Online forex trading has frequently experienced bad press. In fact, you have probably heard it referred to as scam; many people simply do not see it as an investment opportunity.
However, while there are some brokers who are only interested in relieving you of your funds; there are many which provide genuine facilities to assist you in generating an income.
Understanding Forex & CFD Trading Basics
The basic premise of online forex and CFD investments is that they are ‘all or nothing’ investments. In essence you will choose a share and decide whether its price is likely to rise or fall within a certain timeframe. You can then invest your capital and wait. If you are correct you will receive the agreed payout; if you are not correct then you lose your investment.
This is the reason it is essential to compete your research before you start trading. Of course, there are those who will simply trade on a gut feeling and be successful; this is true in any type of investment. But, in the vast majority of cases this will not be enough to provide you with consistent results.
Long years of research and experience in the field have helped me recognize the authentic systems among the scam. The most sought after and trustworthy platform at the moment is the QProfit System by Jerry Douglas – read the QProfit System detailed review Here.
To successfully trade you must follow this 7 step guide; while it is not possible to guarantee success; you will, at least, understand what you are trading and be able to make the best possible decision at every step of the way:
- Understand Your Finances
The first step of any investment plan s to consider the funds you have available to invest. The golden rule of investing is to never invest more than you can afford to lose.
This means you are not using your rent or food money; only funds which are genuinely unneeded elsewhere. This will ensure that, if you do lose your investment, you are not financially ruined.
It is worth noting that the majority of forex brokers require a minimum $250 investment before you can start trading. Of course your investment can be higher but it may be preferably to test the market and your chosen broker with the minimal funds necessary.
- Study The Markets
CFDs trade in shares, currencies, indices and commodities. It is best to start trading in one specific sector of the market. This will allow you to focus on learning as much as possible about your chosen sector.
There are several ways in which you can trade, generally traders either monitor the past price movements of assets to decide likely future movements, or, they monitor economic events.
Both approaches can work and you can even mix the two; but the more information you know about the markets the easier you will find it to adapt your investment to current situations. This is important to continuing success in the markets.
- Select a Broker
There are many brokers to choose from; in fact the market has been inundated with options. It is advisable to choose one which is registered and regulated. There are several bodies which do this; depending upon where you live. The biggest body in Europe is CySEC, Australia has ASIC and the US has extremely tight controls over which brokers can provide their services to US residents.
A registered broker will provide you with a fair trading opportunity and there will be safeguards to ensure you can access winning capital or remove your funds.
Many brokers offer promotions which will give you additional credit when you sign-up and make your first deposit. These promotions come with terms and conditions; be certain you know what they are before you commit your funds to a broker.
Once you have chosen a broker registration is very simple; you will need to create an account with your basic personal details and then fund it.
- Discover the Payout Rates
The payout rate is the amount you can get back if you predict the trade correctly. For example; an 80% payout rate would equate to $8 profit if you trade successfully with $10.
However, the payout rate is more than just the percentage you receive if you are successful. Of course you will want this percentage to be as high as possible but you also need to look at whether there are any charges per transaction; this can make an 80% payout rate more attractive than a 90% one.
- Find a Strategy Which Works
There are many different strategies involved in forex and CFD trading. As a new trader it is advisable to choose the simplest techniques, such as trend or even the Pinocchio strategy.
Once you have gained knowledge of your chosen strategy and can use it successfully you can graduate to other strategies.
Whichever strategy you choose it is advisable to test it first. This means monitoring the market, selecting a trade and applying your approach; without actually investing any funds. You should do this every time you consider adopting a new strategy.
- Set Daily and Long Term Goals
One of the biggest challenges in forex investments and CFD trading is when your trades are not performing as expected. It can be easy to increase your trade amounts and take bigger risks in an attempt to reduce your losses. Often this has the reverse effect.
It is, therefore, important that you set yourself a limit regarding how much you want to win and how much you are prepared to lose on a daily basis. This will prevent your funds from disappearing too quickly and ensure you can trade another day; hopefully with more luck.
Finally, you must remember to have balance in your life. Trading in forex and CFD can be surprisingly enjoyable. You must trade enough to generate the funds you need but do not trade all the time. Finding balance in life is important if you are to enjoy your profits.
Forex trading can be a very successful way to generate an additional income, or even replace your current one. But you must follow these steps to ensure you can become a successful trader.