Trading foreign exchange, or forex, pairs is something that most people can do if they set their minds to it. However, it’s not the sort of career that can be kick-started overnight. In fact, it requires a lot of preparation in order to do well: from learning about the unique procedural aspects of a forex trade to finding the right broker and information sources, there’s plenty to think about if you’re looking to trade this innovative and potentially lucrative instrument.
Learn the terms
The world of forex trading is a peculiar one compared to the rest of the trading and investment industries. For a start, all forex investments take place in pairs: if you want to trade the British pound, say, then you’ll have to use your new-found trading knowledge to decide on another currency for which you can predict the pound’s relative performance. If you decide to predict that the pound will rise relative to the Japanese yen, for example, then you’ll need to opt for the GBP/JPY pair. You’ll also hear the terms “major” and “minor” a lot: major pairs are those with US dollar halves, such as USD/GBP, while minors are those big worldwide currency pairs without a US dollar presence, such as EUR/GBP.
Find a broker
When it comes to finding a broker, the good news is that you’ve got plenty of options. In-person or telephone brokers are handy for those who want a connection with their broker and the chance to properly talk through opportunities, while an online broker offers convenience, fast set-up, and the chance to be fully self-directing. Whichever option you choose, you’ll be able to compare brokers online and find one that’s right for you. It’s a good idea to do this, as this way you can filter out those with characteristics that you either don’t require or want to actively avoid – such as high set-up fees.
Get an information source
Being well-informed is, of course, essential no matter what investment vehicle you choose. Trading stocks, for example, requires knowledge of the health of the company in question, perhaps acquired through directors’ reports or profit and loss sheets. Forex trading is no exception. Those who take the technical analysis approach will need to make sure that they have access to past market trading data revealing trader behaviour from a given time period. Those who are looking to trade on the basis of fundamental analysis, meanwhile, will also require an economic calendar that highlights key dates such as monetary policy committee meetings.
If you’re thinking about becoming a forex trader, then it’s definitely a smart move – but it’s one that will require a bit of hard work before your career gets off the ground. From investing time in learning the terms required to taking key steps such as finding a broker, there are a few jobs to do before you can truly begin to reap the rewards of your new career choice.