Published On: Wed, Dec 20th, 2017

Things You Need To Know If You’re Thinking of Forex

Stocks rise and fall, property bubbles burst and don’t even get me started on Bitcoin! The stock markets are daunting even for those who know their way around. For new investors or those who are considering investing, looking at the market must be like strolling around the world’s scariest aquarium. One tank hold sharks, another holds alligators, yet another holds flesh eating piranhas. Each tank holds a Rubix cube that, if solved, can make them a lot of money. They know they’re doing to have to get into one of those tanks and swim around if they’re to stand a chance of solving the cube, but the tanks all look fraught with danger.  Of course, any investment carries with it an element of risk, but if you’re a new investor Forex is a worthy place to start.

Things You Need To Know If You're Thinking of Forex

Image by MaxPixel

 

Forex (foreign exchange) involves the buying and selling of foreign currencies and making profits from them. It has some inherent advantages over stock trading but it has still led to large losses by the uninformed and undisciplined. Therefore, here are some things you’ll need to know if you’re thinking of investing in Forex.

 

Don’t go it alone

Most markets are complicated and subject to a range of contributing factors but foreign currencies are incredibly intricate and require years to gain a working familiarity. Finding a trusted and reliable broker with a glowing track record should be your first port of call. Find out more here. A good broker will be able to guide you by listening to your short and long-term goals (or help you to reach some if you’re unsure). They’ll keep your expectations realistic and explain the intricacies of trading to you inaccessible yet transparent terms.

 

Define your risk tolerance

Sure, in a perfect world we’d all be trading in markets that only ever profit us. In the real world, however, losses are an inevitability. You should neither run away screaming in the event of a loss nor keep shovelling money into a black hole. You should, however, define your risk tolerance and clearly established how much you are prepared to lose in the short term for the sake of longer term profits.


 

Start small

As with any investment, the key is to start small and let your gains come organically rather than by shovelling more capital into your investment. A larger account will not necessarily generate larger profits. By only reinvesting your gains back into your account you improve your leverage and reduce your risk.

 

Expand as you go

As well as starting small in terms of the size of your investment, you should also begin by trading only one pair of currencies. The sheer scope and complexity of world markets can be extremely daunting and can easily bamboozle the inexperienced. Starting with your native currency is an excellent idea as it is a known commodity. You can find the right currency pairing for you by starting with the most liquid and widely paired currencies and adjusting your strategy as you gain a greater understanding of the markets.

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