Are you new to the trading world and ready to make the transition from a demo account to a real live account? Like many beginners, the question is how much money will I need to start the journey. This post will go straight to the point and give you an idea of what to know.
Before you start trading it is important to focus on learning, learning more and practising the skill. Next, put in hours and hours of practice with a demo account till you feel you have a strategy and are profitable. Being profitable is having a streak of more wins than losses consistently for a long duration. So let’s say you have done this and are ready to move on to the next stage. That’s moving on from using a demo account to a real and live trading account. It will be advisable to use an amount that doesn’t mean much to you, one you are willing to lose. This amount will vary per person but if you can lose one hundred dollars ($100) or equivalent start with that. For someone else, this amount could be less or more.
Trading a 0.01 lot size to grow your account
Start with one hundred dollars and use the 0.01 lot size. Doing this prevents you from blowing your live trading account with one trade. Practise taking out trades and sticking to your plan. Yes, you need a plan and you’ll need to stick to it. Trading is said to be a get-rich slow method, doing otherwise can lead to not sticking to plan and over trading, which will lead to losing everything.
You really need to have a plan and a strategy to prevent you from jumping into every trade. When you have a plan, you wait for your setup and stick to your risk management. This will help you build consistency, and master your psychology and emotions.
When you are doing this and everything is going well, meaning you have grown the account from about one hundred to two hundred, you can now add more or just keep growing it. Just don’t go crazy and throw your whole life savings in there.
Losses are part of trading so don’t be afraid of failing, let failure teach you a lesson and don’t give up. Go back to the drawing board, backtest and learn more. All the best in your trading journey.
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Online trading is becoming increasingly popular, with Modern Trader reporting that the number of global online traders has grown from 9.5 million four years ago, to more than 15 million today.
Dany Mawas, Regional Director at INFINOX, a leading CFD and FX broker with an international presence including in Africa, attributes this growth to technological advances, which makes trading convenient and fast. Traders can now trade from anywhere and at any time and will get quick, easy access to the markets.
“Apart from the potential of achieving lucrative financial returns, additional benefits of online trading includes greater financial knowledge and developing associated skills with trading like discipline and emotional control,”.
Dany Mawas
How to start online trading
There are those that are apprehensive about starting online trading, due to the associated financial risk. To put them at ease, Mawas notes that while fine-tuning trading skills comes with experience, the best way to start is to open a demo account with one of the many online trading partners available today.
“A demo account is a simulation account that provides users with the opportunity to place trades and to become accustomed to how markets move,” he says.
Additionally, some online trading brokerages provide bonus incentives to boost traders initial deposit and give them a better platform to start on. With INFINOX, traders are only required to deposit as little as US $50 and will, in turn, receive an additional US $25 bonus. Meaning that 33% of their at risk capital is the bonus.
However, he points out that traders should also do their due diligence when selecting the brokerage to partner with and not only base their decision on the starting bonus. “This includes investigating where the brokerage is regulated, and ensuring it has a physical presence instead of merely being an online entity,” says Mawas.
Determine your plan of action
Mawas notes that although there are several game plans that beginner traders can adopt to gain profits on their investments, the old adage of ‘over-analysis leads to paralysis’ couldn’t be more true. “When developing a strategy it is vital to spend time researching and learning what works best. The more you perfect managing your risk, the better you become. If I could give one piece of advice, it would be to start simple and keep it simple.”
Mawas emphasises that trading is a humbling experience due to its binary outcome of either making the right or wrong decision. “As such, it is important for traders to have emotional control and the willingness to learn from their trading mistakes.”
Being emotionally invested can be detrimental to success, he adds. “Often, when the market dips, traders will make the emotional decision to continue trading in the hopes that they recover quickly, which often doesn’t happen. It’s imperative to assess each situation for what it is and to make the most informed decision.”
Why trading is more accessible
Current affairs such as COVID-19, the U.S election, and Brexit have prompted people to stay more up-to-date with current news, says Mawas. “This is important as the outcomes of these events have an effect on the markets. Nowadays people are more clued up than they think they are when it comes to knowing what is happening and what could impact their trading. This knowledge makes trading more accessible for those that wish to start.”
