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Want To Start Trading Forex In 2022? Here's How To Get Started

Written by Contributor, on 28th Jan 2022. Posted in Financial

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If you've decided to begin investing this year, there are many ways to get started. Popular options are stocks, gold, and even cryptocurrencies. But if you want an exciting and fast-paced investment vehicle that works both in the short and long term, look no further than the foreign exchange market.

One of the largest and most liquid markets in the world, forex has a daily turnover amounting to trillions of euros. Trades here are based on currency exchange rates, which in turn are affected by factors like current events and a country’s financial policies.

In particular, this year may turn out to be especially lucrative for Irish traders, with the European Commission doubling its growth forecast for the Irish economy. If you're interested in venturing into this highly dynamic market, this quick and simple guide can get you started.

Gather what you need

Forex is one of the most accessible markets today. Since it trades in currencies, the market is decentralised and open 24/7 across various time zones. Consequently, all you need is a strong and speedy Internet connection to get started. The quality of this connection is crucial. Currency values can fluctuate within minutes or even seconds in response to real-time events. A good connection will help inform you of these events so you can open trades accordingly. You also need to determine how much capital you wish to use in your initial trades — which, as a general rule, should be as much as you're willing to lose. As we'll discuss below, brokers can help you start with nearly any principal amount while lowering the risk on your transactions.

Select a brokerage platform

Business World contributor previously discussed why forex brokers are crucial for trading success. For a fee, they give you easy access to the market and even advice customised to your investment goals. Reputable brokers are regulated by the Central Bank of Ireland and comply with the EU's Markets in Financial Instruments Directive (MiFID). One option you may want to consider is FXCM. Aside from providing fast trade execution and reliable customer support, it also lets you open an FXCM account in as little as three steps. An additional demo feature makes it an excellent choice for new traders wanting to familiarise themselves with the market. If you're looking for a hands-off trading experience, there are also algorithm trading platforms that analyse trends in currency value, predict future movements, and automatically place trades for you.

Choose a strategy

If you wish to forego algorithmic trading and instead deal in the market yourself, a strategy will help guide your trading decisions. Day trading is one of the most popular methods used in forex. It involves making trades that are open for less than a day, so you're liquid by the time the market closes. These trades are usually dependent on current news events. Meanwhile, position trading is a long-term strategy that relies on more overarching policy decisions like those made by central banks. Here, one identifies a trend in price movements and buys into a currency that's on the rise. Once the trend peaks, they close the trade and sell the currency to get maximum returns.

Adapt a slow-but-steady-attitude

No matter what you choose, though, try to enter forex slowly and increase your trades with experience. You should consider Trading Psychology when making decisions. This phenomenon finds that greed and fear can warp data-driven judgments and lead them astray. Along with starting small, keeping emotions out of your investments can lower the risk on your trades and ensure the success of your very first ventures into forex.

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