The most interesting part of the investment experiment starts when participants get acquainted with the trading platforms. Each trader beginner has to download the trading platform of the chosen Forex broker. However, there are a lot of questions. First of all experiment participants need to understand what is happening on the screen. Where to start? What are these volatile and constantly changing green figures on a black background?
At the beginning it is the most important to understand how to trade in the currency markets, how to manage a trading platform, how to execute commercial transactions, which trading methods to choose. The same as in other fields of finance, in Forex market traders get opportunity to use huge leverages several times greater than the initial amount invested. In Forex trading is proceeded with standard lot sizes, generally 100,000 units of the base currency or with the with mini lot sizes, generally 10,000 units of the base currency. The ability to trade with money you do not own (using big leverage) and get several times greater return on investments is very tempting. People are greedy and forget that loss may also be several times bigger. By the way, unprofitable transactions may begin to recur more often than profitable. Humans always seek to get back the investment they lost, and try to execute transactions, which are often fragmented, thoughtless, exposed with emotions and random. If trading is carried out with big leverage, then any unexpected change in the market may help to loose investment in few minutes or even seconds. Therefore, participants of the experiment must understand that trading at least in the primary stages should be limited by choosing a small leverage: from 0.01 to 0.1 lot per each trade. Profits will be small as well as losses. Secondly, it is very important to control potential losses and profits by setting “stop loss” and “take profit” boundaries. Participants of the experiment should not risk more than 1-2% the amount invested.
To manage Metatrader 5 platform is not very difficult. Key features can be easily identified and controlled. Nowadays, anyone even with no experience can easily understand and execute trades. This was also verified by the participants of the experiment. After several hours spent working with demo platforms, participants executed dozens of random trades in order to understand trading procedure. Now, they know how to buy or sell currency pairs, can manage risk by setting thresholds when transactions must be closed (stop loss, take profit), know how to use functional keys, can choose and set technical analysis indicators and etc.
However, the most difficult part hasn’t started yet - investment models, risk management, trading analysis, goal setting and maintenance will come soon.
To Be Continued…
