A Beginner’s Guide to Forex Trading
Welcome determined forex trading newbies to the exciting currency exchange market. This forex beginner guide introduces the first steps into forex trading. Our goal is to help you start out trading forex.
Our guide for newbie forex traders will cover forex terms, money management, forex trading strategies, and ISO codes. You’ll get step by step instruction to begin trading. You’ll learn about the best forex pairs to trade. We’ll show you the base currency and quote currency choices new forex traders use to start trading forex. The guide introduces the language and strategies of beginner forex traders.
By reading this forex trading guide you should be able to start moving towards trading on a live account.
Newbie Forex Guide Contents
Be a successful trader from the very start. ForexAdvice will guide you through the entire process from setting up an account to executing live trades. We provide all the information and tools you need to gain an edge in fast paced global financial markets. You can also continue your trade journey by clicking into our recommended tools and brokers, and clicking through to further reading we have put together on each forex topic.
How Does the Forex Market Work ?
How well do you know the foreign exchange market? Here we explain what the forex market is, how to trade it and why it is important. If this is too simplistic then jump on further, but make sure you have the foundations in place before moving on.
Forex is short for foreign exchange. The Forex market is a global market that trades almost 24-hours a day, 5-days a week and all year long. The Forex market is one of the largest markets in the world and undoubtedly the largest financial asset class. Companies, governments and individuals buy and sell currencies 24-hours a day around the world for trade, travel, investment, tourism and more.
The foreign exchange market (forex or FX) is an over-the-counter (OTC) market which deals in the currency of different nations. It works much like a stock market, where currency is bought and sold without any central regulation or government intervention. Two parties dealing in currencies are called “traders.” A fundamental difference between forex trading and stock trading is that most of the traders on the forex market have no intention of holding those currencies for long periods of time.
For businesses and individuals, the market provides a low cost way to buy or sell international currency without the costs of holding foreign money investments.
How Do I Start Trading Forex ?
Let’s start by saying that you do not need to have any specific qualifications, substantial funds, or even an advanced level of English. All you need is a bank account and a computer (and maybe a little common sense).
The first question you may ask yourself is – how do I get access to the currency market?
In order to obtain or trade in currencies, you need to have an account with a broker, which is the company or institution that acts as your agent into the marketplace. In the case of online brokers, you interact with them via an online account. At ForexAdvice.co.uk, we have assembled the world’s best FX brokers. We have selected our featured companies carefully based on their compliance standards and the quality of service they provide to their clients. We’ll go into information about choosing a forex broker later in this guide.
Part 1- Learn the Basics of the Forex Market
Learn the fundamentals of Forex trading with alook at some basic forex terminology, an introduction to the currency pairs, how you make trade profts, market analysis and technical indicators.
The answers to what Forex Terminology you should learn can depend on the level of your trading. Some topics considered important by a professional trader might be a big confusion for an amateur, while another very complicated and boring thing for beginners can be quite self-evident and easy to manage for a more advanced trader. So, let’s start from the beginning.
The point of entry is the price at which a trader enters into an order. The exit point is the price at which a trader thinks the market will move and he exits his trade to cut his losses or lock in his gains, or when a trade goes against him and he closes it to minimise further loss.
A forex broker, or currency broker, is a business that acts as an agent between buyers and sellers of a certain financial instrument, in this case foreign exchange. A forex broker assists a customer by executing trades (making the currency transaction happen), dealing with all regulatory matters on behalf of their clients, and ensuring the highest quality of client service through the entire process. Forex brokers typically have access to hundreds or even thousands of banks and financial institutions which gives them direct access to the markets.
Leverage is borrowed funds that traders can use to trade with. The ability to trade on borrowed funds allows for greater risk/reward opportunities than other markets and the possibility of higher returns. However leveraged trading comes with a greater level of risk.
