Forex trading is strange, because it is both difficult and easy. It is difficult due to the involvement of various effective factors, as a successful trader needs to consider all of them. On the other hand, it is then easy when a trader has achieved a reasonable perception of the forex trading both in theory and practice.
Another aspect of the forex difficulty, which normally leads to traders’ failure, is the involvement of psychological factors, as it is truly hard to control them properly. A forex trader needs to control his greed, pride, hurry and temptation.
Opening a Demo Account
The first step in starting the forex trading is to open a demo account. At this stage, it doesn't matter which broker; but it is better to try the candidate brokers for real trading (see below). If someone has no knowledge about forex, a demo account is still useful. It is similar to a game, fun and challenging; and on the other hand, there is nothing to lose. This helps a newbie to get to know the forex environment.
Reading the forex books and guides does not make sense when someone has never seen a trading platform. Opening a demo account provides a great opportunity to put the theory in action and to see the results. Furthermore, it assists a newbie to get familiar with the charts, which are the essential part of forex trading.
Learning the Forex Facts
First of all, a newbie needs to read some introductory articles like What is Forex? and Forex Online Trading. Then, some advanced articles clarifying the common trading strategies and tools are mandatory. In addition to the forex trading, a newbie should learn features of a good broker, as he needs to choose one for his future trading careers. Some important facts like the Leverage Offered by Forex Brokers should be taken into account.
Trading on a Micro-Account
A common mistake in forex trading is that a trader starts to trade on a real account, just after an initial success in a demo account. A demo account is significantly different from a real account in a variety of ways. Most importantly, psychological factors, which are very critical and essential in forex trading, are not normally involved in trading in a demo account. Moreover, the trading results usually lead to false psychological conclusions.
For instance, when a newbie trader wins in a demo account, he consider this success as his maturity in forex trading; whereas, a loss may be considered a stupid risk and he believes that he obviously will not make this mistake in real trading (in other words, it only happened here and it is just a game).
Risk management is usually ignored in a demo account, and a newbie takes big risks leading to significant wins, which entice the newbie trader. This apparent success is truly enticing, particularly as the amount of money in demo accounts are so high, leading to a psychological (false) self-confidence to make as much money in a real account.
In addition, there are other important differences between a real and demo account, such as their server. Brokers use different data servers for their real and demo accounts. Thus, a fast demo server does not guarantee a fast server for real trading too. It also should be emphasized that a newbie trader cannot judge the service of a broker via a demo account, as most important issues like fund deposit/withdrawal are never an issue in a demo account.
Therefore, a newbie trader should begin by examining his skills in forex trading in a micro-account. In this case, his real money includes the psychological factors, yet the money is not enough to lead to the trader’s bankruptcy upon a possible failure. Furthermore, the trader can also examine the broker by trading on a real server and getting involved in other issues associated with a broker.
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