Image source: unsplash.com

What you Need to Check Before you Make your First Exchange Deal

Forex and investments in exchange-traded assets are actively advertised all over the Internet. Thousands of novice traders are trying to find a “magic source of income” on the exchange, to get rich quickly or to make money without putting any effort into it. As a result, thousands of traders lose their deposits.

The reason for such monetary losses is an incorrect assessment of one’s capabilities, a lack of understanding of market mechanisms, a desire to get everything at once. It’s impossible. And if someone offers you such earnings he is with a high possibility a scammer.

Another reason for the possible loss of investment is a wrong assessment of the situation. Many traders don’t even understand what they need to have before they enter their first trade.

You need capital

Image source: unsplash.com

Speculation in foreign exchange or stock assets is a high-risk transaction. If you do not have investment capital for such investments, you do not realize the possible risks, if you do not have experience and knowledge, do not invest in exchange transactions. Otherwise, you will find yourself in debt or financial troubles.

Therefore, such investments require the so-called rental capital – a certain amount of money that you can spend on investments (risky investments in our case). And if you lose them it would not affect your standard of living.
Since there is always a risk of losing investments, even when you invest money in bank deposit accounts or in blue-chip stocks, you should understand that you can lose your investments in stock speculation even with higher chances.

Moreover, practice and statistics show that most traders lose their deposits. Since a speculative market is a zero-mass market, where each participant tries to make money at the expense of someone’s money losses, it is often inexperienced traders who lose money.

Therefore, do not invest in Forex the amounts that are critical for your budget, which you have set aside for buying a car or other important things for you. Moreover, do not invest credit funds and money that you borrowed. Even if you are 100% sure of the success of your exchange transactions always assume the possibility of monetary losses.

You need knowledge

Image Source: bookmyforex.com

It is impossible to just have money and start successfully trading an exchange-traded asset. Without knowledge of how the stock market works, what affects the value of assets, how the value can change depending on various factors, how to analyze and follow trends, you will lose your money.

In other words, trading is an area that requires deep knowledge, serious education, and constant professional development. It’s impossible to just watch a few videos on YouTube or read a couple of articles and start making money. That is why you’d better not start trading with real money – check your skills with demo accounts. Mostly all brokers offer such an option for novice traders.

On the other hand, be suspicious of the various paid methodologies and paid courses. They are often dangerous (because they mislead) or useless, and you will simply lose your money by exchanging it for information that is in the public domain.

You need tools

Trading stock exchange assets requires special software – a trading terminal for trading. There are several popular programs, but some brokers use their own software. Make sure the terminal offered is right for you and your needs. Make sure the terminal has those functions to minimize money-loss like ‘stop signals’.

In addition, tools are needed to obtain up-to-date information and analytics on market trends. If you can conduct fundamental analysis based on information from open sources, the media, the economic calendar, blogs and expert articles, then the technical analysis will require specialized resources or applications.

You need time

Image source: unsplash.com

When it comes to short-term and medium-term transactions on the exchange, then you will have to spend a lot of time watching the market. Otherwise, you run the risk of making less profit or losing more money. Moreover, you will need to devote to trading from several minutes to several hours daily, depending on the chosen trading strategy.
Even if we are talking about long-term investments in exchange-traded assets, you will still need to spend time monitoring the market from time to time.

There is no open-source magic software that will do the job for you and just bring you passive income.

You need a broker

Image source: unsplash.com

A lot depends on choosing the right broker. For example, the level of financial security or the potential profitability of exchange transactions in the future.

Unfortunately, nowadays the services of “brokerage” are offered not only by licensed companies but also by scammers who disguise themselves as exchange participants. They can also have beautiful sites, good reviews, and attractive conditions for cooperation, but in the end, you will lose your deposit, your account will be frozen or conditions will be created so that your trades end in failure.

Therefore, you should pay attention to the choice of a broker that is reliable and suitable for you in terms of cooperation.

Be sure to check the availability of a license and other documents that are issued by central banks and financial regulators in your country (these data must be in public registers). If the broker is located offshore, there is a risk that you will lose your money and will not be able to get it back, even if you go to court for help.

Certain assistance in choosing a broker is provided not only by independent sources but also information on independent rating resources as well as forums, blogs, social media groups.

One resource we are talking about is tradersunion.com. On the pages of the site, you can read reviews of brokers, reviews of working with various brokers, check the blacklist, compare the sizes of spreads and other commissions. Be aware of the possible presence of advertising and anti-advertising information, so double-check all data.
There are also ratings from international agencies that evaluate large brokers with licenses and large cash turnover.

About Suzan Vega