A lot of people nowadays are using Forex trading to supplement their income and to help them make ends meet in the dire financial times. A lot of these people have no background in economics or finance and have to learn how to trade Forex from scratch. As a new trader, learning to trade Forex can be a daunting, based on the volume of information that has to be learnt and the constantly changing markets, not to mention all of the sharks out there lining up to take advantage of new traders who are seeking guidance and help. So as an aspirant but uneducated trader, what is the best way to learn to trade Forex profitably?
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One way to learn to trade profitably and to learn to trade quickly is to invest in a good Forex system which will give you the basics you need to learn to trade quickly and profitably. But with all the scams out there, how do you find the best trading system? There are a number of things you can do to ensure you get the best Forex trading system for you, whilst avoiding the scams.
The first thing you need to do is have a sound basic knowledge of the Forex market. You need to know what basic concepts like pips, leverage and margin mean so you can spot the scams when you see them. And you need to know what you can risk and the amounts generally risked on a good Forex system. For example, it is possible to turn $100 into $10 000 using enormous leverage and margin, but the chances of doing so are less then if you went to the racecourse and then you are trading like a gambler not a trader, so where a trading system suggests using huge leverage as a beginner it should sound alarm bells that the system is dangerous, for experienced trader let alone beginners. The same goes for systems which promise to make you rich overnight – yes it is mathematically possible but the truth is that at some point, if you trade using these margins and leverage amounts then you will most likely blow your account.
A consistently profitable system balances
Next you need to know what the limits and basis are of a good system are. A consistently profitable system balances risk and reward. There are systems and robots out there which show astounding returns and profits – some of them claiming to have win rates of over 90%. There are few, if any real trading systems which perform like that. The truth is that trading has its fair share of losses and even the best systems in the world show losses. How the scam artists achieve these incredible win ratios is by having huge stop losses or no stop losses at all. They have trades that are running with huge minus amounts but those trades do not reflect on the account because they have not been closed yet. A good knowledge the basics of a good system – leverage, stops etc will help you to avoid these scams.
You also need a basic knowledge of fundamental and technical Forex analysis. Essentially fundamental analysis is based on economic data and is generally determined by the economic climate and economic data releases released by the various countries. Technical analysis is generally based on the chart and chart data is more mathematically orientated. Knowing enough about both is essential to trade profitably and also essential to be able to discern what type of trader you are. Once you know you enjoy a certain type of analysis, then you are able to narrow your search to those types of systems which are based on that kind of analysis.
There are all sorts of people trading Forex, from full time professional traders, to part-time traders who have fulltime positions elsewhere. Knowing how much time you have to trade and then researching how much time a particular system requires will save you from buying the wrong types of systems. A scalping system for example generally requires you keep an eye on the markets almost of a fulltime basis whereas a day trading type system may only require you to look at the charts once a day or every few hours. That is why knowing how many hours you have to trade can help you find the best Forex trading system and help you to eliminate systems which you may not be able to implement.
Once you have selected a few systems, do some research on the system you have chosen. A lot of systems look genuine on the outside, but if you do some research, some of those systems do not work or are out and out scams. One of the best ways to avoid the scams and systems that don’t work is to research the company and the system. Search Google for reviews on the author or owner of the system. Also search for reviews on the system itself. There are a number of independent third party review systems which allow previous clients to write reviews on the system. Read these reviews. They will give you a good idea of the system and even the potential pitfalls of the system.
Finally, once you know the type of trading will suit you and you know you will be able to implement the system in the available time you have, and you know that the company or person offering the system has a good reputation within the market, then its time to consider making an investment in the system.
I hope the above tips will save you a lot of time and wasted money in finding the best Forex trading system for you.