Anyone with a little money and patience can become a Forex trader. However, the skill and patience required to become a successful or profitable trader requires limiting losses while identifying good trade set ups with a positive risk: reward set up. Despite the ease of getting into the business, there are a few steps you should follow. A hasty entrance into Forex trading can lead to the poor house very quickly.
Let’s examine the steps for becoming a Forex trader.
Trading Capital
Forex traders do not need to have a lot of capital to trade due to being able to trade on margin. The average Forex broker requires at least $300 to open an account and start trading. A good rule of thumb is to have at least $1000 to open a mini account, preferably $2000.
This number might sound a little high for beginners, but this will allow you to trade with a bit of a buffer in case of losses. You’re not looking to risk the entire amount but rather just have a higher cushion so that you’re not forced out of a trade, which can happen with smaller balances.
Using a Demo Account
A forex trading demo account is a trading account with monopoly money in it that is connected to the live market. Trades can be placed in real time and represent what would be true losses and gains if the money were real.
Before you put one penny on the line with trading, you’ll need some practice. A demo account will give you the ability to practice trading without the pressure.
How to Practice FX Trading Before Trading Live
Aside from practicing, you may want to seek some forex trading advice and strategies from a forex trainer or forex books. As a trader, you will need to develop your own style and trading ideas, but in the beginning, it can be helpful to have some professional direction and recommendations. Forex is very daunting in the early days and some guidance can really help.
How Trend Traders Find Profit Targets on Their Trade
Before you actually commit to live trading and money on the line, you should be able to profitably trade on your demo account or with paper trading. Your track record should be more than a few weeks, at least three months, preferably six months.
It will be difficult to refrain from trading after you make those first few profitable trades, but experience really counts in forex trading. It’s something that you cannot work around. You have to get it the old fashioned way, hard work.
Are You On the Right Track With Your Trading?
After practicing for several months, doing a little training, and getting some forex education and becoming consistently profitable, it’s time to start making live trades. You may find that it’s a little different to have actual money on the line, but if you stick to the same practices you used to be profitable while trading the demo account, you will be successful.
Closing Thoughts
The FX market gives you the opportunity to find trading opportunities around the clock on your schedule. Additionally, the start up capital is rather low and you can determine how much exposure or leverage you want on a trade, which gives you added flexibility.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.