You have probably heard a lot of people talking about trading forex online and you are wondering what it is. With so many online scams out there, coming here for some research was a wise decision.

In this article, you will learn all the basic fundamentals of forex trading. This includes how to get started and make a profit. By the time you finish reading, you will be able to decide for yourself whether becoming a forex trader is something you may be interested in doing.

What Is Trading Forex Online?

You probably know that each country has its own currency, right? The US uses the dollar and the UK has the pound sterling, and so on.

How the global economy works is that, at any given time, these currencies will be vying against each other for the upper hand. This results in one currency gaining on the other today but losing out tomorrow. This constant shifting of power and the resulting changes in the value of each currency is what a forex trader will try to exploit.

Trading forex online is the speculation on changes in the prices of a specific pair of currencies to make a profit from the buying and selling of either one. In forex trading, global currencies are traded in pairs according to how the trader thinks the market will turn.

Let us look at a simple example to make things clearer. If you use 10 USD to buy 15 AUD (Australian dollars) today, if the value of the Australian currency increases tomorrow you can then use it to buy more than the 10 USD that you spent today. This is how you make a profit when trading forex online.

By staying online, it simply means all your transactions will be conducted over the internet on digital market platforms, such as MT4 software.

Forex Trading vs. Other Investments

When done over a sustained period, trading forex online can be regarded as a form of investment. There are other types of investments that a person can choose to go into, such as:

  • Trade shares on the stock exchange
  • Commodity trading
  • Buy and invest in gold through online metal trading
  • Trade futures, bonds, and mutual funds
  • Invest in cryptocurrency

Each of these investment vehicles, including trading forex online, differs from the rest when it comes to the risks and the potential for reward. Some investment options, such as buying and selling gold have a lot more security and stability while not having high returns over a short period.

When you choose to become a forex trader, you will soon realize that the risks are quite high but the potential to make quick returns is also there. In the end, the type of investment you choose will be based on your long-term goals and your risk tolerance.

Is Trading Forex Online Legitimate?

Yes, trading forex online is a real and legitimate way for investors to make money. The industry’s reputation has simply been damaged by the many online scams that are there as well as the constant threat from cyber criminals.

However, if you choose a reputable platform, trading forex online is just as safe and legitimate as other forms of trading and investing. A lot of vigilance is needed when conducting any type of business online. You should always verify the legitimacy of the broker before you hand over your money.

Three Simple Steps To Becoming a Forex Trader

Now that you have a better understanding of what trading forex online means, you are ready to start this awesome journey. Becoming a forex trader is easy, even for people who do not possess extensive online experience.

All you need to do is follow these three easy steps:

1. Choose a Reputable Forex Broker

The first step to becoming a forex trader is arguably the most important one. With so many forex brokers available, and so many potential scammers, it is very important to choose the right broker with which to trade.

It’s not all about cyber security either. Trading forex online requires quick decision-making based on a vast amount of constantly changing data. If your choice of forex broker does not have the required features, you will be at a great disadvantage and your chances of successful trading will be low.

When choosing a forex broker, look out for the following characteristics shared by all the great forex brokers in the industry:

  • A quick and easy sign-up process
  • Easy-to-use interface
  • Responsive software
  • A solid reputation of reliability and trustworthiness
  • Essential features, such as a demo account
  • Educational material
  • Low fees and no hidden costs
  • Great support team
  • Safe and secure platform

2. Learn as Much as You Can

If you are looking for an easy, get-rich-quick scheme, this is not it! Trading forex online is a difficult skill to master if you are going to make any money from it. Diving in blindly and hoping for the best is more like gambling than anything else and is a sure way to quickly lose all your money.

Having said that, with dedication and the right resources, learning how to be a forex trader is possible. To aid you in your learning, you have three great tools at your disposal, which are:

  • Educational Material

With the abundance of information online, you can teach yourself a lot about trading forex online without ever having to leave the house. There are countless articles, webinars, and YouTube videos that you can use.

  • Demo Mode

Every reputable broker has a demo mode. Do yourself a favour and make use of it! Nothing beats the power of learning by doing when it comes to mastering a new skill.

  • Forex Trading Mentors

This is a very useful tool to have in your arsenal, but it’s also one you have to be very wary of. There are a lot of mentors out there who are willing to share how they made money from forex trading. However, some scammers pose as mentors and try to lure inexperienced traders. Stay clear of the second group.

3. Choose a Currency Pairing and Start Trading!

When you have put in the hours on the demo mode and you feel that you are ready to start making some real-world trades, it’s time to choose a currency pair and take the leap. A currency pair refers to the two currencies you will be trading against each other. There are seven popular currency pairs to choose from, namely:

  • Euro and US dollar: EUR/USD
  • The Australian dollar and US dollar: AUD/USD
  • US dollar and Swiss franc: USD/CHF
  • US dollar and Canadian dollar: USD/CAD
  • US dollar and Japanese yen: USD/JPY
  • New Zealand dollar and US dollar: NZD/USD
  • British pound sterling and US dollar: GBP/USD

In each pair, the USD is a common denomination, which is regarded as the industry norm. You can choose to trade currencies that do not involve the USD but this is rare. Once you are set on your currencies, there is nothing left to do but start trading!

