Acquiring a forex education is an achievable goal, especially considering that information is just ready and waiting online for free. If you’re interested in becoming a forex trader, there’s a lot you’ll need to know before you get started.
On the other hand, if you’ve already begun trading, you may be feeling overwhelmed or thinking that you need to further your education for better results. As we mentioned, you can find everything you need online, but where does one begin? We’ve taken the time to highlight an education checklist so that every trader can start off with the best possibility of being successful. There’s a lot of ground to cover, but you shouldn’t have a problem if you follow our handy guide.
Start with the Basics
What are the basics of forex trading? Obviously, you’ll need to begin here, or you might become confused and you won’t be able to understand more complex articles or tutorials. Starting with a firm base knowledge of the most basic forex information will make the complicated stuff easier to understand later on. Here’s what you need to know:
- Terminology – this includes words and abbreviations that are commonly used in trading. Examples would be stoploss, NDD broker, leverage, and other phrases. You’ll need to be able to recognize most of these in order to fully understand other information out there, so this is the best place to start. Try Googling “forex glossary” to find a list.
- Understand what forex trading and the forex market actually is and how it works. This is usually outlined in beginner’s guides.
- Learn about brokerages. How they make their money, what you need to open an account with one, including a starting deposit, ID, proof of address document, and so on. Look for information about choosing a trustworthy brokerage and what fees are reasonable.
- Learn about the assets that can be traded, including currency pairs like EURUSD, minors, and exotics, CFDs, stocks, equities, and so on. You’ll need to know what drives the prices and which factors influence the market.
This involves navigating and using a trading platform, placing orders, exiting orders, different order types, calculating profit and loss, account balance, leverage, and margin. Anything that involves the physical act of trading would fall into this category.
- Watch video tutorials that explain how to navigate a chosen trading platform like MT4 or MT5, or whatever platform your broker supports.
- Know how to place and close orders. Many trading platforms will allow you to do this with one click.
- You’ll need to understand how margin works when placing a trade. Margin, leverage, and your account balance are all tied together.
- Try trading on a demo account for a more hands-on experience navigating on a trading platform and Google anything you have trouble with.
It’s been said that a trader is never better than his trading strategy. If yours is bad, then you aren’t going to make money. Here are a few common trading strategies:
- Scalping – This involves opening and closing many small trades and profiting from the small price changes. Over time, these profits add up.
- Day Trading – Day traders trade during the day and almost always exit their deals before the end of the trading day.
- Swing Trading – Swing traders allow their trades to stay open for days or weeks at a time.
There are so many strategies out there and each comes with its own advantages and disadvantages. You’ll want to put a lot of work into finding the strategy that will work best with the size of your investment, your trading account, the timing of when you can trade, and so on. You’ll also need to choose a strategy that you can wrap your head around, rather than choosing something that is too advanced for entry-level traders. Start simple and work your way up over time.
Learn About Risk-Management
There are several risks that forex traders are subjected to, including risks from using leverage that is too high, interest rate risks, and transaction risks. This is what you need to know:
- You may have read about leverage briefly, but you’ll need to do more in-depth research about how leverage works. Know that using high leverage often backfires on beginners and can easily wipe out your account. Be sure to choose a leverage option that matches your skill and risk tolerance.
- Learn about setting a stoploss and take-profit level. If your trade hits the stoploss, it will be closed by the system so that you don’t lose more than the specified amount. If your trade hits the take profit level, it will also be closed to avoid losing what you’ve just earned.
- Double-check to ensure that your trading plan accounts for managing risk.
- Read about other risk-management strategies online.
Research Trading Psychology
You might not realize how much of a role psychology can play when it comes to trading forex. Of course, simply pointing this out is enough to make one think about the possibilities. Traders often experience a “rollercoaster” of emotions, from feel-good happy emotions like excitement when one wins big, to disappointment, anxiety, and other stresses.
- Read articles about trading psychology, particularly the way that this affects your trades.
- Know that even happy emotions like excitement can have negative effects that can cause you to lose money.
- Research “analysis paralysis” – this is a common problem that is rooted in anxiety when trading.
- Read about the ways that negative emotions like stress, anxiety, fear, and greed can affect your trading habits.
- Look online for tips that can help you deal relieve stress if you need to. Know that it is okay to take a break from trading if you’re ever feeling overly emotional.
Spend Time on Miscellaneous Information
There is so much information online and some things may have made it to our list so far. This doesn’t mean that you should discount any of those articles, tutorials, or sources of information! As you move through your forex career, always keep open eyes for miscellaneous information that could help further your career. Reading about successful forex traders, trading tips, stories about other traders, etc. is always helpful.
The Bottom Line
Beginning your education as a forex trader can seem like an overwhelming task at first, however, this checklist is intended to help give a big picture of what you’ll need to know. Making sure that you have a good understanding of these concepts before you really get into trading is important, as it can help you to avoid losing your money in the beginning and potentially ending your career. Becoming more educated about forex trading is a great goal that everyone can get excited about. Just think of how successful you’ll be later on and how much of a jump start you’ll have on other beginners if you take learning the various forex concepts seriously.