Every investor knows that the best way to balance risk is through the diversification of your portfolio. It pays to have investments across a myriad of different markets, so that chaos in one can never be the cause of disaster for you.
However, recognising this fact in no way lessens the complexity of entering new markets. Every investment field has its own rules and peculiarities, and being successful in one never guarantees that you will do well in another. That’s why we’ve created this handy little guide for those taking their first forays into the world of forex…
Step One: Choose a Currency Combination
The first step for any new forex trader should be to select a suitable currency combination. There are thousands of different pairings to choose from, each of them carrying their own level of risk and opportunity. What suits one trader will not suit all, so it’s incredibly important to spend some time researching their various strengths and oddities, and seeking out the advice of experts. Never make a decision based solely on the current market performance of a combination; rather, take into account your personality, tactics, and approach to risk, and use these factors to find a pairing that will complement them.
Step Two: Choose a Broker
Once you’ve chosen a suitable currency pairing to begin trading, it’s important to find a broker that can accommodate you. The foreign exchange is a little different to other investment fields, in that there is no central marketplace. This makes the brokerage firm you choose absolutely central to your future performance. It’s incredibly important to select a provider offering the correct level of support, based on your experience and time availability. For those with some skill and practical experience, an execution-only option may suffice; for all others, a discretionary or advisory service will prove infinitely more suitable.
Step Three: Choose a Trading Platform
Once you’ve set your heart on a particular broker, you need to assess their trading platform offerings. Most firms will offer multiple applications, so spend some time testing demo accounts to find the one that most closely fits your needs. It’s often helpful to draw up a rough table containing each of your options, and add some notes to help you compare them. Be sure to assess factors such as ease of use, aesthetics, and the tools that are available to you, in order to narrow them down and find the perfect platform for you.