“Market Maker”. A market maker is a trader who stands ready to buy or sell a stock or other financial instrument in the secondary market. The job of a market maker is to make it possible for investors and their advisers to trade stocks at any time, even if no one else is interested in trading the stock. A market maker has two key functions: (1) a bid and ask price, and (2) the actual purchase or sale of shares on behalf of investors on request.
All trading involves two currencies. There are hundreds of different currencies available to trade. Each currency trades against another in pairs, or a rate per unit of the base currency into units of the quote currency.
The most traded currency pairs in the foreign exchange market are known as Majors. The main currency pairs are: EUR/USD (Euro vs US Dollar) USD/JPY (US Dollar vs Japanese Yen) GBP/USD (British Pound vs US Dollar) USD/CHF (US Dollar vs Swiss Franc) USD/CAD (US Dollar vs Canadian Dollar) AUD/USD (Australian Dollar vs US Dollar) NZD/USD (New Zealand Dollar vs US Dollar).
The vast majority of currency traders prefer to trade the majors. For example, EUR/USD is a major cross as it represents a significant part of the entire Forex market. There are hundreds of currency pairs to choose from, but is it best to trade all of them? The short answer is NO!
The reason you should trade the major currency pairs is because they have the most liquidity of any other market and they also provide easy graphs to look at.The two most liquid pairs by far are the EUR/USD and the USD/JPY. This means that in general, they have the greatest daily trading volume, and thus can be traded with relatively tight spreads allowing for a faster, cheaper, and more transparent trading experience.
Easy: you follow the price action. The price action of Forex, which is the fluctuation in currency prices, offers trading potential. Therefore, you will want to identify the factors driving a currency pair higher or lower. Once you know these factors, you can then formulate a strategy to take advantage of them.
You can make profit by timing it right. There are different market conditions and types of strategies which allow you to choose the best type of approach for your circumstances. It is difficult to make profit in the market when you are not prepared, have no idea about currency pairs, their trends, and risks.
How can you analyse currency pairs ?
Currency strength and weakness (or demand and supply) are driven by economic factors, which dictate the movement of exchange rates. “In economics, exchange rate, also known as foreign-exchange rate, or simply exchange rate, between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency.
Here’s the breakdown of how traders analyse relative strength in currency pairs: Financial market research is an important part of generating profitable trading strategies. Short-term traders rely on technical analysis to project future trends. Long-term traders pay more attention to economic reports and cycles. Forex robots analyze the market continuously for the most promising movements without any human influence or emotion.
Understanding Technical Indicators in Technical Analysis
What are the main forex technical indicators? Technical indicators are dedicated to measuring the momentum and direction of the price (price action). The numerical value of an indicator represents its level and it is visualised as a coloured bar or line. In short, technical indicators should not be used as a trading system in themselves, but rather for identifying potential overbought/oversold areas, trends etc.
Support and Resistance
Why are resistance and support levels important? -The key to trading is knowing when a price range will end and that is possible thanks to resistance and support levels.
It’s a common mistake to think of support and resistance as ‘lines’. Support and resistance is really a zone of price action that changes over time. The best way to think of it is a rubber band. You stretch the rubber band by pulling on it at one end until it feels like it is going to break, then you let go and the rubber band springs back into place. This is where we get the analogy of ‘support breaking’ and ‘resistance being broken
As a forex trader, you need to have thorough knowledge about support and resistance in order to successfully trade the market. Support and resistance is one of the most basic concepts that every trader needs to know.
Bollinger Bands are a technical analysis tool that consists of three lines. The centre line is typically a 20 period simple moving average (SMA), with two standard deviation bands above and below it. What do they tell you? They show how volatile the price action is in relation to its 20 period moving average. When prices move closer to the middle band, this shows an increase in volatility, as well as an increased probability that the price will continue moving in that direction for sometime. A normal up and down movement is expected in any exchange rate. Bollinger bands offer a way to not only see when the exchange rate is going to change direction, but how much it will change by.
