If you’re an aspiring trader who’s looking for a viable market or asset class, it’s easy to see why the foreign exchange would be one of your first ports of call.
After all, this market now sees an estimated $6.6 trillion traded globally every single day, while it’s cumulative worth is estimated to be in the region of $1.934 quadrillion. Currency is also derivative and highly volatile, and this creates numerous opportunities to profit even in a depreciating market.
The volatile and margin-based nature of forex trading can also cause you to lose significant sums of money, however, so you need to constantly seek out ways of improving your skills. Here are some ideas to help you on your way.
Trade Different Pairs
Let’s start with the basics; as the success or failure of your forex trading endeavours will rely heavily on the currency pairings that you trade.
As a general rule, it’s important to hedge your risk and manage this by trading more than one pairing. This ties into the fact that diversification is at the heart of every successful trading portfolio, particularly in derivative markets that encounter margin and high leverage.
Also, you may find that you become extremely informed about a particular currency as you trade it over time, and this may create an opportunity to trade it against alternative assets as your knowledge base grows.
However, we’d recommend starting out by trading just a couple of currency pairings as a novice trader, before scaling your efforts in line with your knowledge base and profitability.
Use the MetaTrader 4
The emergence of online and mobile trading platforms represents one of the biggest developments in the forex market over the course of the last 20 years, as it has helped to optimise market accessibility for retail traders and boosted their profitability in the process.
The MetaTrader 4 remains the gold standard in forex trading, and it has done ever since it was first developed back in 2005.
This is despite the fact that it has since been superseded by the MetaTrader 5, thanks largely to its familiarity, ease of use and potential for customisation. By leveraging this form and all that it has to offer, you can increase your market access while simultaneously boosting profitability levels.
Appraise Different Strategies and Markets
By using this type of software, you can also access a so-called ‘demo account’ which simulates a real-time market environment while enabling you to trade and test strategies without risking your hard-earned capital.
This provides a unique window of opportunity in which you can develop your trading skills, while it bridges the chasm between theoretical knowledge and practical market experience.
You can also use demo accounts to target alternative markets and trading sessions. For example, the Asian trading session runs unofficially between the hours of 11:00pm and 08:00am GMT, while it’s also home to three of the top five forex exchanges (Singapore, Hong Kong and Japan) in the world.