How to Start Forex Trading: What Should I Know and Know?
The Internet is full of ads about quick and easy earnings in the Forex market. Common sense tells us that it's not that easy, and experienced traders, who really build up their deposits on accounts, will confirm - yes, it's not easy at all. And if you join them and try to earn by means of trading, what to start with, how to open an account and open a deal, how much to start with, what company to choose, what assets to choose: currencies, securities, stocks, indexes, and how to make profit. forex? Let's try to figure this out.
What is Forex?
Forex (Fig. 1) (Foreign Exchange Market - For+Ex) is a part of the global financial market, where the exchange of currencies of different countries takes place. Currency on their accounts is exchanged (transactions are opened and closed) by the major players of the Forex market - central and commercial banks, financial and state funds, corporations and ordinary people with withdrawal to the bank card, for example, when exchanging money before a trip to another country (The whole truth about forex).
The supply and demand for currencies in the exchange process change depending on a huge number of factors, so the prices change as well. Speculators can make large sums of money from these price movements - they buy currency when it falls in price, even a little, and sell it when it rises in price. The larger the order (trade), the more profit the speculator makes. To open an account and start trading is available to almost anyone. Currency exchange deals are open all the time, 24 hours a day, the market slows down only on weekends, but because of the time zone difference the break is almost imperceptible. It should be understood that when trading at Forex the currency does not change its owner, trading transactions are opened by orders for currency pairs, and the account is fixed profit or loss in the amount corresponding to the fluctuations in currency prices.
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Those wishing to make money from trading can join the global exchange at almost any time of the day or night through online terminals where trades are opened. They are installed as programs on a computer, in a browser or as online applications. In them, traders open trades in stocks, currencies, securities and even cryptocurrencies. Trading is done around the clock, and the goal is to make money on price differences. Trading opportunities for ordinary users are provided by Forex brokersSince individuals are forbidden to independently enter the foreign exchange market to open private transactions, there is no Forex without brokers. Trading - trading on price fluctuations, carried out by currency pairs, such as EUR/USD. Among the pairs there are popular and not so popular, as well as stocks, securities and other assets. By the way, Forex trading is not an investment in stocks and other assets, as is sometimes written on the Internet. Trading is for the purpose of making a profit by opening a deal on short-term fluctuations in market prices.
All that is needed to start trading and to profit from price differences is the Internet, an online trading terminal and a relatively small amount of money to open an account and to be able to open trading deals on shares, currencies and other assets at the exchange. Trading is very fast and dynamic, because asset prices are changing every minute, broker's commissions at the exchange are relatively low, that is why Forex transactions are popular and constantly attract new people who want to earn on the price difference, without going to work in the office, in the factory or in the field. However, the fact that any person who has internet access can at any moment open an account and start working at Forex market does not mean that this person will be able to earn serious money on shares and currencies. Of course it is possible to open an account and try trading without any training and opening deals on currencies and stocks at random, but only in case if one wants to lose the whole sum of money as soon as possible rather than make profit. But if the goal is the opposite - earn in forex without riskIf you want to make money, you first have to learn. Quick money is impossible, and if someone promises it on the Internet, he's a crook. The answer to the question "How to start forex trading"The first thing you have to do is to learn. You will have to learn not only how to forecast prices, but also how to open an account and trade, how to trade currencies, shares and other assets, how to withdraw money to the bank, how to determine the amount of trading per day, how not to blow the profit, etc.
Now there are almost unlimited opportunities to learn any kind of trading - stocks, securities, investing in the stock market, cryptocurrencies and Forex. It is possible to choose the most suitable method of training - books, videos, courses, individual lessons and so on. It is possible to learn trading and earning on the price difference in a completely independent mode and absolutely free, although it will require more effort and self-discipline than in case of lessons with professionals. With any method you have to first learn quite a lot of theory, then practice in simulated trading terminals on demo accounts and only after gaining full understanding of how to trade, open a trading account, credit it with the initial amount and proceed to open the first deals on a real terminal with real currency (forex trading training).
