How New Forex Traders Can Set Themselves Up for Success
Forex trading markets as we know them today have been around for about 50 years, but are still attracting new investors. In fact, we’ve seen a rise in forex activity in Nigeria just recently. Nairametrics’ analysis of forex’s growing popularity noted that some $1.25 million is traded in this market from Nigeria on a daily basis. And this is attributed essentially to the fact that traders are continuing to see the FX trade as a suitable option for diversifying their investment portfolios.
Because this appears to be an ongoing trend, we’ve decided to post a few basic tips that new forex traders can use to set themselves up for success.
Get Familiar with Major Currency Pairs
For forex traders in Nigeria, it’s tempting to look at the currency markets from the standpoint of the Naira. This is fine, and it’s certainly an option to trade Naira-centric currency pairs. However, we’ve recently seen that limiting a strategy to native currency can be problematic as well. The Naira sunk to a four-year low toward the end of 2020, and though The Guardian’s 2021 projections suggest that it will recover, many Nigerian traders lost money on the currency’s recent devaluation. This is an example of why it can be best to assess forex more broadly, looking at currency pairs around the world and finding opportunities, rather than prioritising local currency. Newcomers in forex should take the time to get familiar with the most heavily traded pairs and consider the trading potential in all of them.
Try Demo Trading
Another essential step for new traders is to try demo trading — which is basically just what it sounds like. Today, there are reputable forex trading platforms online that include demo programs. These are designed to mimic the movements of the actual markets and allow users to make trades with what is essentially fake money. When you’re new to the market this is a very helpful way to get used to issuing transaction orders and trying different strategies without real risk.
Learn to Read Heat Maps
New forex traders should also get used to using a variety of analytical tools to gauge the market — rather than simply looking at isolated currency pairs and viewing price movement. Chief among these tools are heat maps, which exist to help forex traders visualize currency markets in a more comprehensive and meaningful manner. The heat map tools by FXCM clearly demonstrate the effectiveness of this kind of visualisation, showing that more currency prices can be compared at once, and fluctuations in value can be made much clearer. Learning to read and understand tools like these is actually a fairly straightforward process, but it can meaningfully improve a new trader’s understanding of the market.
Choose the Right Broker
It is also essential to do adequate research and find a reliable, trustworthy broker before actually beginning to trade. Our take on ‘Forex Brokers in Nigeria’ dug into this idea in a little bit more detail, noting that the number of brokers has soared of late, making it all the more essential to take the time to find one that will work well. With the right broker, a new trader can enjoy a smooth and secure experience, and focus on the actual trading rather than other concerns.
Success in forex will also require a lot of effort, learning, and practice. But these basic steps will go a long way toward preparing new traders for this particular trading market.