The Relative Strength Index
The Relative Strength Index (RSI) is an extremely popular technical indicator that measures and identifies overbought and oversold trading conditions. RSI only takes into account the closing prices of the current bar and the two bars before it. The relative strength index is calculated by subtracting a security’s current close from 100, and then dividing it by its current high-low range. At 90 and below, RSI indicates oversold conditions; 80 to 89 indicates neutral conditions; at 80 and below prices might be undersold.
Moving Average Convergence Divergence
The MACD indicator is used to identify trend changes and reversals. It determines the relationship between two moving averages of prices, which are calculated over different periods of time. The MACD line is commonly plotted on top of a price chart and as a histogram. `MACD` stands for `Moving Average Convergence Divergence`. This indicator was created by Gerald Appel in the 1970s.
STOCHASTIC is a market momentum oscillator. It is based on a band of three simple moving averages: fast, slow and median. A breakout to the upside indicates excess buying pressure, whereas a breakout to the downside indicates excess supply or bearishness.
SPARABOLIC SAR indicator is a technical analysis tool which helps predict price direction. Sparabolic Sar gives fast, simple and easy to interpret signals. These signals are based on sar (standard acceleration oscillator).
Sparabolic SAR is a trend indicator that works by looking for price drops followed by quick bounces. It will help you identify potential turning points in the market because it is a convergence of various different indicators. To understand how Sparabolic SAR indicator works, you first have to realize that markets tend to move in waves.
Pivot points are a simple, yet powerful indicator that is used in technical analysis. The pivot point comes in three forms: the basic, the advanced and the weighted. They are commonly used to identify key support and resistance levels based on previous price action.
Part 2: Open an Online Forex Brokerage Account
Learn the fundamentals of Forex trading with alook at some basic forex terminology, an introduction to the currency pairs, how you make trade profts, market analysis and technical indicators.
Choosing a broker
To choose a reliable forex broker you can use some tips that will guide your choice: follow the recommendations of reputable brokerage firms, ask for recommendations from people with whom you already do business (such as your bank), confirm that the company has been licensed by an authorized regulator, examine the security and privacy provisions of the website and, finally, make sure that there are no hidden charges.
What is the best online Forex broker? There are a large number of foreign exchange brokers on the market. Some of them are reliable, some are not. If you are looking for a reliable broker to trade with, we have prepared a comprehensive list of the most reputable Forex companies according to various evaluation factors.
Start by trading a demo account
Start by opening a demo account with and test the live forex markets risk-free. See if you can consistently achieve positive returns and build your confidence before trading with real money! You’ll have all the same tools at your disposal as real traders, but without the added pressure.
Have you set-up your trading account? If not, do it today. Set up your demo account with a broker you like, learn how to trade and start learning to make profits tonight.
So How Do You Choose a Forex Broker when you are beginning to trade for the first time?
There are a lot of Forex Brokers out there. But how do you choose? This is a good question, especially for those who are just getting started and have no forex trading experience. Learning how to choose a Forex Broker means doing your research ahead of time.
The short answer is this: A good forex broker should be able to offer you a regulated trading environment; friendly and professional account management; ample educational materials, including online lessons, forex analysis software and even free practice accounts for you to try out before opening your real account with them.; fair pricing policies; and most of all, data security.
Thinks to know about Forex Brokers:
Forex Broker Regulation and fund safety
The forex market is regulated by a number of global financial and governmental bodies, including the US Commodity Futures Trading Commission. There are also many online forums and analysts that provide objective, reliable reviews of each broker.
Forex trading takes place in a global marketplace that is subjected to high levels of regulation. Government agencies around the world are tasked with protecting investors, as well as making the market fair and safe. All Forex brokers are required to adhere to financial regulations in their home country, and must also comply with the rules set out by the Financial Conduct Authority, CySEC, ASIC, FCA and other government agencies across Europe & Australia.
Forex Platform Software Options
A forex trading platform is the software used by a trader or investor to execute trades. They are simply an interface between the user and the broker, whether it be through web based communication or software. Think of a trading platform as an engine for making decisions on the foreign exchange market. Using an entry panel, a chart, and various analytical tools, you can make trading decisions through your computer.