He also states that the internet is full of useful information for new traders to digest and that websites such as IX Intel offers manuals and how-to guides to help traders learn the basics of a successful trading career.
Mawas points out that the rise of social trading has also increased accessibility for beginner traders. “Social trading apps such as IX Social, allows users to access all the financial markets at their fingertips with the added bonus of tapping into other traders’ knowledge. Users can auto-copy top traders and receive the same results that they do.”
“Today, online trading is an easily accessible journey, and anyone can be successful if they use the right tools and spend time developing the necessary skills and acumen,” concludes Mawas.
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With cryptos not looking appealing with recent trends, investors are seeking alternatives. Is forex trading an answer? Let’s take a look.
Cryptocurrency
Cryptocurrency has become a trendy investment topic over the course of the last five years or so, and it’s never been hard to see why. It offers an entirely new opportunity, decentralized and set apart from ordinary investment markets. For many in Africa, it can also be somewhat more accessible than those traditional investment markets. And, of course, there have always been arguments suggesting likely profits. That bitcoin and its closest counterparts will one day skyrocket to high values. Or that cryptos will serve as “hedges” in times of economic downturn. There is definitely some logic to all of this. But all of a sudden cryptos aren’t looking quite as appealing, which could lead some investors to seek alternatives.
Crypto mining in Africa
For starters, there’s the fact that crypto mining in Africa has begun to feel somewhat problematic. Last year, we wrote about the ‘Top Five Countries Mostly Impacted By Ransomware And Cryptocurrency Mining’. Several African nations (Ethiopia, Cameroon, Tanzania, and Zambia) were included. While not nearly as many people mine cryptocurrency as actually use it or invest in it, this does pose a larger problem. Concerns over malware could reduce the flow of new cryptocurrency into Africa, stunting the market and potentially dissuading would-be investors.
There’s also the “hedge” argument to consider. For many years now, crypto advocates have tended to suggest that digital currencies would resist economic downturns and serve as financial safeguards in much the same way gold has occasionally done in the past. Now, however, faced with its first big test on this front, cryptocurrency is coming up short. As world markets plunge in reaction to the coronavirus pandemic, NewsBTC writes that bitcoin is at risk of a massive drop-off (and it has already plunged sharply). This is not to say that the hedge argument has been conclusively disproven. But right now cryptos don’t look any safer or more reliable than ordinary market investments.
Fresh alternatives for investors
This brings us to our main point, which is that we may begin to see African investors seeking fresh alternatives. Options that are not tied to traditional stock markets, but which also don’t involve cryptocurrency. And one logical option is going to be the forex trade.
If you aren’t well versed in the forex trade, it’s actually fairly simple to grasp. At least on a fundamental level. Basically, it is the worldwide market comprised of the exchange of different currencies for one another. It is by nature a decentralized investment market, and one that operates 24 hours a day during the week. FXCM adds that it is the most liquid market in the world as well. Meaning its trade volume exceeds that of any other market (and vastly so, in fact).
In a sense, that description closely matches how many investors view cryptocurrency. The characterizations that the market is decentralized, enjoys high liquidity, and functions via the exchange of different currencies could certainly apply equally to forex and cryptocurrency. This is one reason that the former could become such an attractive alternative to African investors if indeed they start to back away from cryptocurrency. Fundamentally it’s a similar way to invest. Except that it does away with some of the uncertainty that surrounds crypto markets.
Similar?
It may also be that the similarities don’t end there, either. Another thing investors tend to like about the crypto market is that transactions occur via blockchain technology. Which ensures a certain degree of security, fairness, and in many cases efficiency. This method of trading transaction initially only found in crypto markets. However, the last year or so has brought about continual stories concerning the adoption of blockchain tech by other trading entities. For instance, Reuters covered HSBC’s blockchain venture just last year. Revealing that the company had “reduced the cost of settling foreign exchange rates by a quarter” through a blockchain-based system. This could indicate that before long a significant portion of worldwide forex trading will use this technology.
None of this means that forex trading is identical to crypto investment. There are significant differences between the two. However, if crypto does start to look like a shakier prospect, we could begin to see investors in Africa and elsewhere turn to forex as a fairly logical alternative.
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