More and more people are showing interest in starting forex trading. However, not many know the best way to become a profitable forex trader. So if you too have the question’ how to start forex trading in 2022 and earn good profits, this article is for you.
Table of Contents
What is forex trading?
Forex trading is the act of trading foreign currencies. This is the world’s largest and most liquid financial market, and it does forex trading by creating currency pairs. The forex market is active 24/5 and has no centralized marketplace making it one of the more flexible trading paths available. Since you now know what forex trading is, let’s see why you should start it.
Why start forex trading?
If you are wondering how to start forex trading, the first question you need to find solid answers to is why forex trading? Everything has pros and cons, and so does Forex Trading. However, there are many benefits that come with it that make this one of the most popular trading means in the world. Let’s look at a few of them.
- Needs a small capital: Forex is a trading venture that does not need a large capital to start. Traders can spend a small amount to open an account and start trading on it. If you are someone who is still wondering how to start forex trading, look for a platform with free demo accounts like Icon FX.
- Trade when you need: The flexibility that forex trading allows the traders to enjoy is unmatched. The marketplace where forex is traded is open 24/5, and users can whenever they feel like it. This makes it a lot easier for part-time traders to be flexible with the little time they have.
- Better liquidity: A large number of traders allows them to match with more suitable traders and find the fair prices that they seek. This removes any risk of big players manipulating the price and provides greater liquidity. Which is why as of now, the forex market is among the most liquid financial markets.
- Profitability: Forex has the potential to make a trader into a millionaire if done right. The high profitability of forex comes with well-timed and educated trades. High volatility is the reason behind this and keep in mind that it is a double-edged sword. In addition, high leverage available within forex trading platforms also allows traders to make big bucks by spending a little.
- Easy to get started: Trading forex is a task that traders of any calibre can take part in. Even if you are a beginner in the scene, you can start forex trading by trying out demo accounts or trading in small quantities to lessen the risk. Of course, if you are an expert in the field, you have more advantages over other traders.
How to start Forex Trading?
If you are looking for a place to start your forex trading endeavour, you came to the right place. Below is a step-by-step guide that covers all questions you face when looking into how to start forex trading.
Step 1: Connect to the internet
An internet connection is a must-have if you want to start forex trading. Connect the device that you are using, may it be a computer or a mobile device, to the internet. A connection with minimal interruptions is preferred as a connection loss while trading can cost you significantly.
Step 2: Find a broker
Without a forex broker you can’t get into forex trading. So first you need to find a broker for you. But this is way simpler than finding a stock broker as there are many forex brokers out there that you can sign up with online.
Step 3: Create a trading account
A trading account is something necessary when doing forex trading. Create a trading account and fund it according to the trades that you are willing to take part in. Different brokers have different ways to fund trading accounts. Make sure to find a broker with a funding method that you are comfortable with.
Step 4: Start using a forex trading platform
The trading platform is where all the trading activity takes place. Each broker comes with a unique trading platform, and you will have to use the one that you think is better. These also come in web, mobile, MT4, and MT5 versions.
Step 5: Start your forex trading career
When you are done with all of the above steps, all you have to do is start trading. If you are unsure about anything, use a demo account until you become familiar with the process.
Key factors to keep in mind to start forex trading on the right foot
Anyone can become a forex trader, but to become a good one, there are few requirements that you must complete. They are,
- Good Education: The difference between gambling and trading is defined by one’s ability to control the risk. If you don’t know what you are doing, you will lose all your money even before you know it. Forex trading requires complex analysis. This is why you need to learn Forex trading first before doing any actual trades. If you want to become a profitable trader you need to make solid trades that end up being profitable. Luckily, there are ways you can learn about Forex Trading, one of being self-learning.
- Good exchange: A good exchange is a must-have for any trader willing to become successful. Low fees/spread, high leverage, and being regulated are some common features of a good exchange. Icon FX is a great example for this.
- Enough Experience: Experience will play a huge role in your forex trading. With enough experience, traders can place well-calculated trades to always get positive results. If you want to develop your skills risk-free, use a demo account. The demo account in Icon FX allows traders to start trading with up to $100 000, 24/5.
- Risk management: This is a very volatile field that revolves around trading with risks. Because of this high-risk involvement, it’s always better to have risk management strategies. So you are able to ensure your financial safety.
Best strategies to start Forex Trading
When it comes to forex trading, there are lots of strategies that can help the trader to maximize their profits. Let’s take a quick look at some of the most common trading strategies when starting forex trading.