Most brokers offer online trading platforms that allow you to trade from anywhere in the world, using your computer or smartphone. Many will also allow you to download their software directly onto your PC.
The Forex trading platform has become such a standard nowadays with traders of all ages, it is no wonder that the analyzing software and metatrader 4 have also become very popular. Very few Forex traders will be unfamiliar with MetaTrader 4 as this is the world’s most used platform for Forex trading. There are many different versions of MetaTrader 4 available for download including mobile versions and web-based versions.
Ease of Deposit and Withdrawal
Forex trading has never been easier to jump into. That’s because the platforms out there are designed to make it as easy as possible to deposit and withdraw funds from your broker. The best part is that there is a plethora of options for both newcomers as well as advanced traders (there is a good selection of credit card, debit cards and wire transfer options).
Forex Trade Transaction Costs
The cost of trading is something that you have to take into account when you are trading in the FX market. For Forex, trade transaction costs are different from stock market transaction costs. Forex doesn’t have any fees for opening an account with a forex broker.
There are a variety of costs associated with trading. The largest and most obvious one is the spread (or commission). This is the difference between the buying price and selling price for a currency pair. As a little comparison, the average spread on EUR/USD is about 2.50 pips during the European session and 5.00 pips during the U.S. session.
Funding Your Forex Account and Trading for Real
Most forex brokers accept funding from multiple online payment processors. However, each company charges its own fee for the service. Typically, fees range from 1-5% or more of the amount funded. Due to lower operating costs, it is wise to use a low-cost processor when funding your forex account.
Currency trading is highly speculative and involves continual monitoring, analysis and research. It’s possible for traders to lose a substantial amount or all of their investment at any time. Although forex can be traded on margin (margin requirements apply), traders should not use more money than they can afford to lose without adversely affecting their lifestyle.
Part 3 Beginning to Trade
Define what success in forex means to you
The only thing that’s commonly accepted about forex is that it can be a financially rewarding market. To get to the point where you are trading with a decent chance of success, you need to define what success means to you.
The Forex market can be compared to a river. Some people see it as a way to earn some extra money, while others consider it to be a good long term investment opportunity. For some it is just one of the options on how to make money, while for others it is their day job. If you want to be successful in trading the foreign exchange market, you first need a clear picture of what success means. Success is unique for each person and some may see dollar signs while others might see safety and security it gives them.
Download a Forex trading platform to begin trading
Forex trading has never been easier or better. Instantly open a free Forex demo account that lets you trade live forex, no money required.
Choosing the forex pairs to trade
Understanding the basics of forex trading pairs is an essential way to start your journey in the foreign exchange market. It helps you to understand which pair can be best traded according to your personal goals, strengths and preferences.
When it comes to the volatility of the market, some traders would prefer a slower pace. While this is great for people who are more risk-averse, it can also be difficult to open new positions when needed. If you’re planning to begin forex trading, consider taking the time to develop a strategy that suits your risk profile and bankroll goals. By learning what works with a volatile marketplace, you can become more successful in the long run.
If you want to trade long term, select a pair that is trending upwards. If you want to trade short term or scalping, select a pair that is in an upward movement and ideally highly volatile with high spread. Additionally, you should take into consideration the spreads and leverage when choosing your trading platform. Forex brokers offering tight spreads will result in lower costs allowing for higher profitability with less risk per trade.
Choosing your forex strategy- An Intro to trading options
As a forex beginner, you may be confused about what are the best strategies available. There is an array of different kinds of strategies. A forex trading strategy is simply a plan that you implement when trading the forex markets.
Choosing a trading strategy or forex strategy is one of the most important parts of becoming a successful trader. It becomes all the more tricky when you are a beginner and you haven’t learned to read the market yet and you are new to all the technical jargon. However, there are multiple strategies that work great for amateurs and can bring in quite handsome profits too.
