Five Ways to Become a Master Forex Trader

Whenever you learn something new, you need a combination of patience, research and time. Foreign exchange trading (forex) is no exception, although once you pick it up, you can quickly become a master of it. Forex involves trading one currency against another, deciding whether one half of a ‘currency pair’ will become more or less valuable over a set period of time.

If you’re used to spending or selling in Dollars, Euros, Yen and Rubles, even if your native currency is Pound Sterling, you already have a head start. However, there are three steps any novice forex trader must take before mastering this financial art.

Step One: Pick a Broker

Without a forex trading broker, you won’t be able to trade forex; it’s that simple. When picking one, make sure that they have a trading platform that’s easy to use, so that you can start and stop trading as and when you see fit. Then, when learning how to trade forex, you won’t worry about it crashing when it’s least convenient.

Step Two: Read Your Economic Calendar

After picking a broker and reading up on trading, the next step is to look at big financial events coming up. Through an economic calendar, you can find out when interest rate announcements and other big financial news is coming and what the markets expect. Follow it closely before you trade to help you decide which currencies you would like to trade with.

Step Three: Learn About Indicators

Forex trading can be tracked by different types of indicators that let you know if each trade is going as planned. The first one you should know of is a trend follower – this lets you know which way currencies are heading, using a simple moving average. Secondly, you should learn about trend confirmation tools, which verify if a trend is genuine.

After that, tools that tell you if a currency pair is oversold and when to take a profit are must-haves. They should be available through your broker.

Step Four: Create a Trading Strategy

Next, work out how you would like to trade forex. A clear strategy, which states when you want to open a trade and when you want to close it, is advisable. While it can be flexible, it’s better to stick to the same pattern as you learn how to trade. It’s better than just jumping straight into the deep end.

Step Five: Keep Following the News

In tandem with Step Two, it always pays to keep following financial news. Without necessarily having to visit, say, the BBC, Bloomberg or CNBC, you can just type in a search term on Google or Bing and see what’s happening around a particular currency.