As part of theoretical training beginners are introduced to what is the forex market, they learn terminology, fundamental and technical analysis for predicting the price of an asset, money management, money management. When studying technical analysis of the forex market they study the laws of price behavior, price charting, the work of indicators and oscillators, risks. When studying fundamental analysis, one studies the influence of global factors on currency prices. In general, all training leads to the trader knowing how to open an account, how to open a deal to buy an asset (shares, cryptocurrencies, securities) at a low price and to sell the same asset at a higher price. How to withdraw money to the bank and how to predict the amount of profit received.
Books - They can be bought or downloaded for free or for a nominal price, among them are best-sellers who have proven their usefulness in practice. Of course, preference should be given to authors who have achieved real success in Forex trading. There are many top-lists of the most useful books on the Internet - you can be guided by them when choosing a textbook. The books present the basics of trading and basic knowledge, which does not become outdated with time. From books you will get knowledge about stocks and securities, price forecasting, risks and basic instruments. At the same time, Forex does not stand still and textbooks alone, even the most famous ones, are not enough. Moreover, books are the most distant from practice. They will give understanding of the market, but they will not teach to trade and make profit on differences in currencies and stocks prices.
Video lessons on YouTube - a very popular modern method of self-study. Many videos are created by quite professional traders, whose advice is useful for beginners. But they must be distinguished from videos generated by amateurs, who themselves have not gone far from novice traders in the stock market - and such videos are much more numerous. The advantage of YouTube videos is that you can find video material on practically any topic of trading on the Forex market, even on the most complicated ones. Forex strategies or narrow questions like "how to trade forex, bollinger training". That's why videos on the net are more useful after a beginner has learned how to trade. Also on YouTube there are broadcasts of trading on the exchange. In this case you can simply copy strategies, open trades in parallel with the blogger, invest the same amounts in trading, get the same profit.
Training with a broker (Fig. 2): nowadays almost all brokers present the whole courses "how to trade at Forex", from teaching the basics of trading, to solving complicated problems. Training is the most productive way to gain knowledge because training materials are prepared by professionals, in the right order, and the classes are aimed at working on the account and in the terminal of this particular forex broker, there is an opportunity to try immediately the acquired skills on the demo account terminal, here you can try how to open a deal, how to predict the rise and fall in prices at the exchange, what amount to put on one deal, etc. As a rule, in such a case one is taught to trade from the very first steps up to the beginning of real trading, and some of them even up to the first profit received. In addition, almost all, at least the top brokers, offer ongoing educational support to clients - they conduct webinars, seminars and other events for a nominal fee, raising the professional level of traders.
Special trading courses. Developed by experienced speculators or educational companies that are willing to share their experience in opening trades on the exchange with newcomers. These are often even free courses in the form of video tutorials, but there can also be high-quality paid courses priced at tens of thousands of rubles. Such courses include not only classes but also final testing, certificates and all other attributes of professional training. If these are truly high-quality courses, the user will receive structured knowledge in an exhaustive volume that will allow him to confidently enter the market, open a trading account at the exchange and start trading stocks, securities or cryptocurrency. The main difficulty is that even paid courses can be useless and of poor quality, even if their price is high. Numerous paid courses on "how to properly trade forex" often turn out to be useless at best. Before buying a paid course familiarize yourself with its structure. Lessons must be built not only on theory, they must include practical lessons, such as how to open a deal on the exchange, how to open an account with a particular brokerage company, how to deposit the account and how to withdraw the profit to the bank card.
Individual training - probably the fastest and most effective way to train forex trading from scratch to profit, as long as the mentor is a professional and practitioner. The problem is that it's hard to find a professional who really wants to teach beginners how to make money in the stock market, even at a high price. Not all good speculators are good mentors and can correctly explain how to open an account, which stocks, securities or other assets are the most profitable, how to make money on the exchange, etc. According to experts, individual lessons are the best way to learn trading. If you are lucky enough to find a good tutor, there are no problems with learning. He will show as a guide all the steps to success, from how to open an account and make a deal on the exchange, to withdrawing money to the bank. Also, an experienced trader will teach you how to plan your budget and tell you how to trade with what amounts of money is less risky and how to make your own financial plan.