A lot of people in the markets make their trades based on technical analysis and the chart patterns they see. Others trade based on fundamental analysis which is trying to read the news or central bank and government policies, with a view that it will affect the economy and stock price movements. Others are just looking for a good trading environment by identifying volatility or other market anomalies in order to earn money when those anomalies correct themselves.
A simple forex trading system is the best forex trading strategy for beginners.
Trading strategies, such as the breakout trade strategy, are used by traders every day to predict market movements. The most common trading strategies include: Swing Trading, Breakout Trading and Position Trading.
A rundown on forex trading strategies for beginners
Trading in foreign currency pairs is the most common type of trading done on head to head exchanges. Beginners should try to learn as much as possible about the moves and behavior of currency pairs. Find out why a trader wants to buy a particular currency at a specific moment in order to understand how it will affect this market. Having a general idea of what will drive the price in a certain direction can be crucial to your success as a trader, and it may take some time to hone these skills.
Forex trading strategies are powerful tools that can be used during a foreign exchange (forex) trade to help traders make their trades. There are several ways in which forex trading strategies can be incorporated into a trader’s strategy, and the more advanced the trading strategy, the better the chance of success over time. Forex strategies can be learned and applied by both beginner and experienced traders, however, it is true that a higher level of skill or expertise may be needed for advanced or complex strategies.
Trend line trading is one of the simplest trading strategies that can help you make consistent profits in Forex. Trend lines show where the price has been and where it may go. if a trend line breaks, it is an indication that a reversal may be imminent and that you should take action to protect your position. There are many ways to use trend lines like building support and resistance levels, going long when price bounces off of trend line or sell short when price comes down to a support level.
The Momentum Forex Trading Strategy is an extremely simple forex trading system that allows you to trade based on the momentum of a currency pair and without requiring any elaborate pre-market analysis.
A Momentum Forex Trading Strategy is one which uses the trend of the market prices to predict the direction in which they should be traded. A momentum trading strategy is based on having a target price, without using any economic indicators to trade. The main distinguishing feature of a momentum trader is that most of his trades are based on either an attempt to take advantage of a gap up or a gap down in market prices after a news release.
The Simple Moving Average strategy is a very popular trend following system. When the short term moving average crosses the longer term moving average from below, it’s an indication that a new uptrend has begun. However, when the short MA crosses from above it’s a strong indication that the trend is about to end and that a new downtrend has just begun. The indicator uses exponential and linear weighting and also allows you to select which period(s) you want displayed—1, 2, 3 etc.
The Dual Stochastic Forex Trading Strategy is a combination of two different Stochastic Oscillators – the Slow Stochastic and the Fast Stochatic. The Slow Stochastic Registers a buy signal when price rises after diverging from the slow stochastic. A Sell Signal is generated when price falls after diverging from the slow stochastic. In addition, the price reacts differently to Slow and Faster stochastic signals.
The Dual Stochastic Forex trading strategy is one of many strategies out there, but it’s also one of the easiest methods to understand and use for trade entry. The Dual Stochastic strategy is a short-term trading approach.
The Breakout Strategy is an advanced trend-following strategy designed to capture a large percentage of the biggest Forex Market moves. The Strategy trades with a tight stop-loss and is based on: breakout of resistance, confirmation from other market data (for example exponential moving average EMA crossover or support/resistance), increase in volatility and significant momentum indicators.
The purpose of this strategy is to buy a breakout move, but with the risk of being in a false breakout. If you have been trading for some time you already know that markets are not perfectly efficient and often overreact to news, so by definition false breakouts often occur. However, by using a stop-loss it will help limit your losses and will allow you to participate in the market volatility when it breaks out.
A day forex trading strategy is a pre-planned strategy for trading the currency market in the short term. There are different types of strategies that one can use, whether it is mechanical, fundamental or technical analysis.
The objective of day trading is to make small profits during the trading day. With a short time frame it is important to act quickly, so you can jump on opportunities as they arise.
