Before you put one penny on the line with trading, you'll need some practice. A demo account will give you the ability to practice trading without the pressure.
How to Practice FX Trading Before Trading Live
Aside from practicing, you may want to seek some forex trading advice and strategies from a forex trainer or forex books. As a trader, you will need to develop your own style and trading ideas, but in the beginning, it can be helpful to have some professional direction and recommendations. Forex is very daunting in the early days, and some guidance can really help.
How Trend Traders Find Profit Targets on Their Trade
Before you actually commit to live trading and money on the line, you should be able to profitably trade on your demo account or with paper trading. Your track record should be more than a few weeks, at least three months, preferably six months.
It will be difficult to refrain from trading after you make those first few profitable trades, but experience really counts in forex trading. It's something that you cannot work around. You have to get it the old-fashioned way: through hard work.
Are You on the Right Track With Your Trading?
After practicing for several months, doing a little training, and getting some forex education and becoming consistently profitable, it's time to start making live trades. You may find that it's a little different to have actual money on the line, but if you stick to the same practices you used to be profitable while trading the demo account, you will be successful.
The FX market gives you the opportunity to find trading opportunities around the clock on your schedule. Additionally, the start up capital is rather low and you can determine how much exposure or leverage you want on a trade, which gives you added flexibility.
Frequently Asked Questions (FAQs)
How do you start trading forex for free?
You can't start forex trading without any money, but you can start practicing with a demo account. Also known as "paper trading," these accounts can help you develop trading strategies while familiarizing yourself with the broker's software.
What time does the New York forex session start?
Forex trading takes place around the world, so forex traders aren't restricted by stock exchange hours in their local countries. Forex traders will refer to "sessions," or time windows when a particular market is most active. For New York, the forex market session is 8 a.m. through 5 p.m. EST.