This guide to forex trading for beginners focuses on the myths that you should ignore when you think about starting your trading career.
In a recent article, we talked about how you can successfully use forex trading to supplement your income. Provided you know what you are doing, this is certainly true. Still, you do need to be mindful. In this article, we will list some of the misconceptions that linger around trading. You believe them at your peril, as you may lose money because of them.
Forex trading for beginners: Common trading myths
Myth #1: It’s about making big money
This is true to an extent, but as you are putting down your own money in forex trading for beginners to begin trading in the first place, your priority is not to make money, but to protect the capital you have already put down. You need to strategize, knowing where and when to spend your money. You should bide your time in forex trading for beginners, not making a move in the trading market without a little research. You have to defeat the temptation to battle other traders in the market. In short, you need to look after your money, and while you will take risks, you still need to look for those opportunities that are almost guaranteed to help you win big, instead of jumping into something blindly. Only then will you start bringing in the money.
Myth #2: You need to be good at maths
The key to making money in forex trading for beginners is not only about using complicated algorithms to predict the market, so don’t assume you need to be a hotshot with numbers. You can make use of the online trading software provided by Algo Terminal to do this for you if maths really isn’t your thing. To be a successful trader, you need to rely on your gut instincts more than anything, and while logic should play a part too, you don’t want to spend too much time over-thinking when your gut is telling you what you need to be doing. You may miss out on making money if you do.
Myth #3: You need to have a lot of money to make money
Not true at all, as a successful strategy, forex trading for beginners can begin with a small pot of cash and still see it increase. In fact, those with a large capital can quickly lose it if they make the wrong move, so it doesn’t matter what your initial outlay is. Especially if you are new to the trading business, the key is to do as we have said already: be careful with what you do have and preserve it at all costs. For this reason, you shouldn’t blow all your money on a trade. Always keep some back just in case disaster strikes. While trading can be very profitable, it’s not worth going bankrupt over.
Myth #4: Trading is basically gambling
This isn’t necessarily true, despite the warnings of your nearest and dearest to steer clear. Certainly, if you don’t know what you are doing in forex trading for beginners, then yes, you are kind of gambling your money away. As we said, you do need to do some research before trading your money, such as getting an understanding of the market, and through speaking to those people more experienced than you. In gambling, the odds aren’t in your favour, but with trading, you can educate yourself to better eliminate the risks involved. So, unlike those slot machines at the casino, you aren’t gambling. Still, some principles are the same. You should limit your budget so you don’t cripple your bank fund, and it’s better to quit while you’re ahead if you are at all unsure about what you are doing.
Forex trading for beginners: What exactly is forex trading?
With foreign exchange trading (English “Foreign Exchange” or for short forex, FX), investors rely on rising or falling exchange rates . The exchange rate determines how much one currency is needed to buy another currency. The price changes are indicated in forex trading in pips and the unit of the trading amount is the lot. Foreign exchange deals are made when banks, trading companies, central banks, funds and private investors buy, sell, exchange and speculate on currencies.
Until the turn of the millennium, global currency trading was only available to professionals, i.e. banks and institutional investors such as hedge funds . In the meantime, however, private investors can also participate in the trillion-dollar business.
The exchange rates are determined every second by the respective supply and demand ratio. But interest rate decisions, political processes, assassinations and accidents can also influence exchange rates. It can also happen that the exchange ratio of two currencies is determined using a third currency (cross rate or cross rate). This also has an impact on the exchange rate.
Forex trading for beginners: How can you make money ?
An example , very simplified: you buy a EUR / USD at an exchange rate of $ 1.1355 and sell the pair at 1.1389 a few hours later. Then you made a profit of $ 0.0034, or 0.3 percent. That is probably more than what the bank is currently paying you in interest each year.
The chances of profit and the risk of loss in currency trading become clear when you know that trades can also be made with a leverage of up to 500 . In this way you can multiply your yield – but also lever it down a lot (more on this below). But be careful: before you get involved in forex trading, you should have some experience. Basically: Exchange rates are subject to unpredictable fluctuations, which can also take on considerable proportions during the course of the day.
Who offers it?
Foreign currencies are not traded via a central exchange, but exclusively electronically on the so-called OTC market (“Over the Counter”). While the banks are networked with one another, private traders need a forex account in order to trade forex . Specialized forex brokers offer their intermediary services with trading platforms.
Tip: Choose an FX broker that is regulated. Black sheep are sometimes also hiding among foreign exchange brokers.
Finally
We hope we have separated some of the fact from the fiction for forex trading for beginners, so get those myths out of your head immediately. Continue your research, benefit from the experience of others, and then begin trading better informed and able to better your odds at making money.