Price Action Trading Strategies are based on the observation of market price behavior. You can make money using Price Action whether a market is trending, ranging or consolidating. Have you ever sat back and watched the market move? Price action trading strategies are about learning to decipher what the market is telling you through the price movement. The primary difference between day trading strategies and price action trading strategies is time frame and the amount of indicators used.
For most traders, price action strategies are the best way to learn forex trading because they require no indicators. Price action trading is the interpretation of market price movements. In other words, a price action strategy is a trading strategy based on price movements only. Price Action Trading Strategies (or PATs) are one of the fastest ways to learn how to trade forex. This makes them perfect for new forex traders and those who don’t have a lot of time on their hands.
Positional trading is a shorthand way of describing a broad category of forex strategies that typically take large positions based on anticipated price moves. These trades are otherwise known as directional trades, although this term has a narrower meaning in the industry than what we’re using here. Essentially, positional trading strategies are those that use market entry and exit with profit targets to achieve profit or loss objectives. Positional traders may utilize technical analysis (observable price action), fundamental analysis (economic news) or both.
It’s a strategy that can be profitable when the interest rate differential between two countries is high. Forex brokers make it easy for speculators to open leveraged positions by providing trading accounts with low margin requirements. Carry trades usually involve borrowing in one currency and using the funds to purchase another. That way, gains on the asset purchased are magnified and losses on the borrowed currency position are restricted.
How do you do Technical Analysis?
Technical analysis is the exploration of historical price data to determine trends in market behavior. Technical analysis usually entails examining different charts and patterns that are generated by segmenting a series of price points. Forex traders also use technical indicators alongside economic indicators. Traders can use a number of tools to carry out technical analysis such as candlesticks, charts, oscillators, trend lines and price patterns among many others.
The best Forex technical analysis is all about breaking down price action in a non-biased way to provide you with the most accurate picture of price. If you don’t know what is happening behind the scenes, it can be very hard to make sense of things and get yourself out of potentially dangerous situations. Using the right tools is one thing, but knowing how to use them is another. It’s crucial for all traders to first have a good understanding of how price moves on charts before attempting to apply any technical analysis.
- What macro-economic Factors Drives the Forex Exchange Rate?
Traders need to be able to answer this question in order to trade forex effectively. Do they know where money is being invested? To what extent do things like inflation, unemployment, political stability and interest rates influence the underlying currency that is being traded? There are often clear reasons why the price of a currency fluctuates before your eyes: 1) Translation 2) Interest rates 3) Inflation 4) Balance of trade 5) Economic indicators 6) Taxation 7) Geopolitics 8) Stock exchange 9) Elections 10) Weather 11) Polls
- Economic policy
Economic policy is a key driver of currency price due to the multifaceted nature of its impact on a given currency. For example, an increase in the jobless rate leads to various economic effects such as an increase in the country’s borrowing requirement, which needs to be financed by increasing amounts of debt instruments and other sources of foreign financing. This consequently affects investor sentiment and hence the exchange rate value.
Investors in forex markets expect central banks to act preemptively to avoid risk at a time of uncertainty. The Bank of Canada, the US Federal Reserve, and the ECB are just a few central banks that use monetary policies like interest rate hikes and quantitative easing to influence economic growth.
Each country and government has a different economic policy, each of which is likely to have a different impact on currency price. A government could decide to lower or raise interest rates, which will affect the supply and demand of money for that currency. Also, if that country’s economy is improving or deteriorating, the value may fluctuate. Another popular economic tool is having a trade surplus or deficit – if your country imports more than it exports, your currency will likely decline in value.
When it comes to economic policy, there is one big thing that matters in the Forex market – confidence. Economists from around the world weigh in on the future of currency, creating predictions and analysis that dictates the market attitude to a currency.
- Political events
Political events can have a big impact on currency price. Whether it is a natural disaster, unrest in the Middle East, or an event that affects confidence of investors or traders.
Political events can lead to currency volatility and affect the value of a currency. A currency’s value can fall if political tension or an event causes people to buy another currency for safety, or if it causes them to sell their local currency as they consider it to be too risky.