- Price action trading: Trading according to the price movements of a certain instrument is the idea behind this strategy.
- Range trading strategy: Trading according to the trading instruments that are consolidating in a certain range. The range can be from 20pips to several hundred pips.
- Trend trading strategy: This strategy involves identifying trade opportunities in the direction of the trend. Most of the time, trends will raise the value of certain assets.
- Position trading: Capturing profits from long-term trend moves while ignoring the short-term trends is the goal of the position trading strategy.
- Day trading strategy: Trading currencies on an intraday basis, using shorter-term charts is how to start forex trading with a day trading strategy.
- Scalping strategy: Taking advantage of small intraday price moves even with 5pip shares is the idea behind this strategy. Trades belonging to this category usually happen within seconds to minutes.
- Swing trading: Holding their positions open for multiple days is the key to this strategy. This can take up to a few weeks, and traders of this kind need a lot of patience.
- Carry trade strategy: This strategy is making a profit from the difference in interest between the two different currencies that make up a currency pair.
- Breakout strategy: Entering a trade as soon as the price manages to break out of its range is the way to go about this strategy.
- News trading: Trying to profit from a market move that has been triggered by a major news event is the key behind this method.
- Retracement trading: This involves trying to capitalize on short-term price reversals within a major price trend while trading in the direction of the trend.
- Grid trading: Making multiple orders above and below a certain price to benefit from volatility is a grid trading strategy in simple terms.
How to choose the best strategy to start Forex Trading?
As you can see, there are a number of ways that you can follow when starting your forex trading career. Among them, you should select one that matches your requirements and master it. That way, you will have a better understanding of the market and the way it moves.
It’s better to learn and master at least three strategies since the market changes, and the same strategy won’t work all the time. A great way to test out your skills and strategies is by using a demo trading account. Virtual funds that you can use in the demo account will allow you to see what method suits you.
Forex Trading Analysis to use when starting forex trading.
Analyzing the forex market is a procedure that allows traders to determine whether to buy, sell, or hold a currency pair. The analyzing process is done in two ways, fundamental and technical.
Fundamental analysis involves looking at the impact of political, economic and social factors on the relative value of a currency. Technical analysis, on the other hand, involves poring over charts to identify patterns or trends.
Both of these types of analysis are necessary when making trades that can yield better results for the trader.
How to select the right exchange when starting forex trading?
Selecting the most suitable exchange to do your forex trading on is another important step in how to start forex trading. There are a few things that a good exchange has when compared to a bad one. Firstly, make sure the exchange in question follows regulatory compliances.
Then proceed to check the features it provides to the customers. Some common features of a good exchange are high leverage, large currency pair support, low commissions and spreads, minimal initial deposit, and ease of withdrawal and deposits.
Finally, see if they provide good trading platforms and come with good customer service. If the exchange in question has all of these, then it’s a potential candidate.
How much money do you need to start Forex trading?
Forex trading is an activity that you can start with even just $100. Even though your returns scale with the amount you deposit, a trade is still possible. The most important thing to keep in mind is that the amount you need to put in depends on the trading strategy that you follow.
When invested in an exchange with high leverage, you will be able to get better results with lower risk. Even with all of this, you won’t be able to make the best out of your funds without doing a proper forex analysis.
How to start forex trading risk-free?
The best way to start forex trading is by practising the craft on a demo account. Trading in a demo account with virtual currency will enable you to learn the ropes of each strategy that you are willing to master.
The most important part of this is that it’s all risk-free. Even if you make a mistake on a demo account, you will not lose any of your money as you are using virtual currency. You can still utilize a demo account even if you have a live one. Test your strategies on the demo account and if they see success, try them on the live account.
Frequently Asked Questions
You can start forex trading with $100 with some forex brokers. The most common amount that most brokers request is $1000.
First, select a currency pair and a broker and create an account in it. Then trade using a demo account until you are comfortable with your skill and move on to real trading.
Forex trading is an activity that even beginners with little experience can take part in. Even still, experienced traders will have an advantage over beginners with their knowledge.
Starting forex trading is something that anyone can take part in. When done correctly, forex trading can allow traders to earn a higher income by just doing a fraction of the work. When done conservatively with money management in mind, you can start forex trading with a small amount of money.
One important thing that you should keep in mind is that traders who earn big with forex worked hard at it too. While it is possible that you can earn an additional income with forex, if you want it to be your full-time job, you will have to put in a lot of work.
So follow the steps in this article, do your analysis, and do your research before getting into forex trading to see better results.