Trading Forex for beginners
Have you made your mind to make money on Forex market? Do not hurry.
First, it is important to study well all the theoretical aspects of working with the tools in this system. To learn Forex trading step by step also takes some practice. Exchange trading is an entrepreneurial profession that requires you to risk your money.
Making money is worth taking a rational conservative approach to the market. There are some tips for traders preparing to dive head-first into trading – with a focus on preserving capital and sanity rather than getting rich quick.
Tips for traders:
Explore the product
Forex market instruments first of all are currencies and precious metals. In addition to them, shares of the world’s largest companies, stock indices, futures on commodity markets, and oil are traded on the Forex market. The main share of this market still belongs to currencies. Knowing your product is the basis that all Forex trade tutorials recommend.
What currency pairs should you trade? It is best to concentrate on one currency pair at first. Learn its patterns and characteristics, find out what time of day it is most volatile, and how it reacts to other crosses and news releases.
You should have a desire to thoroughly study your currency pair, build a level of intuition that will help you make the right trading decisions. It is better to choose one of the highly liquid currency pairs like EUR-USD, GBP-USD or USD-JPY.
Explore the software (MT4, MT5)
Shortcut on your monitor is the entrance to Forex market. Online trading platforms play the role of your personal Forex office. Internet trading platforms are portals or programs from companies that are professional brokers of the Forex market. These companies operate with the money of their clients-traders, making transactions on their orders.
Trading platform is the heart of any broker. There are enough trading platforms on the market today: MetaTrader4 and MetaTrader5 and many others. Some companies develop their own trading platforms, but it’s better to learn from the example of one of the most popular and used platforms among traders – MetaTrader4.
In general, all that has been said can be applied to any other trading platform. Forex trading tutorials for beginners do not recommend you to start with any, albeit innovative, but little-studied platform with a small community around it.
In simple terms, this is a software package that is responsible for processing and executing all trading operations of clients of a brokerage company, and carrying out all related calculations, payments, and write-offs of funds.
The main thing that you should do if you decide to trade on the exchange is to study the working program. In a few seconds, prices can change – both rise by tens of points and fall. When a trader thinks which button in the program to click to create a particular order, instead of looking for an entry point, he is unlikely to be able to make a long and successful profit in this market.
Find a reliable service provider
Forex broker is a financial company that provides you with access to the foreign exchange market and the necessary technical and informational support.
They are the link between buyers and sellers of currency. Their income is determined by the size of the commissions they charge for services.
At the same time, you should not lose your vigilance, since this area is no exception and there are scammers here too. In order to avoid fraudsters, you should contact large companies that have the necessary documents to carry out their activities and have a good reputation.
It will be difficult for a novice trader to make the right choice, and therefore the following recommendations should be followed:
- Ask to show the license. If not, look for another partner.
- Pay attention to the term of the broker and his reputation.
- Find out if the broker is regulated by regulatory authorities.
- What tariffs the broker offers – fixed or floating.
- Is there a round-the-clock technical and informational support.
Track your progress weekly
You will not be able to achieve results if you do not do systematic work and monitor your progress. You will not be able to work on mistakes in a certain period of time. Therefore, the basis of trading Forex for beginners recommendations is record keeping, which can be analyzed.
Write down information about your mistakes made in the process of calculations, about changing trading tactics and strategies, about the effectiveness of a particular trading method. All this will help you track down mistakes and make your work more efficient and profitable.
In addition, this will help you understand which tactics and strategies are working and which ones are better not to use in the future.
Have at least 3 different trading notebooks:
- For trading ideas
- To test trading strategies
- To maintain a trading diary.
Keep records of your trades – this will help you not only track your profits and correlate with losses, but also show the dynamics of your development as a trader.
Study for free
Find out everything that can be learned for free. If you go for paid tuition, you can understand a lot more if you know the basics.
Some schools offer a lesson program that you can find for free, but you won’t be able to understand this if the basic concepts are not familiar to you. You can familiarize yourself with the main words of a trader in the manuals Forex for dummies.