Understand political events and market sentiment to make better investment decisions. Learn how the world really works. Informed investing leads to better decisions and successful risk management.
How do you do fundamental analysis ?
Fundamental analysis comprises an important part of trading. Because no two traders are the same, it’s vital that you develop your own methods, but even more important is to have an understanding of the basic concepts. The main difference between fundamental and technical analysis is that technicians analyse charts in order to predict market direction based on previous price movements whereas fundamental analysts look at factors affecting supply and demand within the economy.
Whether you’re an aspiring forex trader or new to the market, fundamental analysis should be an important part of developing your strategy so that you understand the landscape for your trading.
Fundamental analysis in forex trading is accomplished by studying economic reports and statistics. These reports are typically prepared by the government, central bank, or large commercial banks. Some of the most commonly watched reports for fundamental analysts include: unemployment rates, retail sales, order book data. All this information helps you forecast where the economy is headed. Which is important for Forex traders because the strength of a country’s economy will probably also affect currency movement.
- Understanding Risk Management
Forex trading is historically risky and is not suitable for all investors. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, please read the CFD risks, expenses, and other information carefully.
Successful trading is all about minimizing the amount of risk your exposure to the market poses to your capital. By employing proper risk management strategies, including setting stop losses and taking a profit (or loss) when you have reached your desired position size, you can succeed without risking your entire investment.
When a trade isn’t going according to plan, when you’re new to currency trading, most people will take the wrong action. This further compounds any losses or causes anxiety and potentially leads to a full blown trading crisis. Forex is about controlling your emotions and thinking logically in times of high stress.
- Decide on the amount of leverage/margin you are going to trade with
Have you ever wondered what level of leverage you should use when trading FX? Applying leverage can be a good tool for improving your returns, but it also increases risk.
The trading level is simply the amount of leverage you will use in your trades. The higher the level, the less money you’ll have to invest but the more risk you’ll expose yourself to. Before you start trading it is important to be clear about how much capital you can allocate to the foreign exchange markets. This in turn will tell you what leverage level to trade using. Too much leverage and you could find yourself quickly losing large sums of capital, too little leverage and you may not be able to make large enough profits in the time available.
- Decide on your trade timeframe strategy
You need to work out which timeframe will suit you best. This should be based on your available time and the amount of market analysis you intend to carry out every week. Do you have plenty of free time to follow the markets closely, or are you just looking for some low risk entries with occasional exit signals?
The best way to become a great trader is through education. Short time period trading involves a faster learning curve but can result in higher wins and loses, while long term is more stable but will mean you tend to learn to trade more slowly.
There are three main trading sessions you can plan to trade in:
The European session (6am – 5pm GMT)
The US session (1pm – 9pm GMT)
The Asia session (10pm – 5am GMT)
On your charting platform you have access to nine different chart timeframes:
4 hour chart
1 hour chart
30 minute chart
15 minute chart
5 minute chart
1 minute chart
- Placing your first trade
How do you actually place a forex trade? Make your first forex trade in 3 easy steps: 1. Find the right currency pair 2. Find the best price for it 3. Enter an order
TITLE Make sure you set stop losses and take profits if they are part of your strategy
A take profit order can be set to execute once you’ve reached a certain amount of profit to cut the session right there. This is useful to protect you from big fluctuations in the market. It is also possible to adjust take profit points while trades are open, so you can trade out of a position before it reaches your predetermined level of profit.
A Stop loss is an order to sell or buy a security once the price surpasses a certain point, known as the stop price. It can be used in forex trading as a way to limit losses on a trade if the market unexpectedly moves against your position. Set a stop loss to make sure you don’t lose more than you want to.
- How Often Should you monitor your trades?
Should you monitor your forex trades every 5 minutes, 30 minutes, hourly or once a day? The answer is different for every trader. The shorter the period of time you monitor your trades the higher the chance you will be emotional. Of course, if there is a trade that is very volatile and you are concerned of price fluctuations, then it might be a good idea to monitor the trade throughout the day.
