Did you know that smart trading and investing in foreign countries can make you very rich? In fact, in the largest forex deal of all time, George Soros made more than $1 billion and crashed the bank of England in one day of forex trading. At the time, he’d had years of experience in trading, reading the market, and the capital gains to show for it.
Everybody’s got to start somewhere, though. If you’re looking to break into investing and trading in foreign currencies, check out our list of four essential Forex trading tips everyone needs to know.
1. Value Investing Is the Best Long-Term Strategy
The most basic thing traders will tell you is to buy a commodity when the price is low and sell when the price is high. There’s little difference between pure speculation and gambling. You bet that more people will buy the currency, and that will drive the price up, which is much riskier and can lead to great losses.
Value investing is one of the other ways to invest whereby you analyze the thing that gives your investment its value in order to make your decision. In stocks, you’d look at a listed company’s success, operations, and future plans. With Forex, you’d be diligently researching the base country’s economy, economic policies, and trade relationships.
If you read the Soros story again, you’ll see this was the approach Soros used to make his billion dollars. Taking a Macroeconomics course can help you learn the same fundamental skills.
2. Learn to Read Signals
Understanding the language and knowing when markets are likely to shift up or down is vitally important information. First, make sure you know what terms like “pips,” “shorting,” “bull and bear markets,” and other such financial shorthand mean.
You’ll also want to have a website on forex signals bookmarked on your phone or computer. This is especially necessary for traders who want to make short-term purchases on a weekly or daily basis.
3. Get a Broker With a Low Commission Fee
Your broker’s commission policy can severely impact your investing strategy. For instance, if they charge per trade, you’re automatically incentivized to make long-term trades and to make as few trades as possible. It’s important that you get the most value for the trades if you’re doing all the research and thinking.
However, you should also make sure that they’re well regulated and have good customer service. Unlawful brokers can invalidate your hard work by not adhering to your region’s laws. Sham brokers are also liable to steal your money outright.
In a sense, you want to pay enough for good quality service, but not too much.
4. Understand Your Country’s Tax Laws
If you start making a lot of money off of Forex and other trades, you’ll want to know how your country taxes that income. Some countries don’t tax capital gains; other countries have an automatic collection system. Making sure you know what your fiscal rights and responsibilities are will keep you out of debt (and out of jail).
Find More Forex Trading Tips
Our last tip is to keep researching once you understand the basics. Learn more about global and national economies to understand currencies’ value better and make sure you can monitor them well. Also, make sure you understand the fees and commission policies of your chosen broker and the tax laws of your region.
After you’ve done the basics, you can research more to find more nuance forex trading tips. Start the rest of your journey by checking out some of our other great articles on investing strategy and financial education.