Safe trades: how a newbie forex investor can get started

When it comes to foreign exchange trading, there’s no such thing as a safe trade. No matter whether you’ve been trading for years or you only just started yesterday; nothing is ever guaranteed. Every transaction comes with a risk of loss, and there’s nothing a trader can do to prevent that. But if you’re a new trader, there are some steps you can take to help get your foreign exchange career off the ground gently and in an experimental way.

Risk-off currencies

First off, it’s worth noting that not all international currencies are created equally. Some currencies are known for having a higher level of inbuilt volatility than others, and that can be significant for a new forex trader looking to get started with an exploration of the markets. There is a wide range of reasons why a currency can be inherently risky. It may be exposed to a commodity like oil, for example, or it could be a particularly sensitive node in the global trading network.

Currencies which fall into this category include the Australian and the New Zealand dollar, given Australia’s current trading relationship with China. That is especially pertinent at the moment given the volatility caused by the coronavirus pandemic.

Other currencies, like the British pound, are sometimes included too – although the category certainly can shape-shift. As a new trader, it may be worth avoiding these until you have more knowledge about the triggers. That’s not to say there’s no volatility elsewhere in the markets. It merely means that it could be easier to learn the price action movement triggers for pairs like the US dollar/Japanese yen, for example – and as a new trader this could be a godsend.

Demo trades

Depending on the broker you choose, you may also be able to practice your trading before you even get started with real money. Many brokers offer the opportunity for traders to place unlimited practice trades which require no capital – but which, of course, do not offer cash results. While these are not “trades” in the strict sense of the word given that there’s no financial side to the transaction, they are a great way to find out how each relevant pair works. Not all brokers offer this sandbox-style option. But if you compare forex brokers using a comparison tool and read some reviews, you’ll soon be able to find out which brokers do offer it and which do not.

So while there is no guaranteed way to make money on the foreign exchange markets, there are some ways to get to grips with the forex trading world. Whether you choose to trade some easier to understand risk-off currencies at first and benefit from their lower volatility or you choose a broker with a demo trading option, there are several ways to ease yourself in gently.