To start any business, you should know everything about it, otherwise, you will never succeed in it.
The same thing applies when it comes to forex trading.
If you have no idea how the market works, you will never figure out a way to make a consistent profit.
In this article, I’m going to tell you 10 things you need to know before going into forex trading.
What is Forex Trading?
Forex trading is a financial market in which two parties exchange currencies.
It is the largest and most liquid market in terms of currency pairs, with an average daily turnover of $6.6 trillion.
The forex market offers greater liquidity than other financial markets like stocks, bonds, or commodities because it deals in real-time.
This means that you can buy or sell an asset from anywhere in the world within seconds of it being available for sale or purchase on an exchange.
10 Things You Need To Know Before Going Into Forex
The markets are composed of two players:
1. The market makers.
2. Retail traders.
The market makers are banks and financial institutions, and these players are the most participants in the foreign exchange market.
They trade millions of dollars every single day. They control and manipulate the market, and drive prices whenever they want.
These players have the best technical analysts. Likewise, they know how retail traders analyze and trade the markets.
They know where your stop loss and your profit targets are, and they can manipulate the market and take money from you whenever they want.
So if you have interest in foreign exchange market or forex trading then below are the things you need to know before going into forex.
Let’s face it:
- Have a clear understanding of the market.
- You have to be prepared for your long-term goals.
- Understand your personality
- Your decision-making skills.
- Understand yourself.
- Loss is inevitable.
- Trading Is mostly psychological.
- It’s the market makers vs retail traders.
- Forex trading is not a get-rich-quick scheme.
- Forex trading is risky.
One of the things you need to know before going into forex is yourself; how you think and react in different situations. You also need to know what makes you tick.
This will help you have an edge in the market and an advantage over some traders.
Know your goals and objectives before going into forex trading. Forex trading can be very profitable if done right, but it can also be very risky if not done wrong.
As a beginner, make sure that your objectives are clear and simple and that they are achievable within the given timeframe.
If you do not have a clear objective then there is no point going into forex trading because it is too complicated.
Loss Is Inevitable
In forex trading, a loss is inevitable, you can’t avoid it.
If you are a beginner, you will lose money.
But if you have enough experience in the market, then you can make more profits than your losses.
The beauty of a loss is to learn, and this will help you to be a better trader.
Trading Is Mostly Psychological
Forex trading is mostly psychological, and to make money, you need to be aware of your emotions.
Trading can be stressful, so it’s important to have a plan and stick to it.
Market Makers Vs Retail Traders
In short, this is one of the reasons why forex trading is risky but profitable because it involves both market makers and retail traders. This is part of the things you need to know before going into forex.
Market Makers are entities that take position’s in the market and control the price of a currency pair, while retail traders trade with each other at a lower cost than market makers do.
Market Makers can add liquidity to the market by buying or selling currencies, thus, creating volatility within those currencies.
While retail traders buy and sell currency for profits, since they do not have a large capital, they have to resort to smaller trades that are less risky than those done by market makers as they have less capital to trade with.
Forex Trading Is Not A Get-Rich-Quick Scheme
Forex trading is not a get-rich-quick scheme, and it’s a long-term investment.
You need to be prepared for the fact that it will take time to be a winning trader and make pips consistently.
Forex Trading Is Risky
Forex trading is risky, and it’s not for the faint of heart, nor for those who are looking for a quick fix to their financial problems.
Many traders are attracted to forex trading because it seems to be an easy way to make money.
However, that’s not always the case; there are no guarantees that you can make money consistently.
There are reasons why it’s true;
The market is very volatile, and fluctuations in interest rates made it for most traders to predict the next move in the market.
So to be a successful forex trader; you need to come prepared.
Conclusion
Bottom line, trading can be a risky business, but if you’re willing to devote time to extensive research and learning, it could also prove to be worth the effort.
It should never be a gamble, the aforementioned are things you need to know before going into forex.
