From an exclusive investment vehicle accessible only to affluent traders, Forex has become one of the most widely employed investment strategies by regular individuals. In the past five years, the global trading volume has increased considerably, and the barriers to entry have been lowered. You don’t need a bachelor’s degree in finance, and you don’t need to work on Wall Street to successfully trade currencies. All it takes is a smartphone, an account with a Forex broker, and the curiosity to read a few educational resources and discover what strategy works best for you.
Forex: Image taken from https://unsplash.com/photos/OmPqCwX422Y
If you’ve heard a lot about Forex trading lately, or you even have some friends who managed to boost their income from it, you’re probably wondering where to start and what rookie mistakes to avoid in the beginning. Here are some of the most common questions about Forex trading, answered.
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Do I need a lot of money for Forex trading?
No, and that’s precisely the beauty of it. Unlike many other types of investments, which require you to set aside a lot of money in advance, Forex is relatively easy to start. Most Forex brokers only require a minimum of $100 to begin trading, although you should keep in mind that you will need larger sums to make a considerable profit and to better manage your risk. Regardless of the sum you deposit, remember one of the ground rules of investing: never invest the money you can’t afford to lose. This applies to any type of investment, no matter how safe. Before starting trading Forex, make sure you have an emergency account and that all essential expenses are covered. For trading, you should only use your disposable income.
How do I find a good Forex broker who accepts US citizens?
If you live in the US, finding a good Forex broker can seem tricky. Because of the harsh regulatory environment, the number of regulated Forex brokers in the US is very, very limited. Besides, their features and offers may not be flexible enough to cater to all preferences. Fortunately, there are easier ways to trade. You can choose instead an offshore Forex broker that accepts US citizens and enjoy better terms and conditions. Offshore Forex brokers can be regulated, but not in the United States, which means that they might offer you better features and fees. You’ll still have to do some research to find a broker that matches your trading style, but that’s the beauty of it: you’re not limited to only a few options, and you can find an option that aligns with your level of experience, risk appetite, and long-term plans.
Is Forex a high-risk investment?
That depends. First of all, all types of investments carry a certain amount of risk, including Forex trading. It’s simply inevitable. However, the level of risk you take on can be managed. For example, you can use a stop-loss order, and that automatically prevents you from executing any further trades if that would lose you money. Or, you can choose position trading, which is a longer-term strategy. At the other end of the risk scale, you have strategies such as scalping, which keeps you on the edge of your seat and requires a lot of your time. It all depends on what you are comfortable with. In general, low-risk trading strategies have low rewards but are more stable, whereas high-risk trading strategies have high rewards, but there’s also a chance you might lose your assets. When deciding on the right level of risk, make sure you consider your realistic capabilities and trading skills.
How can I fund my Forex account?
Digital transactions have made funding your Forex account easier than ever before. All you have to do is link your credit or debit account to your Forex broker, and choose the amount of money you want to deposit. It usually doesn’t take more than a couple of days for the money to appear in your account, but you should keep in mind that most brokers charge a small fee for each transaction. These days, you can even fund your trading wallet with crypto. Since the number of cryptocurrency holders has increased, brokers have been quick to respond, and now you have quite a lot of options if you want to use your Bitcoin to trade Forex.
How much time do I need to become a professional Forex trader?
We’ve all heard incredible success stories of beginner Forex traders (some of them even teenagers), who turned a couple of hundred dollars into a small fortune. But while it’s totally possible to start from zero and become successful, you should have realistic expectations. Forex is not a get-rich-quick scheme, and there’s no shortcut to quality education. If you want to find the best trading strategy for you, manage risks, and turn trading into a sustainable, long-term investment vehicle, you need to educate yourself. Forex doesn’t turn you rich overnight, and you usually need a few years of practice until you can call yourself an expert.
How do I avoid emotional trading?
Emotions are an inherent part of trading, and investing in general. To a certain extent, it’s impossible to separate yourself entirely from your emotions and not feel a bit of joy, pride, or anxiety when executing a trade. But, if emotions control you, trading can become quite risky. How can you overcome that? First of all, by investing as much as possible in your education. This way, you’ll make informed decisions and not decisions based on fear or overconfidence. Secondly, know yourself and your risk appetite and trade based on your established strategy.
Can I copy another trader’s strategy?
Yes, you can. It’s called copy trading, and, in the beginning, it can actually be a good way to earn while you learn. However, keep in mind that this method isn’t infallible, and it will only work for you if you copy the actions of a trader who has a similar strategy to your own. Otherwise, you might lose more than what you’re comfortable with.
