The forex market is one of the single biggest financial entities in the world, with an estimated $6.6 trillion traded globally every single day.
However, this financial behemoth has evolved from incredibly humble beginnings, with forex trading having actually originated during the time of the Babylonians. During this era, a rudimentary system was designed for the use of currencies and exchange, where goods were traded for tangible items with universally accepted value (such as gold or silver in the metal age).
In this post, we’ll look at the pros and cons of forex trading, while asking how you can get started with your first order.
The Pros and Cons of Currency Trading
The size of the forex market offers some evidence of the sector’s popularity, while it’s also indicative of incredibly high levels of liquidity.
This means that it’s relatively easy to buy and sell major currencies, enabling investors to trade flexibility and enter or exit new positions in real-time.
The market is also incredibly accessible and margin-based, meaning that traders can achieve profits that are far in excess of their initial deposit. As currencies are also classed as derivative assets, traders are able to speculate on the performance of specific pairings and profit from price movements without assuming ownership of an underlying financial instrument.
However, the popularity of the market and its fundamental mechanics also create challenges, particularly as the forex sector allows for incredibly high amounts of leverage.
It’s this that enables traders to control large positions with relatively small amounts of capital, with leverage ratios as high as 100:1 available in some instances in the marketplace. While this has huge benefits, it also makes it possible to lose considerably more than your initial deposit amount.
This is a key intricacy of forex trading, and one that requires investors to have a comprehensive understanding of the market and a keen sense of determinism.
How to Get Started with Your First Trade
If you have spent time accumulating knowledge of the market and the underlying laws that govern change, the next step is to open a demo account and start trading in a simulated, real-time marketplace.
This allows you to test and hone your trading strategies in corporeal market conditions for a period of months, without requiring you to risk your hard-earned capital. In this respect, it provides a window of opportunity to bridge the gap between theory and practice, which is crucial to the ambitions of every aspiring forex trader.
When you start trading for real, you should consider using a comprehensive platform such as the MetaTrader 4.
One of the main reasons for this is the fact that it offers access to the markets from your mobile phone, while enabling you to customise live forex charts and ensure that data is presented in a way that you can easily understand.
During the initial stages of your career, we’d recommend trading just one or two major currency pairings that are relatively predictable and less volatile (such as the USD/JPY). Both of these assets have relative safe haven status and can be leveraged to deliver sustainable returns over time.
From here, you can scale your efforts organically in line with your experience and profitability, embrace more pairings and a wide range of assets over time.