The best advice I can give to all new traders is to become really familiar with a forex demo account before risking any of your hard earned money trading in the markets.
When you are starting out you are excited and on a high thinking about all the money you are going to make trading in the forex markets. Great, but you also need to get to know how things work before jumping straight in.
A demo account allows you to get your feet wet while learning to swim without drowning in the mass of information out there as you are able to try out many different trading systems before deciding on the one you are confident will make you the money you desire.
One thing that you will need before you begin trading for real is a profitable system, and you may have to test several before you find one that works for you. You do not have to search very far for systems. There are many available on the internet. They are often found in the form of an ebook which you can download.
Always check your system in two ways before you begin trading for real. First, backtest it. This means that you look up the past 6-12 months’ charts (or more) and calculate what your profit or loss would have been if you had been following the system during that time.
Backtests can be very revealing but of course past results are not a guarantee of future profits so even if the system performs well in backtests, you still need to carry out forward testing too.
So second, you will operate the system on the real time market in a forex demo account. You can begin to do this at the same time as the backtesting, but using the demonstration mode will take longer because you must wait for real time changes in the markets.
Most systems rely on trends, patterns and indicators that may not occur every day. So your opportunities for trading in real time may be limited. Still you have to check the markets each day to see whether your signals for opening a trade are there.
Forex day trading or scalping systems are a quicker way to trade. The aim here is to make a small profit on many short trades, often lasting only a few minutes. Day trading is generally considered riskier so it is probably not the best choice for a beginner, even though it is tempting to see quick results.
Whatever system you choose, be sure to run it in demonstration mode for several months and be making consistent profits that way before you switch to real trading. This requires patience, but patience is something you will need as a successful forex trader so this is a good way to develop it.
Most brokers will provide a free forex demo account and they are a great way to test your system and hone your trading skills risk free.