Trading can be a great way to make money and control your own financial future. It's also a very complex activity that will burn you out quickly if you are not trading in a style that fits your psychology.
If you're new to trading and are considering forex vs crypto, know that it is important that you start learning with the right knowledge.
This guide aims to walk you through the basic steps if you want to test your skill in forex; you might also wish to use tools such as the TradingView app to help you out.
Open a Practice Account
A practice account, also known as paper trading account, is where you can start trading with simulated money before committing to real funds. Practice accounts are completely free and will give you a chance to learn the basics of forex trading with no risk. So if you want to get started fast, this is the way to go.
There are thousands of brokers out there that offer these kinds of accounts, but it's important that the broker you choose has an established reputation because that means they're trustworthy and their software is safe.
Practice accounts can be used for getting used to watching live market movements on charts, learning how orders work in real-time conditions, practicing how to place strategies like buy stops and sell stops, or even just getting comfortable with placing trades.
Paper trading will not teach you how to handle emotions in trading as you don’t work with real money, but it is still a valuable tool. So, make sure that whatever software your chosen broker has for its accounts is easy to use so nothing holds you back from getting started quickly.
Find your Trading Style and Strategy
The next step to becoming a successful trader is developing your own trading strategy or at least knowing what trading style you are comfortable with.
While in cryptocurrencies you have the freedom to choose long-term strategies or even DCA and buy&hold, forex will only be a good fit if you are comfortable with short-term trading. This is something you need to find out for yourself.
Either way, you will be able to make better decisions and stay on track if you have a plan in place.
Master Your Emotions
Mastering your emotions is arguably as important as knowing the fundamentals of your financial instrument - be it national currencies or cryptocurrencies.
Every single person has a different emotional makeup, which makes it challenging to generalise how you should manage your own emotions in relation to trading.
However, we can all agree on some basic principles: Emotions can cause us to make bad trading decisions because they tend to cloud our judgment. This applies to making decisions related to money matters and elsewhere.
Generally speaking it makes sense to take a break from trading if you are feeling emotional, stressed, angry, or are otherwise not in a fit state to think clearly.
Have a Trading Plan
A trading plan is a written document that describes your expectations for the future. It's a road map for your trading and should include your goals, strategy, and risk management plan.
A good trading plan should include:
- The type of market (i.e., forex, stocks, futures) that you will trade in and why it's appropriate for your goals;
- An idea about how many positions or contracts you'll open at one time;
- How much leverage (margin) to use;
- How long each position should last before being closed out in order not to lose more than what's lost in any single trade;
- How often to check on all active orders and positions (some people like checking every day while others do it once per week).
Learn to Read Charts
Charting is a big part of both forex and crypto trading, although crypto and forex each have a different sort of typical chart patterns.
Charts are a visual representation of market activity. They are used to help traders make decisions, identify trends and support and resistance levels, identify chart patterns, and much more.
The best way to learn how to read charts is by reading them once a day for a few months until you become comfortable with what they look like when they're "normal" or "strange".
I hope this list was helpful in giving you a better understanding of how to try trading forex and see if it is a good fit for you.
If you are a crypto trader, you probably know that there are ways to trade all sorts of TradFi instruments in tokenized form, but if you are serious about trading those assets, you should look into their own platforms.