(image credit: Pixabay)
Forex trading means making money through the gains accumulated by pitting two currencies against each together. Today, it’s quite easy to trade Forex given the availability of online trading software.
The global market of Forex boasts over AU$6.28 trillion in trading volume every day, making it the biggest financial platform in the world. It is bigger than all the stocks that are traded online on a daily basis. As it’s easy to trade Forex thanks to daily trading sessions, access to important trading leverages, and low premiums, Forex is seen as an attractive way to make money for people retiring soon.
While trading Forex is much more accessible to the general public now, it’s a different story when it comes to generating profits. Unlike any other venture that can be built on over time, Forex trading is an ever-changing landscape that gets affected by investor sentiment and economic factors.
For those who are considering trading Forex in order to generate some retirement funds, here are some things to consider before starting your trading journey.
Learn the Ropes
Potential Forex traders must learn everything about how the markets move and the major currencies involved with Forex. While most of the learning comes from experience, a trader must understand some of the theories on technical analysis, as well as a working knowledge on geopolitical and economic factors that affect the prices of currencies. For example, FXCM states that at one point China intentionally devalued their currency to draw more foreign business to the country. When that happened, traders had to decide whether it was a good time to buy or sell the Yuan. The answer depended on whether they thought that the Yuan would recover and strengthen in the future. If it did this meant that they could sell their investments at a higher rate. Monitoring the economic factors that affect currencies is an ongoing effort that traders need to do in order to be successful in Forex.
Use a Demo Account
Most trading platforms come with a demo account. It allows traders to place inferences without using real money. While a demo account doesn’t award correct inferences with money, it does equip traders with the confidence to face real market decisions in the future.
It takes some time to become an expert trader so experiment with order entries and learn about making decisions based on charts. It’s not uncommon for traders to keep losing money by buying high-valued currencies instead of closing trades. Multiple errors in order entry will eventually make traders realise the importance of practice, and learn valuable lessons when it comes to losing unprotected trades. The Balance has a comprehensive article on how beginners can learn the basics of Forex charts.
Find a Trustworthy Broker
Unlike stocks and commodities, Forex has no central exchange or “clearing house”. That being said, the lack of transparency makes the market vulnerable to certain instances of malpractice. In Australia, the Australian Securities and Investments Commission (ASIC) acts as a watchtower to ensure that brokers are acting ethically. ASIC-regulated brokers must adhere to the organisation’s rules, one of which is keeping client funds separate from company funds.
If you’re unsure about a broker being referred to you, contact the ASIC to see if it’s compliant with the organisation’s rules.
The aforementioned subheadings are only the basics of the trade. Trading Forex is not as easy as people think as they need to constantly keep themselves in the loop with news that can affect currencies. In addition, they also need to be comfortable assessing price charts, through practicing with demo accounts, to make sound trading decisions. In short, while trading currencies through Forex is accessible, gaining profits is another story. However, once you get the hang of Forex trading, it can provide you with a steady stream of income that could make your retirement really comfortable.