Forex Basics

If You Don’t Know THIS About Forex, You’re In Big Trouble!

The forex market is known for providing traders with favorable conditions, including 24 hours of market access and high levels of liquidity that provide a great number of trading opportunities. If you want to make the most of the opportunities that the forex market provides, you’ll need to approach the market with the right level of skill and confidence, while making smart financial decisions that limit your overall risk along the way. If you want to start out off on the right foot with a competitive edge in the market, it’s important to know these three key ideas.

The Forex Market is the Best Place to Practice Your Trading Skills

Practice is one of the most important factors that will take you from a novice trader to a professional level investor. Fortunately, the forex market is filled with practice opportunities that beginners can take advantage of thanks to the high liquidity and 24-hour market access we mentioned earlier. Sure, you can get in some practice on a demo account beforehand, but it’s different when you’re practicing on a live account because real money is on the line. This introduces emotions and a sense of danger that just isn’t present when you’re trading on a demo, even if you take your results seriously.


Another plus is the chance to test your strategy using micro-sized trades, as long as this option is available through your broker. This will allow you to test more entries in a shorter amount of time, especially if you were to use a shorter 5-minute chart. You’ll also risk less money trading with micro lots versus standard lots, meaning that there is still a financial risk present, but less pressure because you won’t lose much money if your strategy doesn’t work as well as you had hoped. 

With Forex, You Can Start Small and Work Your Way Up Over Time

Contrary to what some believe, you can actually open a trading account with a small investment through most brokers. Some companies will even allow you to open an account with just $1-10. You’ll also find many different account options available through different brokers, including micro/mini, standard, VIP, and other account options. Micro accounts are one of the best options for beginners because they support low entry-level deposit barriers and allow you to trade with smaller lot sizes, thus allowing you to test your system with a scaled-down level of risk. 

Many brokers offer tier-based accounts or will allow you to upgrade your account to a standard level or better once you’re ready. This means there’s no reason why you can’t start small with an entry-level mini or micro account, gain confidence, and test your strategy with minimized risk, and then move on to better account types when you’re ready. If you take advantage of this opportunity, you’ll lose less money along the way while increasing your confidence in your trading plan. You can also keep a trading journal in order to identify and make any changes to your plan that are needed before you start to risk more of your hard-earned money. 

You Can Decide How Much to Risk on Each Trade

It’s true that forex trading carries some level of risk, however, traders have a lot of control over the amount of money that they could actually lose. If you don’t want to risk a lot of money, you don’t have to. In fact, it’s better to test new strategies with a low level of risk at first until you have the chance to see that there aren’t any flaws in your system. 

There are a few different ways that you can control your risk level, like using a smaller amount of leverage, using a stop loss, trailing stop, and take profit for each trade, and managing your position sizes. If you’re wondering just how much to risk on each trade, it’s helpful to know that many professionals recommend risking no more than 1% of your total account balance per trade. In the end, you should remember to never invest more money than you can afford to lose. If you need to, you can also adjust the amount you risk based on other factors, for example, increasing your position size if you feel confident that the trade will be a winner or risking less when you aren’t completely sure about entering a trade. 

The forex market offers an endless amount of opportunities for investors that know how to manage their money and make smart financial decisions. If you keep these three key ideas in mind, you’ll be on the right path to making money in the competitive industry of forex trading. 


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