The best way to learn about forex trading is through a strategically diversified learning structure. The level of diversification required will depend on whether you already understand trading within other markets and are simply looking to expand to forex or if you are new to trading entirely.
Entering trading for the first time through forex
For those who don’t know about trading at all, it is important to understand the broad principles of trading before actually engaging technical content related to currencies. Such trading principles include: emotional requirements, the zero-sum nature of trading, basic probability theory, the differences between trading and investing, and general trading strategies (momentum, candlestick patterns, etc.). These principles apply to every financial market and will help you understand the difficulty level and general skill set required to trade successfully.
In an effort to learn these principles efficiently, consider using learning style tests to narrow down which mediums will enable you to absorb the most information possible. One common learning style model is VARK (visual, auditory, reading, kinetic); free online tests which use this model can help you determine which senses you prefer to consume information with. Additionally, many other learning style tests are available to help you strategically outline your learning process. Although this is adding extra work to an already challenging research topic, the benefits of learning efficiently will far outweigh the costs, especially considering that traders are required to continue learning all the time.
Once you have determined your preferred medium for learning, don’t simply utilize that medium exclusively. Rather, you should overweight the medium which is most efficient for you while still engaging mediums which you find more challenging to understand. For example, if you strongly prefer auditory learning, listen to lots of podcasts and lectures about trading while still making sure to read some articles and watch some tutorials.
Engaging forex-specific material
For those who understand the general principles of trading and are seeking to learn about forex-specific strategies and concepts, continue the aforementioned practice of efficient learning via overweighting of your preferred medium(s). Beyond the medium you use, ensure that the information you are consuming comes from a diverse set of reliable sources. No one knows everything about forex and you shouldn’t become attached to a single source of information for all of your learning. Simultaneously, you must balance that need for source diversification with the danger of information overload. That is, the potential for too many contradictory or confusing sources rendering you unable to make meaningful progress in your forex education. An easy starting point is to find three sources which present information in an understandable manner and expand your learning to more sources as you feel comfortable.
Some relevant concepts you must master when learning about forex trading are currency correlations, reserve currencies, forex terminology, and macroeconomics related to the currencies you are seeking to trade. As you continue researching, try to evaluate what aspects of forex trading come easier to you and what aspects seem arcane. Once you do, FOLLOW YOUR STRENGTHS. This is something that most people won’t tell you: finding an edge in forex markets is incredibly difficult and you cannot afford to add any additional obstacles to profitability. If you can easily understand certain types of charting, make that the focal point of your research and become an expert in it. Do the same if your strength lies in analyzing macroeconomic news.
How much can you learn without actually trading?
The truth is, no amount of research will completely prepare you for the experience of live trading. Having said that, research and analysis is the backbone of trading and if you can do it in theory, you’re that much closer to being able to do it in practice. Conversely, if you struggle to grasp trading concepts or generally find learning about forex trading uninteresting, the chances that you will succeed with the added pressure of having money on the line are effectively 0. In fact, one sign of a good trader is a desire to continue researching rather than a desire to jump straight into the action.
The essence of learning about forex
In summary, learning about forex trading requires a cascading approach, beginning with general trading principles and eventually narrowing down to specific sub-strategies within forex. Throughout this learning process, make sure to use learning style testing to ensure you play to your strengths and assimilate information efficiently. Finally, diversify your information streams to develop a comprehensive understanding of the forex markets.