So, you are currently living in the UK and want to be a forex trader? Great! Wanting to do something is always the first step, and wanting to trade forex opens up a lot of new opportunities for you. You will be joining a large number of people. In fact, there are currently over 400,000 active online traders in the UK, making it one of the leading financial online trading hubs in the world. If you are from the United Kingdom and starting with forex, you are joining a large community of like minded people with various skills and knowledge available to be shared.
The first thing that you need to do is to get a basic knowledge of what forex actually is. The sad truth is that a lot of people are starting to trade without actually understanding what it is that they are trading or how it actually works, so that is going to be our first port of call here. The interesting fact is that even without doing any reading, you have probably experienced something similar to forex trading at some point in your life, such as when you go on holiday, you are exchanging one currency for another, that in a sense is exactly what trading on the forex markets is.
The main difference to that is that as a trader, you won’t simply be trading just one currency for another like when you go on holiday. Instead, you will be making predictions on what you think the price will be, whether it will go up or go down in relation to another currency. There is a huge selection of currency pairs from majors to minors and then on to exotics (we will look at them briefly later). There is always something to trade and so it is becoming an ever popular thing for people within the UK to do. The good news is that it is highly accessible and you will be able to do it from pretty much any location within the UK where there is an internet connection available.
Why exactly is forex trading good for people in the UK? Simply because it is so accessible. There are all sorts of people trading, from wealthy investors to central banks, to individual traders sat in their bedrooms, there are no limits on who can be trading on the markets, as there are always opportunities available. There is also a wide range of strategies. In fact, there are hundreds of them, loads of forex pairs, tons of different account types to choose from, and in addition to that, you are able to trade from whenever you like.
Another thing that makes it quite accessible, is the fact that the minimum amount of capital required has fallen dramatically over the years. It used to be that you needed at least £10,000 in order to open up an account, but today you can open an account from as little as £1. Of course, you will need a little more than that if you want to be successful, but it just shows you how easy it is to gain access to the global markets of forex trading. You can also trade with leverage, pretty much every retail trader at home does, making profits even more accessible to you.
A lot of people also choose to be a trader, especially those in the UK, in order to help supplement their current income. They don’t necessarily do it in order to quit their job and trade full time (although a lot of people do), they simply do it to make a little extra money on the side. You do need to remember though, that trading the forex markets is not a 100% guarantee of profits. There will be losses and a lot of people actually end up losing all the money that they have put in, so it certainly does come with some risks. Due to the number of traders in the UK, it also shouldn’t come as no surprise that one of the most popular currencies to trade in the GBP.
Many traders within the United Kingdom like to trade there because there are very strict policies put in place to help protect the traders. This makes the UK one of the more trustworthy places to trade from. There are also very flexible tax laws when it comes to trading. As a trader, you will be classed as either a private investor, a self-employed trader, or a speculative trader which is actually completely tax-free. There Are also a huge number of regulated brokers within the UK. In order to function as a broker within the UK, you need to be regulated by the Financial Conduct Authority (FCA) which oversees a lot of the operations of the brokers and that they are adequately protecting their clients.
So you have decided to start trading which is great, but how and where exactly do you begin? Here are a few things that you should do as a starting point for your trading career. Of course, you can do other things, these are just some things that may help you to get a little jump start.
Educate Yourself: It is vital that you get yourself some proper education when it comes to trading, forex and trading as a whole is such a vast beast that you will never be able to learn everything by simply trying. It is one of the things in life that’s actually takes a lot of learning and dedication to truly understand and to become competent at. There are a lot of courses available out there, both free and paid. We would suggest sticking with the free ones just until you realize that you are 100% ready to be a trader. There is no point wasting that little bit of money only to find out that you don’t really like trading at all. A good education on forex is the basic foundation for becoming a successful trader.
Learn Forex Terms: There are a lot of them, including terms like pips, spread, bull markets, bear markets, breakouts, trends, base currency, quote currency, and more. There are hundreds of terms that you will come across. Try to learn the majority of the more frequent ones. You won’t be able to learn all of them, but getting to know the basics will make understanding some of the education or things that people are saying a lot easier. Then as you progress in your career and come across new terms, you can simply look them up as you come across them, but make sure you understand the meaning of at least the most common ones.