Read everything that comes to hand. There is a lot of literature on Forex trading and at first it will be difficult to understand everything. Only by accumulating your personal baggage of knowledge, you will learn to distinguish worthwhile things from information trash.
Use demo trading as part of the first steps on the market. Some knowledge does not require material costs.
The offer to open a virtual Forex account can be equally useful for both beginners and experienced traders. Many successful exchange tradeers use such deposits to practice various trading strategies.
Different platforms and programs for Forex differ significantly in terms of functionality. Opening a free demo account will make it easy to adapt to new conditions when moving from one site to another.
In practice, a detailed assessment of the correctness of the chosen strategy requires testing for at least a month. This long period of trading can have an extremely negative effect on real finances as well. In such cases, a virtual account becomes a learning tool.
With such a virtual free “simulator” it will be easy to master the following skills for making money:
- Opening and closing positions;
- Monitoring the movement of the market;
- Fast response to changes in the market situation.
Do not think that this account is needed only for beginners who work according to the Forex tutorials. Most experienced exchange traders always have two accounts open at once – a training one and a real one. This tactical move is used to master new trading floors offered by financial companies.
Working out the strategy on a virtual deposit makes it possible to analyze the profitability of instruments, evaluate the convenience of trading, compare commissions and get other information of interest.
Use deposit bonus
The first way to get profit on Forex from scratch is to trade using bonus funds, which can also be called a “no deposit bonus”. This opportunity is offered by almost all major brokers.
Although the amount of bonuses is small, it usually ranges from $ 5 to $ 20, and you can trade small volumes in the 0.05 lot area, however, they will undoubtedly be beneficial.
With this account, you can try to trade not with virtual money, but with real money. The Forex trading tutorials attach great importance to the psychological difference between virtual and real currencies.
This experience will give confidence to a novice trader, because you still have to trade for your money.
Most important: set a limit
Now – about the main thing. When it comes to practice, you will quickly learn that the most important thing for a trader is the ability to place a stop loss. True, this lesson is often very expensive.
Stop-loss is an automatic order to close a trade if it has reached the level of acceptable loss you have set. By default, the stop loss is set at the level of the part of your deposit that became the collateral for the transaction.
Be careful, many trading platforms do not have an automatic limit setting function. You can set a stop loss yourself by defining the maximum amount that you are willing to lose in a particular trade.
A stop loss is necessary to avoid plunging you into excessive losses. And so as not to turn your entire Forex deposit into a hostage of just one transaction – which means just one potential mistake.
Common beginner mistakes
The mistakes of beginners usually consist not only in the lack of knowledge, but also in the psychological side of the issue.
You need to have patience, be able to wait or stop in time. But if you cannot be cold-blooded, the mistakes described below can be avoided by knowing them.
Work without preliminary research
It is information that becomes the axis around which the movement of exchange rates is twisted. Being the worldwide “store” that determines the “price of money” – the universal economic equivalent, Forex is highly sensitive to everything that happens in the global economy.
Hence the logical conclusion: the better informed a trader is, the sooner success awaits him in Forex trading. Even if a trader is not going to become a professional, he may well define for himself several sources of information besides Forex trading for dummies that he will use to “stay in the know.”
The formula for success in the Forex market is quite simple. To be in profit, it is necessary to correctly interpret the information received, draw the correct conclusions from it and react correctly by opening certain deals.
There are several basic information flows that a trader can use. The most convenient help is the financial news feed, which is equipped with all major online trading platforms.
As a rule, on this tape the specialists of the brokerage company or their partners – business news agencies post in real time all the news that are important for the Forex market.
Waste all money
Another common mistake is transferring all money into deposit. The fact is that a trader most often loses his first trading deposit. No matter if you use Forex trading tutorial for beginners, you still need experience. This is totally normal.
You have to become a professional trader to make a stable income. You have to pay money for this: pay a teacher or Forex itself, because Forex is also a teacher.
There are two types of traders – those who have money to continue trading (which means there is a chance to make money), and those who do not have this money (there is no chance to earn money).
You need to divide your trading capital into parts so that in any case you have money to continue trading.
Most newbies are desperate to guess where the price will go. You don’t have to try to guess, you have to watch the price. Over time, you will see that price movements follow certain patterns.
