What do I need to start online trading?
Online trading is an exciting and potentially lucrative approach which can be used to supplement your current income or be turned into a full-time trading career.
For beginner traders, it is important to enter the world of online trading in a measured way that will allow you to mitigate your risk and make the most out of the markets.
In this article, we examine the most important steps beginner traders should take in order to start online trading successfully.
1. Enter with enough capital – but don’t risk too much
Because they can trade on margin, forex traders don’t need a lot of money to get started. To open an account with a Forex broker and begin trading, you’ll need at least R500. If you want to open a small account, you should have at least R5000 in your bank account, and ideally R10 000.
This may seem like a lot for a new trader, but it will provide you some breathing room in case of a loss. To avoid being driven out of a deal, which might happen with lesser balances, you don’t want to risk the full amount but instead want to have a bigger cushion.
2. Take time to study the Forex markets
A key component of currency trading is learning about how the forex market works, which differs greatly from exchange-based systems like stocks or futures.
Instead of using a centralized exchange, banks all over the world use a network to purchase and sell foreign currency. This is referred to as an OTC market, or over-the-counter market.
Forex brokers function as market makers, setting both the asking and the asking prices for a certain currency pair.
Forex trading can be done in a variety of methods, but they all work in the same way: by simultaneously buying and selling currencies. With the development of internet trading, you may take advantage of currency price movements by trading CFDs.
Because they are leveraged products, contracts for difference (CFDs) allow traders to open positions for a small proportion of the trade’s total value. For leveraged products, you don’t own the asset, but rather place a bet on whether or not the market will rise or decline in value.
Even if leveraged products increase your profits, they can also increase your losses in a down market.
3. Find a reputable Forex broker
No matter where you live, you should be able to open a forex trading account with an online broker. It’s all about finding one that matches your needs as a trader and accepts you as one of their customers.
The broker you select should, at the very least, keep your funds separate from its own and be governed by a respected regulator in a well-regulated nation.
Your ability to concentrate on the trading process may suffer if you have doubts about the reputation or financial stability of your Forex broker. With a broker you can rely on, you will be able to focus more on your analysis and strategy development.
Choosing a broker without doing your homework first can lead to serious impediments, such as fees that eat away at your profits or losing money because the broker is not regulated. As a trader, this will harm your ability to progress.
4. First open a demo account
Using a demo account, you may practice trading in the forex market without risking any of your own money. Trades can be made in real time and reflect the losses and gains that would occur if the money were actually there.
When it comes to trading, you’ll need to get some experience under your belt first. Demo accounts allow you to trade without the fear of losing money.
In addition to practicing, you may want to see a forex trainer or read forex books for suggestions and ideas.
When you first start out as a trader, it might be beneficial to have some professional guidance and advice to help you along the way. In the beginning, forex trading can be a bit intimidating, and a little help can go a long way.
You should be able to profitably trade on a demo account or with paper trading before you put your money on the line during live market conditions. At the very least, you should have a track record of at least three months, and ideally six months.
After a few successful transactions, it will be difficult to stop trading, but experience really matters in forex trading. It’s impossible to go around it. In the old-fashioned manner, you must work hard to achieve your goals.
When you’ve been trading forex for a while and have been consistently profitable while doing so, it’s time to move on to live transactions.
It’s possible that trading with real money is more challenging, but if you follow the same strategies you used to be successful on the trial account, you should have no problems.
5. Create a trading strategy
As a novice trader, developing a trading strategy is essential. You may remove emotion from your trading decisions by following a trading plan, which also gives you guidance on when to enter and close positions.
In addition, you may want to consider adopting a forex trading strategy which dictates how you identify opportunities in the market.
You can also use the guidance of your strategy to decide on your first transaction by using your preferred technical analysis tools on the markets you choose to trade.
Even if you’re only interested in technical trading, you should keep an eye on any changes that could trigger volatility.
It’s possible that upcoming economic developments will have a ripple effect on the forex markets, even if your technical analysis doesn’t take that into account. This is where a trading strategy that integrates a sufficient amount of fundamental analysis also becomes useful.
6. Open a trading account with your preferred broker
A trading account can be opened once you’ve chosen a broker. Deposits can be made via bank wire transfer, debit card, or electronic payment providers such as Skrill and PayPal at most online forex brokers.
7. Decide on a Forex trading platform that works for you
A forex trading platform provided by your broker can be downloaded or accessed online. MetaTrader4 and MT5 (MT4/5) from MetaQuotes.com and NinjaTrader are the most popular 3rd-party platforms supported by most forex brokers.