The type of trade will largely dictate your monitoring timeframes. This will depend on the time of day and where you are in your trading cycle. If you are a short-term trader who makes trades every 1-15 minutes throughout the trading day, then setups can be checked 30-60 minutes apart to ensure the equity curve is not too steeply sloping. If you trade intraday or swing trades with up to several weeks between entries and exits, then it is much easier to allow the equity curve to slope steeper.
- When should you close your forex trade?
Typically, most new traders do not know when to close their forex trade orders.There’s no hard-and-fast formula to help you determine the exact time to exit a particular forex trade, but there are some guidelines that can help you make an informed decision.
Here’s a few things to keep in mind when it comes to forex trading timing: -Keep an eye on the big picture: Try focusing on making smarter, longer-term trading decisions. It’s simple: If you’re not getting clarity, close your trade. Changing trades frequently costs money. -Don’t sweat the “small stuff”: Don’t react to small price changes or minor market movements, let them roll off your back.
The general rule of thumb for closing your forex trades is to always take your profits.
- Learn what you can from every forex trade
How you can learn from every forex trade? If you’re a (beginners) trader, one of your main concerns may well be whether or not you could have done better or worse on your last trade. Watching the market move as it does has got to be utterly stressful, but it doesn’t have to be!
A perfect trade is hard to come by in forex trading. However, that doesn’t mean it’s impossible to learn from every forex trade and so improve your forex trading skills. The development of trader mindset is the key to success in trading Forex currency pairs.
All forex traders have made mistakes in the past. The secret who succeed in the long run is those who learn from their errors and never repeat them. While everyone makes mistakes every now and then, the real test is whether or not you can learn from these mistakes, analyze your trading behavior and strategize to avoid them next time around.
Get going with forex today! Your trading journey starts here. You can start by making a virtual trade using a demo trading account (risk free) and have access to useful trading materials. If you’re ready to take on the real thing, sign up for a trading account!
Beginner questions about forex trading
Are you thinking about taking the step into forex investing and trading? Here are some simple answers to common beginner questions about forex trading.
Sure you can! Anyone can learn to trade, but the hard part is sticking with it. Forex is one of the most complex financial markets in the world and thus one of the most difficult for beginners. If you have experience trading stocks, options or futures before, getting started won’t be a problem. The rules are fairly easy to pick up and margin requirements are much less than other asset classes.
Self-taught forex traders are the norm. What’s not the norm, however, is consistent profitability over time. Why? Because most self-taught traders lack a systematic method for identifying and executing winning trades, an objective perspective on the forces that drive forex price action, and a reliable way to interpret market data and use it to predict future price moves.
Forex trading is simple but not easy. It takes some effort and time to be consistently profitable and you need to learn your trade, build experience, trust your trading strategy, develop a system, and measure results. Forex trading can be very rewarding and profitable when you have the right information and skills. You will find here a wide range of learning resources designed to help you become a better trader.
There is no easy answer here. However, expect to put in a lot of study time if you want to be successful. Most students start small with a small amount of money and then increase the size of their investments as they get experience. Make sure that you only invest money into Forex Trading that you can afford to lose. Try studying forex systems that are based on technical analysis if you want to learn fast.
Absolutely, but the most important thing to understand and remember is that trading in the forex market is a marathon, not a sprint. There are no get rich quick schemes. Be patient and learn the basics before you invest your hard-earned money.
It’s true that it takes education and practice to become a successful forex trader. But even with just a few hundred dollars you can make small, test trades and learn the fundamentals of currency trading.
How much money can I make trading?. That’s a question that everyone who gets into the forex market asks.
The general answer is not as much as some people hope. Although the potential to earn big bucks exists when you become a successful trader, the reality is that most people will fail to make a living from trading and will lose money.
The average trading profit among successful forex traders is around $1,000 to $5,000 per month. Some traders make a lot more.