  • The Journey To Trading Forex Online Profitably

Only when you start trading will you realize that there is a vast difference between being just a forex trader and being a successful one. While trading forex online has made many people extremely wealthy, a great number of unfortunate traders have also lost a lot of money.

If you want to avoid becoming another negative statistic, you will need to employ the following tips:

  • Get a Winning Strategy

Trading forex online requires having a good strategy if you are going to make money. Many mentors are willing to share the strategies they use so you can adopt one of those if you wish.

Another way is to simply dedicate a lot of time to work on your own strategy that works for you. The demo platform gives you a great place to develop new strategies without risking your hard-earned money. Once you are confident, you can apply your technique to real trades and see how it goes.

There is a third way to adopt a winning strategy, and that is by copy-trading. When trading forex online, you can simply work with a more experienced trader and make the same trades he is making. Trading bots, used by those who auto trade, are great at doing this.

  • Risk vs. Reward

Every move you make when trading forex online comes with a certain amount of risk. There is even risk in not taking any action at all because a great opportunity to make profits can pass you by. As a trader, you must analyze the risk versus reward of any trades you make.

There is no point in risking a large chunk of your portfolio just to gain very few rewards. On the other hand, you should always be on the lookout for opportunities to make huge profits from relatively small investments.

  • Be Realistic About Profits

This has been the downfall of many trades. They start trading forex online with the belief that they will be millionaires in a matter of months. However, when they realize the amount of hard work that is required, as well as the difficulty of making substantial money, they get dejected and give up, or they make poor decisions and lose all their money.

To be safe, always be realistic about how long it will take you to reach your goals and the risks you will have to take to get there. That way, you will not be discouraged when you go through a bad patch where most of your trades are losing you money.

  • Invest 5% Or Less of Your Capital

Your capital is everything when trading forex online. Lose it and you will be right back where you started but this time with a huge hole in your bank account where your money used to be. The golden rule is to never trade with more than 5% of your capital at any given time.

Even when things are going very well, resist the temptation to invest more than you absolutely have to because the market can turn in the blink of an eye. When that happens, you do not want to be the guy who has his entire portfolio on the line.

  • Avoid High Leverage

High leverage is when you invest very little in the hope of getting huge gains. As tempting as it is, it’s one thing you need to avoid at all costs, especially if you are still new to trading. There will be a lot of success stories about traders who have made a killing off high-leveraged trades but you need to keep your eyes firmly on your strategy.

By growing your capital bit by bit, you will soon get to a point where 5% of your portfolio will be a very sizeable amount. This is the best strategy to protect you from losing all your funds in a very short time.

  • Keep Track of Your Trades

As you learn all there is about trading forex online, you will have some very good days and some very bad ones. After a while, all these experiences will seem like a blur. To make the best of every new lesson you learn, always write everything down so that you learn from it in the future.

Keeping a journal of all your trades should be something that is second nature to you. Whether it’s a negative or a positive experience does not really matter when it comes to keeping track of your trades. Write it all down because you never know when that piece of knowledge may help you make a winning trade one day.

  • Constant Research

A real trader knows that the journey to profitable trading is a never-ending one. You never really stop learning because trading forex online is a constantly changing environment. Whenever you get the opportunity, do some research on the latest strategies being used by successful traders.

If you go on social media platforms, you will see that countless seminars are being held to discuss trading forex online. Even if you are already experienced, take the time to attend every once in a while. You never know what you might learn or who you might meet. Seminars also allow you to share knowledge with beginner traders, much like you right now.

Demo platforms are not just for beginners too. They should be your constant companion throughout your journey of trading forex online. After doing a bit of research, use the demo mode to try out new strategies.

  • Seek Advice

The forex trading community is a vast one that stretches across the globe. You can be sure that whatever problem you are having, another trader out there has not only experienced it but found a way to overcome it.

Rather than risk losing your money by attempting unfamiliar solutions, sometimes all you need is to reach out on social media platforms and an answer will be given to you. When trading forex online, do not be afraid to seek advice when you really need it.

  • Be Patient

Last, but not least, you need to be patient. Start small and give yourself time to learn and grow your account. Yes, some people have made millions seemingly overnight, but they are the exception, not the rule.

The reality is that forex trading is a long process. If you keep that in mind, experiencing a few setbacks every now and then will not be enough to bring you down. Set realistic goals for your portfolio and devise strategies to attain them. With time, you will have the kind of money that you were dreaming of when you decided to try trading forex online.

Trading Forex Online Is Risky but Worth It!

With all the internet stories of people losing their life savings from poor decision-making or at the hands of internet hackers, it can be enough to put anyone off forex trading for good. However, when done correctly, forex trading can be a life-changing decision.

There are tangible benefits that can be had for those traders who make the right decisions, choose a good online forex broker, and are patient enough to wait for their portfolio to grow over time.

However, do not turn a blind eye to the risks of this industry. Do your trading as best as you can, keeping a lookout for any forex promotions that can assist you, but all the while remember that one false move can cost you everything.

Final Thought

Are you ready to become a forex trader? It could be the best decision you can ever make. Take your time to learn about the industry. When you are ready, apply the tips you have learned in this article and start trading.

Many people make a living off forex trading, as well as many who have lost a lot of money over the years. Which group you will fall into depends on your decision-making, your hard work, and how well you apply everything you have just read.

DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication