The international Forex currency market continues to gain momentum and today there are more and more people interested in earning money in the Forex market. People go into trading with different levels of understanding of how Forex works and with different goals. But everyone who has just encountered trading activities needs to learn the basics of understanding and interacting with the market. As a rule, the first knowledge can be learned step by step fairly quickly. But in order to become a professional and start with quality trading for profit, you still need a deep study of the principles of Forex, fundamental and technical analysis, trading tools and strategies.
Let’s start learning Forex trading. Shall we.
Table of Contents
What is Forex Trading and How Does it Work
Beginners in Forex trading often face the problem of understanding what is forex trading and how does it work. Of course, beginners are often prone to mistakes such as unrealistic goals, greed, undue haste and lack of knowledge are the main reasons why many who try to start a career in trading become frustrated and leave empty-handed. Before doing anything, it is extremely important to understand what is behind the Forex market and how it works.
Who is a Forex Trader?
A forex trader is a participant in the exchange, exchange trading, who has the right to carry out various operations with currency, other securities, independently or at the request of clients, paying for transactions through intermediaries.
Trading CFDs (contracts for difference) is a type of market speculation that does not require buying or selling of any underlying assets. Click here to learn more.
Any person who has a minimum amount of capital and certain knowledge about the features of the Forex market can become a Forex trader. It is also desirable to have at least a general idea of the features of the functioning of the financial market, the formation of national currency rates, and the factors influencing the formation of quotations.
Forex Trading for Beginners
It is worth noting that for many beginner traders the issue of discipline becomes quite difficult – in the absence of control, many stop trying, give in to emotions, which is unacceptable for trading in the Forex market. Decisions should be made solely on the basis of a sober calculation based on the results of analysis and adequate forecasts. In order to minimize the influence of emotions and feelings on their work, many people first undergo Forex training, train to work on a demo account, and only after mustering all the difficulties, they start working with real funds.
A Forex trader can use various methods for performing analysis and calculating transactions. There are adherents of technical and fundamental analysis, as well as those who use their own methods and tools. Moreover, it is crucial for the agent to implement robust security measures to protect client assets. This includes implementing secure storage methods, utilizing reliable technology systems, and conducting regular audits to ensure that funds are protected from theft, fraud, or any other security threats. Information can help you make an informed decision about which broker is best suited for your needs. The following is an example of an Exness Forex broker review that can help you to gain a deeper understanding of the company’s services, trading conditions, and customer feedback.
Traders who prefer technical analysis use technical indicators, graphical constructions, candlestick and wave analysis in their work. The popularity of this type of analysis is associated with the availability of a large amount of data for its implementation, relative simplicity.
Many traders prefer fundamental analysis – this option is suitable for those who work with large time frames. Fundamental analysis is considered more complex, for its implementation it is necessary to analyze a large amount of information, have an analytical mindset, and certain knowledge from the field of macroeconomics. The main purpose of fundamental analysis is to predict the impact of certain events on changes in the value of a currency in the future.
Using your own analysis methods, systems and advisers is relevant for experienced traders who have extensive experience and are able to “feel” the market, intuitively (based on previous experience and knowledge) determine price movements, and make profitable deals.
Regardless of the funds that a Forex trader uses in his work, he must always remember the need to comply with the rules of Forex money management, deposit protection, the need to avoid unjustified risks, constantly improve his own abilities and adapt the funds used to the requirements of an ever-changing market.
How to Choose a Forex Broker/Software
In order to increase the starting capital, to reach a stable income, a trader is recommended to be very careful in choosing the Top forex broker. The profitability of transactions and the success of trading directly depend on the experience of the intermediary. The agent must securely store capital, firmly establish itself among competitors, and promptly respond to changes in the international market.
First of all, users are guided by personal preferences: the territorial location of the company, a place in the rating table, and a variety of assets. We list the basic criteria by which it is worth choosing brokers.
- Time on the market – Brokerage firms publish information about registration, terms of activity in the foreign exchange and exchange markets. If a company exists for more than ten years, it means that it has already established itself in trade, has earned a certain status, a rating. Young firms are able to reach the maximum position in the market in a short time, but very often there are sharp drops after the peak point.
- Regulation – In the event of conflict situations, the regulator will try to settle the dispute and find a compromise. If the broker conducts unregistered activities, the trader is not immune from risks. In problematic cases, it will not be possible to achieve the truth through the courts. That’s why regulation is important.
- Trading account size, starting capital requirements – For beginners, it is especially important to enter into trading with a minimum deposit in order to reduce the temptation to make uncontrolled bets, to reduce the excitement of easy profit. Some companies allow you to open an account and replenish it with a couple of hundred dollars, others require customers to deposit a thousand dollars or more. The total turnover on the trading account will become an indicator of the broker’s activity.
- Leverage, Bonus programs – If the trader does not have large amounts of money, but wants to get the maximum possible profit, the broker offers a lending program. The optimal leverage of brokerage firms is 1:100. Large leverage will allow the trader to win large sums, but the risk increases in proportion to the winnings.
Loyalty programs for customers are a good marketing tactic. Firms attract new users with demo accounts, strategy training bonuses. Regular players receive commission benefits and participate in promotions.
- Service package – The main function of a broker is to accept bets and implement the trading preferences of clients in order to obtain benefits. For beginners, trading strategies, thematic and educational materials will be useful. Experienced traders will be interested in investment accounts and portfolios. If the user wants to save time and effort, he transfers the capital to the trust management of the broker.
- Commissions – This is one of the important indicators for choosing a broker for trading and investment. It is necessary to compare the data on the spread, the amount of remuneration between the leaders of trade and give preference to a company with an average level of remuneration. High commissions are not always justified by the profit received, and at minimum rates, a trader will be able to save money even in a losing trade.
What Currency Pairs to Trade as a Newbie?
Each currency pair has its own specifics of behavior and movement, as well as its own nuances, which are recognized and understood by traders with sufficient experience in trading in the market. In fact, by focusing on trading currencies that the trader knows fairly well, one can gain a significant trading advantage.
We would advise a novice forex trader not to take more than 2-3 pairs into work at the same time. Imagine that you came to study as a doctor and you need to choose a specialty. You can’t be both a dentist and a therapist and a gynecologist at the same time, right? Specialization decides.
If you give a specific set, then take GBPUSD, USDCHF and USDJPY. These three pairs will allow technical analysis to test and feel that each pair has its own characteristics, as well as observe trend movements.
- GBPUSD – The GBPUSD currency pair likes to spike up and down on the chart and is well known for its volatility and big moves.
- USDCHF – Historically there is a high correlation with the EURUSD pair. The Franc often appreciates in value as traders race to find a “safe currency”.
- USDJPY – USDJPY is another currency pair that has been heavily influenced by major news events related to the US dollar. We would also like to note that the typical Fibonacci levels for USDJPY in the trend are the levels of 23.6 and 38.2.
4 Best Forex Trading Strategies (Beginner-Friendly)
The trading strategies are used to determine when to buy and sell a currency by tracking Forex signals. The most effective Forex trading strategies help determine the best entry and exit points, position size and trading time. Trading hours globally form a 24/5 trading week where different markets open and close. Technical indicators are used to predict the market.
Forex strategies often contain elements of several types of analysis, a wide range of trading methods, depending on the goals and objectives of trading. Good Forex trading strategies allow you to make profitable trades and manage risks properly.
1. Trend trading (trading against the trend based on support and resistance levels)
A trend is a wave-like structure in which extremums replace each other, forming a consistent price growth in one direction.
Every experienced trader will tell you that if you want to be successful in trading stocks, you need to work in the direction of the current market trend. Many experienced traders claim that this is the easiest way to make money in the financial markets.
An important argument in favor of trend following is that it is a reliable way to trade. Statistics show that when trading with the trend, your chances of being right increase to 75%. Note that we don’t say “make money with a 75% chance” or “75% chance the trade will be profitable”. The fact is that novice traders often cannot take profits, even if the transaction initially went in their direction. Instead, they allow the position to turn into a loss. Deal mismanagement is very bad.
2. Scalping Ranges
First and foremost, scalping is a trading style. It is characterized by the frequency of transactions, the time of holding a position, the volume of the position itself, and, not least, the risk and profit potential in each transaction.
This trading strategy is very popular in Forex trading.
Strategy consists of opening a large number of trades in a bid to bring small profits per each, but disadvantage of scalping is that traders can’t afford to stay in a trade for too long. Remember that scalping takes a lot of time and attention to find new trading opportunities.
- Define Your Entry and Exit Points on the Macro Chart
Ideal entry and exit points in Forex is the number one task for a trader. The better the trader determined the moment of entering the market, the smaller the drawdown and the greater the profit.