The price draws certain patterns over and over again. It is especially good to watch the price when you have no open trades. The fact is that with open trading positions, you are interested in the price movement in the direction you need.
That is, it is difficult to remain open-minded. But when you do not have open trades, you look at the market calmly and impartially.
Many newbie traders try to catch the top or bottom of the market. The logic is clear – if we buy at the very bottom of the market, we will take all the price movement. If we buy (sell) in the middle of a price move, then we take only a small part of it.
The truth of Forex trading is that it is almost impossible to catch the top (bottom) of the market. And whoever tries to catch extreme points quickly goes bankrupt.
Always follow the trend
Almost all amateur traders trade exclusively with the trend. It is a good advice of any Forex trade tutorial. So it turns out that crowds of people are moving in one direction.
Trading Sharks trade against the crowd. They watch when market participants get too carried away by some trend, and act the other way around. If everyone is actively buying, then you need to sell.
Follow the trends constantly. Make it a rule: starting a trade, view not only the current trend of your time period, but also a longer period of time.
For example, when trading on a daily time frame, ask what events occur on a weekly or monthly basis. Are you going against a trend on a larger time frame? View charts with a shorter time frame to find convenient entry and exit points.
Trading unknown currencies
To learn how to start trading currencies in Forex, you must first understand that all currency pairs are divided into four groups:
- main currency pairs (majors)
- secondary currency pairs (minor)
- cross pairs (cross courses)
- exotic couples
The main and additional pairs contain the dollar on one side of the transaction:
- EUR / USD, USD / JPY, GBP / USD and USD / CHF
- USD / CAD, AUD / USD and NZD / USD
A combination of currency pairs that do not include a dollar are called cross pairs.
All other pairs are called exotic pairs – their total volume is very small. Forex trading is also a great combination of correlation between different currencies and finding dependencies.
Leverage is an integral part of Forex and CFD trading, futures and options markets. In simple terms, leverage is a tool that allows a trader to use an amount many times more than he has in his account. However, this can become a trap.
The golden rule of Forex trading tutorial for beginners is that you should not risk more than 5% of your deposit per trade. Ideally, you shouldn’t even go beyond the 2-3% mark.
Limiting your risks wisely will help you avoid losing too much on bad trades and easily tolerate losses.
Like almost any long journey, investments require start-up capital. And there are important points here:
1) You should only invest a very small part of your free cash in the stock market in order not to lose everything.
2) There can be no question of borrowing from friends, taking a loan from a bank, quick earning 50% per annum on the market and being happy.
You cannot trade with borrowed money! Because there are risks in any case, and if you are overwhelmed by the need to return the initial capital to creditors, this will lead to psychological discomfort and a number of mistakes.
Trying new strategies without testing
At the initial stage, you must decide whether you will be an investor or a speculator, and which trading system you will adhere to. The fact is that for a stable profit from trading in financial markets, one must strictly adhere to certain rules, which the investor himself determines for himself empirically.
The set of such rules, which determine the moment of entry and exit from the market, the volume of investments and the choice of a financial instrument, is called a trading system.
After choosing a strategy, open a demo account and start testing it. The best thing is not to deviate from it and not give in to emotions. Remember, emotions are the first enemy in the foreign exchange market.
Test your strategy for at least a month according to Forex tutorial. This is quite enough for you to get used to it, delve into its nuances, check how it works and understand what the level of earnings can be with this system. Engage in trading ideas that you can research and test.
The trick is to turn market observations and hypotheses into concrete rules that you can test against past price data. And only then risk real money.
Everyone can profitably trade on Forex. To explain the statistics, according to which 5% of the total number of beginners earns at most, it is possible to be unable to control oneself, unwillingness to learn.
An important reason for starting a virtual deposit for beginners in Forex trading tutorial, is the psychological moment. That is, the problem lies in the trader himself, and not in the fact that the market is complicated.
Mistakes are a matter of everyday life. Fortunately, in Forex you always know when your actions were wrong. If you are losing money, then you did something wrong. Just learn to notice it and not repeat the same mistakes.
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