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While trading is a way to earn money on your own, you will have to learn some trading basics before you will be able to earn money. Professional market participants know many analysis tools and apply them in various strategies. After learning the basics, you can practice your skill in demo trading.
Learning the Basics
Trading is not only about luck but also about skills. This is why, before placing your first order, it is better to learn the basics of financial markets. First and foremost, you should learn more about support and demand and how they affect the price.
The next step is to learn more about the existing market analysis methods. There are two of them — technical and fundamental forecasting methods. The first one is about working with the price. It includes various math indicators and graphic tools like support and resistance levels, trend lines, channels, etc.
Fundamental analysis helps you to understand the current market situation and predict the future using macroeconomic indicators like interest rates, inflation, unemployment rate, PMIs, etc. Fundamental analysis can be used for predicting long-term price fluctuations, while technical analysis can be used even for short-term forecasting.
Creating a Strategy
To proceed with this Forex trading for dummies guide, it is to mention that all skilled traders use strategies to make reasonable market decisions. Those strategies include the description of tools that they consist of and general rules, describing the signals that they provide.
To create a strategy, you should basically learn an indicator or a graphic tool that you are going to add to your trading tactics. Moreover, you should also be aware of how to set your tools up to get the most of them.
Before trading for real money, it is better to practice your trading tactics without risking your own investments. Most Forex brokers allow you to start with demo mode, which is a good opportunity to test a strategy with virtual money. It is recommended to set the amount of virtual funds, which is equal to the sum, that you are going to trade with.
Money and Risk Management
Careful money and risk management planning will help you to gradually increase your trading balance. All modern trading platforms include special money management orders like Stop Loss and Take Profit, allowing you to automatically cut your risks and let your trading profit grow.