Back in 1995, the total daily trading volume in the global forex market was just $1.2 trillion. This had increased to $5.1 trillion by 2016, while the number by the end of 2020 has reached $6.6 trillion.
This increase has been largely driven by a rise in the number of part-time and retail traders, who have been empowered to enter the market during a sustained period of digitisation.
But what steps can aspiring traders take to get started in the forex market? Here are some steps to help you on your way!
What is Forex Trading?
Let’s start with the basics; as forex trading describes a global marketplace in which investors buy, sell and trade international currency pairs as derivative assets.
This enables individuals to trade currencies without assuming ownership of the underlying financial instrument, creating far greater flexibility and enabling speculative trading that can deliver a profit even in a depreciating economy.
Interestingly, the so-called “major” currency pairs (which comprise around 68% of all daily trades) also offer tremendous liquidity, while the market is also known for offering inflated leverage to customers.
In fact, you can access leverage of up to 200:1 through even reputable forex brokers, enabling you to open and control disproportionately large positions with a relatively small cash sum.
How to Get Started
The question that remains, of course, is how can you get started successfully as a forex trader? Here are some steps to keep in mind:
- #1. Research, Research and More Research: Ultimately, knowledge is power in the global forex market, as understanding the sector and its unique fundamentals is key if you’re to trade successfully over time. Not only does this broad base of theoretical knowledge inform your trading strategies, but it also creates a much-needed sense of determinism that can hedge against emotive trading and allow you to operate with a more logical mindset.
- #2. Open a Demo Account: While having a broad base of knowledge is important, this means little unless you’re able to utilise this effectively. This is where a so-called “demo account” can come into play, as this enables you to trade in a simulated, real-time marketplace without risking your hard-earned cash. You can usually access a demo account through an online web trading platform for between three and six months, creating a crucial bridge between knowledge and understanding and practical trading experience.
- #3. Start Out Small and Scale Your Efforts Over Time: When you start trading for real, it’s important to start small and scale your efforts organically over time (usually in line with increased experience and profitability). In practical terms, this means starting out by trading one or two highly-liquid currency pairs, before diversifying into minor or exotic pairs and eventually creating a broad portfolio that includes a much wider selection of assets.