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Published On: Mon, May 20th, 2019

Top 5 factors to consider before investing in Forex Trading

The foreign exchange has been the favorite financial market of many investors throughout the years and it can still boast with an unleveled popularity. There are plenty of reasons behind its notoriety, but the main one is the ability of this market to offer traders the means to make major profits with a relatively small investment. Of course, it isn’t a risk free activity, but once you get a handle on how it works – the rewards will be worth it!

photo/ Gerd Altmann

Read below the top 5 factors you need to consider before investing in this asset!

 

  • A professional trading environment is fundamental

 

This journey has a starting point – and that is the online broker you invest with. This is where you’ll keep your capital, this is where you’ll come back every day to enter and exit trades, and this is where you’ll define yourself and evolve as an investor. It’s a lot of pressure to put on just one platform, but the truth is, there are plenty of brokers fully-equipped to handle it. For instance, TradeLTD.com is one of those online brokerage platforms that make trading so easy and accessible. They offer you 5 account types to choose from, 3 trading platforms compatible with all formats (iOS, Android, Desktop), 24/5 professional customer support – and a comprehensive educational center – which you will be very thankful for as a beginner. When you embark in the forex adventure, the online broker you choose to invest with is the first and most important thing you need to consider, as it will determine the outcome of everything that follows.

 

  • Determination, practice, and discipline are three magic ingredients

 

The Forex market is overwhelming and intimidating. You won’t feel ready to face it in two days, weeks or even months – and that’s ok! The charts, the price action, the abundance of technical terms can’t be contained overnight. You need to be determined to learn and educate yourself to reach your goals. Practice is what will help you get there! Test strategies with a demo account; get familiar with the trading platform, the charts, the indicators and the other tools. Once you feel prepared, you can switch to a real account and trade with real money. Make education your priority, as well. Webinars, articles, tutorials or any other materials from trustworthy sources will work miracles on your skills and self-confidence.

 

  • Forex trading is not just a matter of luck

 

The Foreign Exchange market isn’t a video slot with a pretty story behind it, where luck is all that matters – it is a complex and dynamic financial market, which can be affected by a number of factors. You are basically “trading” on the idea of a currency’s performance against another, therefore, the correlations between the currency pair and its economic indicators, value, and mass-media presence must be taken into consideration before you open a position. Let’s take Brexit as an example. The UK vote to leave the European Union had a major impact on the British Pound (GBP), making it to reach its lowest levels since 1985. The political landscape of a country, its economic health and exchange rates will indicate you almost everything you need to know about a currency – so if you want to succeed, do your best to stay as informed and updated as possible!

 

  • A trading journal is the best mirror of your actions

 

It can be so easy to lose yourself in such an enormous and demanding financial market. Although it might sound like a cliché, an ordinary trading journal can save you from that. Grab a notebook or create a Word document and keep track of your trading activity. Try to write down every detail of your trades, such as the strategy you used, the research you made for the trade, how the market was looking that day, when you entered and exited the position and so on. If you fail, the notes will give you the opportunity to detect where it all went wrong and vice versa. This is an efficient way to learn from your own mistakes, but also from your progress.

 

  • Staying true to yourself will help you progress

 

“I’ve just had a successful trade, the odds are in my favor so I will open a new position” or “I’ve had two unsuccessful trades, the third one will surely be a charm!” – These are scenarios you will surely bump into. John Coates, a former Wall Street trader, believes that traders are naturally pre-wired to be less concerned with risk after winning and over-concerned with risk after losing.  Greed is the psychological trait most investors experience; and so is fear, panic, or guilt. Emotions will always stand in your way, they will make you lose control and overtrade. Staying true to yourself and being disciplined will help you see a clearer image of the market and your actions.  You can progress and evolve as an investor by simply being realistic and logical.

Conclusion

Succeeding in Forex trading depends on a series of factors, but the ones listed above are among the most important. Be determined to win and learn along the way from your own actions – they are all valuable lessons in such a competitive market.  

Author: Nick Parsons

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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