Forex trading is becoming increasingly popular as a way of investing, because when it goes well it can have incredibly high returns. However, there is quite a steep learning curve with trading, and many people struggle and lose money when they first try to learn forex trading.
While there are a lot of courses and e-learning services out there, perhaps the best way to learn forex trading is to actually do it – only with a demo account instead of with real money.
Opening A Forex Demo Account
You can sign up for a forex demo account with most reputable brokers, and use this account to get a feel for the system. The reason it’s good to practice with play money instead of real money is that it allows you to mess around a little and to get a feel for trading without worrying about the financial consequences. You can take risks that you would not normally take, for example, and see for yourself what the outcome would be. You can also get used to the user interface of your chosen trading platform without worrying that a mis-click, or being a little slow, will mess things up for you.
Forex trading is not easy to do, no matter what the brokers will tell you. There are a lot of things that you need to take into account before you make a trade, and if you are planning on using leverage then you will need to think carefully about where to set your stop-losses so that you don’t end up losing a huge amount of money if the currency pair moves in the wrong direction.
Once you have spent some time with a demo account, however, all of this stuff will be second nature, and you will be able to trade confidently.
A Word Of Caution
Do note, however, that if you try to use a demo account you will find that the pip value on that account is probably different to the pip value on a normal trading account. This difference might take you by surprise when the big profits that you were making on the demo account seem much more modest when you are trading for real.
Forex trading is not the same as putting money into a savings account. It can give massive returns when you do things right, but if the markets go against you then you will lose money. You need to make sure that before you start trading you have enough money to see you through the bad times so that you can get to those good trades. When things go your way, reinvest some of the money you earn into your trading bankroll, and take some as a profit for yourself. Learning good bankroll management is an important part of learning to be a good forex trader – and it’s not until you master both money management and trading that you will figure out what it takes to make a profit from forex trading online.
Byron Simpson is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance cent.