We will consider in the article the key points for determining these points, I will give an example of an indicator for entering the market.
The entry point is the moment when we can sell or buy a certain currency or, in the language of traders, open a position. The main task of a trader: how to find an entry point into the forex market so that it is potentially more profitable.
The entry points to the forex market directly depend on what trading strategy you are working on. There are types of trading strategies based on the trend, counter-trend, news, as well as systems for working in price channels and in flat.
● Counter trend – It’s the opening of a deal in the opposite direction from the main trend. And if we correctly determine the entry point in Forex, we can catch the beginning of a new, big trend and get a good profit. Or if we just catch a corrective movement against the main trend, we can get a small, but still profit.
But working on the counter-trend is quite dangerous, since a large number of false signals are possible, so it is preferable to work on the trend.
● Trade the news – For example 5 minutes before the news release, two pending orders are placed: one for sale (sell stop), the other for purchase (buy stop) at a distance of 100-200 pips from the current price. One of the orders is triggered and, depending on the volatility of the news, take profit can be set from 100 to 2000 pips.
Note: as soon as one of the orders has worked, the second must be canceled.
Trading on the news is a rather risky type of trading, since the price can go in a completely unpredictable way and hook both of our orders – this is called a helicopter.
Best Online Platforms to Learn Forex Trading
● IFC Markets
IFC Markets has launched its Trading Academy which is for all levels of learning Forex, CFD and Crypto Trading. After passing each level traders receive a Certificate of completion. It consists of three levels; beginner, intermediate and expert. Each level has both video tutorials and articles.
ForexSignals.com was founded in 2012 by trader Nick McDonald, who at the time was himself a relatively new trader in the Forex industry. Noticing the lack of community support resources in the industry, ForexSignals.com was born. ForexSignals.com positions itself as a comprehensive community where you can learn and share knowledge on all aspects of Forex trading.
● Asia Forex Mentor
Asia Forex Mentor was founded by Ezekiel Chew in 2008 and is headquartered in Singapore. At some point, the project grew so fast that Ezekiel Chu even started teaching live classes, and finally, trading institutions and banks asked him to coach their team. Today, Ezekiel Chew has consolidated all educational content into one product called AFM One Core Native Program.
● Traders Academy Club
Traders Academy Club offers a wide range of trading systems and Forex trading courses. The Vladimir Rybakov Academy of Traders Club is an online trading center that unites the minds of the trading community. You can learn about trading setups, chat with other traders and learn practical trading systems under the guidance of trader Vladimir Rybakov.
How Much Can You Earn as a Forex Trader?
Anyone who has little money and patience, but a lot of desire to earn extra money, is a direct contender for Forex traders. There are many myths and rumors around this market, both in favor of the foreign exchange market and against it. But there is an obvious truth – they earn on Forex. How much can you earn in Forex?
Cold Shower first Real data on the success of traders breaks all illusions. World statistics are relentless: only 5% of traders are truly successful.
The remaining 95% of traders empty their trading balance and move on to less risky investments. It is a fact. For the CIS, the statistics are even sadder – here no more than 2% of traders came to success on Forex. For others, it is too risky and unpredictable.
If we come closer to the point and deduce the average rate of return on Forex, then on average it is 10% per month of the deposit amount. But there are nuances. No one guarantees market stability. This may be 2%. Or a couple of months in general by zero, and then immediately 20%.
In theory, a trader’s earnings depend on just a few indicators, which we will now list:
- Average monthly profit in percent
- Deposit amount
- The size of drawdowns in trading
The better a trader trades, the more stable he gets positive results, the higher the likelihood that this is not just luck, but really a skill that all currency speculators strive to master. For example, you can add up the percentage of profit for each month for the year and divide this amount by 12, which will give us the average monthly return.
Beginners, as a rule, do not earn anything, and on the contrary, they can even lose more money in the market than take profits. There is no knowledge or experience yet to count on profit. Chances for such speculators appear only after their extensive training in trading.
Mid-level traders already have certain experience that contributes to the growth of the deposit. True, such traders cannot boast of stable results, which means that the profitability in their work will have a wide range of values, including negative ones. Of course, investors will be reluctant to invest in the trade of such speculators.
Professional traders are the elite of currency speculators. You should not think that these are some special people who studied in advanced institutions and so on. In fact, if you read interviews with successful traders, you can pay attention to the lack of special education. People knew exactly what they wanted from the market, and therefore, they continued to develop, improve their trading and gradually reached a professional level.