FOREX FOR BEGINNERS: TO BAN OR WARN?
Forex for beginners: Do Forex brokers need to limit services for beginners. Forex recommendations to dealers. How to choose a forex company.
In this issue, I would like to move away from work and life tips on how to become more affluent, more efficient, and more successful in addressing the issue of trading again. Today I want to share with you my thoughts on the topic of opening accounts with brokers for newcomers to forex. The idea of this article was inspired by the talk that the Russian forex regulator is thinking about allowing only professional traders to the market, i.e., those speculators who have already confirmed their qualifications by passing prof. Exams. Let’s think about whether a newbie trader needs such an intense “care.”
To begin with, I suggest thinking over two fundamental questions: “Who is a newcomer to Forex?” And “Why is the first deposit lost?”.
WHO IS NEW TO FOREX?
A beginner forex trader is a person who is interested in trading in the foreign exchange market, seeing ads about earning opportunities without leaving his home or on the Internet, while only starting to delve into the essence of what is happening “on the other side of the terminal.”
Most likely, this is a person who reads something about trading, about “bulls and bears,” about leverage and having an idea of how transactions are opened. I think that he has already successfully opened deals on a demo account several times, and he has a very approximate strategy, which was formed in his head, or he read it somewhere.
And finally, a novice trader knows how to make money if it is cheaper to buy a dollar for rubles, and then sell it at a higher price, but don’t know about leaks, requotes and floating spreads ( Do not know what this is? See at the end of the article ). Those. In general, a person who decided to try his hand at Forex understands what he will do; difficulties only open when he comes across nuances that are not visible at first sight.
WHY DO TRADERS LOSE DEPOSITS?
Why do traders mostly lose their first deposit? Sometimes, but not often, just because of ignorance of the above nuances – the strategy assumes a low spread. On the news, it expanded when the trader did not notice, requotes in busy time did not allow to close the deal on time, the market opened with a group, and so on. Usually, these situations are incredibly puzzling for beginners and their deposit, and therefore (as a positive) they stimulate to deepen their knowledge or (as a negative) write a complaint somewhere.
More often than not, the first deposit merges due to an unstable reaction to what is happening, or, more simply, to a human factor or psychology. Losing real money is very different from the minus on the demo: closing a deal at a loss is more difficult, as well as enduring a profit of 40 points when there are already 25. About funds management systems and discipline rarely anyone remembers at such moments. The euphoria of self-importance or confusion in case of loss cripples traders and managers with many years of experience, let alone beginners.
As Sergey Kozlovsky of Grand Capital successfully noted: “The level of financial education and the success of a trader are not always interdependent. There are frequent cases of complete loss of capital by investors with FSFM qualification certificates. At the same time, success stories of self-taught traders allow us to state that financial literacy is a loose concept. ”
Separately, it is worth noting the issue of leverage. Quite often, even experienced traders do not fully understand the principles of margin trading and the risks of significant leverage, to say nothing of novice speculators, who are frightened by the word “credit” on the one hand and, on the other hand, are happy to be able to trade for $ 100 as well as for 100 $ 000 Big profits are always significant risks, but realizing this can be difficult. Therefore, newcomers to Forex often lose their deposits due to the wrong leverage.
“It would be simpler to say that newcomers should not offer services that they don’t understand, but still it’s the company’s task to convey the essence of the offered products and make them understandable,” Igor Volkov, president of MFX Broker.
WHAT A TRADER NEEDS TO KNOW TO START TRADING FOREX
Let’s summarize what a forex trader needs to know to more or less prepared and consciously start trading:
- What is forex, and how does it work. What are the risks of Forex trading?
- How a forex broker or dealer works: receiving quotes, transactions, commissions, spreads, etc.
- About how the terminal works and transactions are completed.
- What is leverage, what risks does it carry?
- What is a money management system (Money Management), how to use it, and why?
- On trading strategies and market movements.
- On the psychology of trade.
Even a general understanding of these issues will reduce the risk of losing the first deposit, as well as the number of complaints and appeals of novice traders to regulators and forex communities with questions about company fraud.
“So that traders can earn money in the financial markets, it is necessary not to introduce restrictions, but to increase financial literacy. This is not just important; it is a crucial moment when trading forex. A trader must understand what bid and ask are, collateral requirements and leverage,” confirms my opinion, FxPro PR specialist Evgenia Konovalova.