Conduct Analysis: Before you start trading, start trying to analyse the markets and the way that they work. The markets are influenced by pretty much everything in the world and they are influenced in different ways. Try taking a look when something comes out on the news to see how it affects the markets. A great way for someone just starting out to gain a little knowledge about the markets is to look at the important influential aspects of the arts and to understand them. Think about things like the trading positions, market sentiment, the Gross Domestic Product (GDP), the current political climate, any social protests or turmoil and more.
Broker Selection: Start thinking about what broker you may want to use. This is a big decision, but the good news is that any selection is not final. If you start with a broker and then later decide to change to a new one, there is no problem with that at all. In fact, a lot of traders jump around multiple brokers at the start until they manage to find one that suits them. You may want to think about joining one that is in and regulated within the United Kingdom, but this is not always necessary. There are some great brokers available from outside the UK that offer different features due to different regulations. What is important is that the one you pick has the features that you need and is right for you.
So those are some of the things that you should be looking to do before you start trading, but how about when you are actually trading? There are of course a number of different tips that we can give you for that too, so we have put together a few small tips and tricks that may help you once you are starting your trading career.
Education, Again: As previously mentioned, only start trading once you have gotten yourself a little forex education. It doesn’t need to be the world’s knowledge of forex, you will never get everything, but at least a basic understanding of how things work.
Study Charts: Learn how to read the charts, each time frame will work a little differently, and each currency pair works slightly differently on the charts. There are hundreds of different patterns to be on the lookout for, so getting an idea of how to read the charts is vital. After all, this is how you are going to be working out when and what to trade.
Using Strategies: When you have worked out what your strategy or trading style is, make sure you stick to it. You will only know if it works and suits you after a longer period of time. There is no point in jumping between different ones every other day, as this will only lead to confusion and lack of direction for your trading.
Using Stop Losses: Make sure you are using stop losses, these are there to protect your account and your sanity. If you do not use them you are potentially going to lose your account with just a single trade, so make sure that you are implementing them into your trading.
Implement Limits: Limit the number of trades that you execute daily. When starting out you will be excited about trading and will want to do as much as you can but you need to slow yourself down. Remember you are new to trading so you need to make sure that each and every trade that you make is right, Trading too much can confuse you and can also cause you to overspend. Trading too much often equates to endangering your account.
Trading Journals: Create and use a trading journal. This is something that you will hear about a lot. Trade journals are a place to write down everything that you are doing, all the trades you make, the reasons behind it, how long you hold the trades, your profit and loss, and more. This journal then gives you a way to analyse your own trading to find your strong and weak points and to ultimately make it a lot easier for you to improve your own trading.
Don’t Overshoot: Be realistic with your trading. Do not go into it thinking that you are going to be making £100,000 in your first month. The fact is that you will most likely lose a bit, as most people do. Be realistic with your expectations while you are in the learning phase.
Trading Buddies: Find someone for support, and do not be afraid to ask for help. The trading community is helpful and will always offer a hand. Find someone that you can get support from, especially when things start to become stressful. It is good to have someone who understands what you are going through can offer some support on how to get through it.
So you have started trading and have made a few trades and know that you need to be able to protect yourself and your account. So let’s work out what we can do in order to help protect your account. One of the most powerful yet hardest things to do in order to manage your risk is to tell yourself to stop, to tell yourself when to take a break. This is a great way of reducing the number of trades that you are making and thus avoiding the pitfall of overtrading. You should also be using stop losses and take profits to ensure that your trades are closing at the right time and that you’re not risking more with each trade than you should be. Create your risk management plan and then stick to it, if you have one and then make sure that you stick to it, any deviation is a danger.
So those are the things that you should and can be doing to get yourself ready to be a trader within the UK. There is a lot of information out there, so take your time, there is no rush to get into it as it will be there for a long time to come, so try not to rush into it. Learn, get the right broker and then practice on a demo account, but if you are choosing this as your next endeavor, then best of luck.