The trading of currency is something that appeals to many people, especially if there’s a profit to be made. However, it’s not as simple as buying some currency and then reselling for a profit, as there are other factors that can determine as to what the outcome is.
Everyone has to take their first steps into the world of investing at one point or another, whether its using Elliott Wave Theory or other methodologies, but that doesn’t mean we should look to run before we can walk.
Many people will be keen to make a profit when it comes to forex trading, but this shouldn’t mean we have to make a series of losses along the way.
Profit Is Never Guaranteed
One of the major misconceptions of forex trading is that you can become a millionaire with the week. The truth is that trading in forex is just like any other form of investment, in that you put your money at risk each time you make an investment.
This isn’t to say that there aren’t rewards available to you, as thousands of people have found forex trading to be very profitable, but it’s important that we approach forex trading with clarity.
The forex exchange rate changes frequently, and it’s not unusual to see currencies listed in four decimal places. You may hear changes in the exchange rate referred to as PIPs, which is an acronym for ‘price in points’ So if an exchange rate of 1.501 has risen five PIPs, the updated rate would be 1.506.
Understanding Currency Pairs
Whether you’re new to investing or you’ve had some experience, you will find that currencies are traded in pairs. The first currency symbol in the pair is known as the base currency. For example, if EUR/USD was given an exchange rate of 1.1431, then one euro would equate to 1.1431 Euros.
Should the base currency rise, then this shows will mean a rise in value. This will also show that the paired currency is dropping in value.
Long-Term or Short-Term Investing?
When approaching the world of forex trading for the first time, it can be difficult to ascertain which strategy to use. While everyone will have a preference, those looking to make an investment for the first time with minimum funds will probably be better suited to a long-term investment.
The reason for this is because short-term investments can last mere hours, which can mean more work on your behalf. If you’re happy with this, then there’s no reason as to why you shouldn’t embrace it. However, as the profit margins will be relatively low for a small investment, the man hours spent staring at a screen don’t really pay off.
However, patience is a virtue, and you’ll soon become comfortable with the forex trading industry and how different commodities are affected by different factors.
Once you have a better understanding of forex trading, you will be in a better position to widen the profit margin, but in the early days, it should be more about learning how investing works as opposed to making a profit with money we may not have.
Don’t Over Complicate the Process
When making investments for the first time, it’s easy to assume that you need a slew of tools at your disposal, but as long as you know how to use one or two, then there’s no reason why you shouldn’t be able to make some headway in the forex industry.
One common investment can be software that integrates the Elliot Wave Theory into modern-day trading. This software effectively simplifies the theory introduced by Ralph Nelson Elliot in the early 1920’s that focuses on cycles and market trends.
There will be many versions of such software online, and there is no one-size-fits-all solution, it’s merely a case of finding a platform that work for you. If you’re a little spoilt for choice, then it may be a good idea to see if there are any free trial that you can make use of.
Consider Practicing with a Demo Account
People learn in different ways. While some may be able to look at a series of instructions and follow them to the letter, some learn more from the mistakes they make.
When you’re dealing with real-life currency, there isn’t much room for error, but what other option is there when it comes to learning the ropes?
When looking at brokers, it can be wise to consider an option that offers the use of a ‘demo account,’ which effectively emulates real-life trading using dummy funds. While you won’t be able to take advantage of any profit you make, it does mean that your funds aren’t at risk during the early days of trading.
Once you get a feel for forex trading and the way it works, then you can easily switch over to your real funds and enjoy the benefits.
Always Make Notes
When you start a new job or educational course, you tend to take note. For some people, this means a point of reference, whereas others can remember more by writing it down.
Although the process of forex trading seems relatively black-and-white on the surface, there can be much more that lies beneath.
Although there are many reference points available to you online, there’s no real experience like your own, and who knows, you my even find a few tips of your own that you can share with others.
When trading in forex, the first steps can be a little worrying and turbulent, but you will soon find that you’re able to adapt quickly, and be buying and selling foreign exchange with relative ease.