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Forex Trading Guide - Opening Your Forex Account And Maximizing Your Chances Of Success
Choosing Your Account Type
If you are trading the Forex part time as a (hopefully paying) hobby, then you can open an account in your own name. However, if you intend to trade the Forex full time, as a full time income earner, then it is best to open a business account. Of course you can use your own name as the name of your business. Opening a business account makes it easier when dealing with the IRS (HMRC in the UK).
You will also need to decide whether you want to open a standard account, (dealing in standard lots of $100,000) or a mini account (dealing in mini lots of $10,000), or if available, a micro account (dealing in micro lots of $1,000).
Always aim to open the smallest account possible when you first start trading. If you want to trade with larger amounts, you can simply trade with more than one lot at a time.
Make sure you read, and understand the fine print. Also make sure you open a Forex Spot account, and not a “forward” or “futures” account. After all, you want to be able to trade in real time.
You will most likely need to print and fill out paper forms, and mail or fax them back to your broker before you can start trading. When your broker has approved your application they should contact you with instructions on setting up your account. They will also explain how you can fund your account. They should also send you your user name and password so you can log onto your account online.
Warning: Only trade with real money after at least two months practice with a free demo account.
Maximizing Your Chances Of Success
You must be realistic. Although the Forex has the potential for making large profits, it is not a get rich quick scheme. You are not going to profit from all of your Forex trades. Even the most experienced Forex traders sometimes get it wrong and make losses. The best you can aim for is to make more profitable trades than losing trades.
Don’t trade with money you cannot afford to lose. You should have at least 10 times your margin in your account. If you lose all the money in your Forex trading account, it should not leave you broke, without cash to buy food or pay your electric bill. Do not expect to open an account with a couple hundred dollars today and become a millionaire by tomorrow.
In reality, only a very small number of Forex traders are successful. The reason most traders fail is because of one or more of the following:
They do not have the discipline to demo trade for long enough.
They expect to profit from every trade.
They are reckless, and trade with money they cannot afford.
They let their emotions influence their trading strategy.
They trade with margins that are too small, i.e. too much leverage.
They don’t take their trading seriously enough, and don’t trade in a businesslike manner.
They try to make bigger profits by taking unwise risks.
They start trading with (and losing) real money, before they have learnt their craft properly through demo trading.
They start trading with multiple currency pairs, before they are competent with just one currency pair.
It is essential that you become competent demo trading, before you risk one penny of real money. Would you expect to become a doctor, surgeon or a lawyer overnight? So don’t expect to become a competent Forex trader overnight.
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