Forex market is simpler compared to the stock market. You buy currencies and sell them for a profit. It sounds quite simple in the definition, and it is; however, one needs to study and experience the forex market before he can earn from it. Many people make their living off forex market, and they're doing a pretty good job. On the other hand, a lot of people face a terrible loss at the beginning of their journey. Here I've shared a few useful practices to follow when getting started with forex trading to avoid any loss.
Study the Market
You need to have a complete understanding of all currencies, their exchange rates, and everything else you should know about the market. Don't jump into the market like playing a gamble. Treat it like a business, and it will give you profit like a business. Only when you understand how to analyze charts and patterns and make decisions based on facts and figures should you make any investment.
Find a Good Broker
Forex doesn't have a central marketplace of its own, so most of its work is dependent on the brokers. A good and trustworthy broker is your most important tool in the forex market. There are plenty of individuals and firms that offer brokerage service, but not many of them are reliable. They can fool even the most experienced traders. You won't be able to earn your place in the market until you find the right broker. You should follow this useful guide on finding the best broker for currency trading.
Don't Get Overenthusiastic
Take one step at a time and don't get overenthusiastic seeing other people earn a lot of money. Many people make a big mistake of investing too much too soon. You should always start with a small investment. See how it goes and what new things you've learned. Every new professional should be more focused on learning than earning. Earning potential is unlimited once you make a stable position in forex trading that is based on strong concepts.
Start with a Demo Account
A demo or practice account helps you get ready for the trading without having to put real money on the stake. You can buy and sell currencies to see the outcome. While the currency rates are real, you aren't actually buying anything. It's a strongly recommended practice for new traders. You can start buying real currencies when you think you are ready for this.
Record Every Win and Loss
Keep a journal of all forex transactions from the day one you start trading. Record every loss and win in the journal along with instructions about what you have learned. This journal will help you in every step of forex trading. Each entry will make your next move smarter as it'll be based on stats and your analysis. You should also make sure that you get the right conclusion from each win and loss. You shouldn't be recording your feelings in the journal, but a tip or useful information. You might get depressed with a loss and end up writing something that isn't based on facts. Write with one thing mind that each entry will impact on your next decision.
Study the Tax and Treatments
As mentioned above, forex trading should be treated as a business if you plan to earn from it. Just like any other source of income, there are involved taxes and commissions after every profit. Some taxes might come as a surprise if you haven't studied about them. Be sure you consider all tax and treatments when trading currencies to ensure a good profit.