Practice - the main stage of training. Practical training must be introduced in any training - independent, with a mentor, free, paid - from the first lesson, and each lesson must be reinforced by practice. For this purpose, in each trading terminal, in accounts, there is demo account - is a full-featured exchange trading terminal where one can trade stocks, currencies, securities, metals, and other assets. Money on this account is conditional and a beginner does not lose anything when trading, but acquires something most important - practical skills. Demo accounts are also available in forex strategy tester programs. Learning on a demo account has some disadvantages. The main disadvantage (Fig. 3) is deprivation of one of the main factors of trading - risk. Perfectly practiced actions in demo-mode can become useless during first real trading experience with real money, when a trader is under stress and that can lead to faster deposit withdrawal.
But as a trader skills simulator, this mode is indispensable, and does not lose its importance even when the trader has already mastered the exchange, because the demo account allows you to practice trading new currency pairs, stocks, securities, metals, trading instruments, try new strategies, and so on. When studying from the beginning, it is necessary to work in the demo-mode until a trader has a clear understanding of what is going on in the trading terminal. But not longer, - at some point it is necessary to decide to go out into the real world, open a trading account and start opening real transactions on the exchange. It is impossible to trade without basic training, but it is not a secret, that basic training for successful trading and training on a demo account is not enough for profitable trading on the Forex market. According to statistics 70% of beginning traders fix losses at opening first deals on exchange market in real terminal.
The amount of loss is usually not large, because the first transactions at the exchange are often opened for the minimum amount, but even these losses can be a shock, because long months of training, a proven strategy, studying the dynamics of prices of currencies, stocks and securities are behind us. Newbies must understand that the first loss is a peculiarity of entering the real exchange account and that the success of trading also depends on continuous learning. Professionals learn constantly, in the course of trading, analyzing successful transactions and mistakes on the exchange.
Many users consider keeping a trading journal an important element of learning to trade and improving their skills. It is kept from the very first day of training, recording on paper everything that has to do with trading on the exchange. And it is written down not only trading actions in the course of realization of strategies, but also the psychological state in different situations. But mainly the trading strategy, circumstances of opening and closing of a deal at the exchange, purpose of the deal and of the whole trading session, what sum of money is actually planned to be used, and so on, up to results are written in the journal. After the results are analyzed in order to make adjustments to the trading strategy and transactions.
Choosing a broker
A broker is a company which provides trading on the Forex market for private traders. The success of trading at the exchange depends not to a small extent on the conditions offered by the brokerage company. The choice of the brokerage company can be simplified - to choose the leader from the general ratings. There are many ratings on the Internet, and the same companies always appear in them, but sometimes new names appear. Nevertheless, you need to know what the characteristics of a good forex broker are:
- License. A brokerage company must have a license to conduct forex transactions in the open market. The license means that the company is checked by the state regulator. This document is not issued forever, so an additional confirmation of the company's reputation is that the license exists for a long time (Forex brokers with a license from the Central Bank of Russia). A broker may have a license issued by the supervisory authorities of one country, but may not have authorization from other countries. In this case, it is important whether the license is issued by a country with serious requirements for financial institutions. This is a very important point from the client's security point of view. In Russia licenses for brokerage companies are issued by the Central Bank of Russia,
- Guarantee Fund. A serious brokerage company has a safety fund, at the expense of which clients can be compensated for losses. It is important to understand that losses are compensated not from unsuccessful transactions, but when the company is closed. The funds are deposited to special bank accounts and guarantee the client's financial security.
- Trading accounts. Brokerage companies offer several types of accounts, before you register you just need to clarify whether there is a trading account of the type you need. First, there must be a free demo account for training. It is optimal if small trading accounts are provided, especially for beginners. Brokers distribute accounts in a hierarchical order - the higher the amount of deposit on the account, the more opportunities for transactions on the exchange are given to the client. Also pay attention to how one can open and close a trading account with the broker. What are the time limits for withdrawal, are there any commissions for deposit and withdrawal to the bank card.
- Commissions. Brokers earn on commissions for trades on the exchange, so you need to find out what exactly traders are paying for and what the mediation price is. In this context, also important are the working conditions in relation to the size of the deposit amount. Therefore, you need to pay attention to the size of the minimum deposit amount and what it gives. Sometimes with the minimum amount such limited trading opportunities are offered, that it's better to choose another brokerage company.
- Training. Some exchanges are designed more for professionals, so they do not have training materials for those who start trading from scratch. In any case, there must necessarily be a demo account, on which you can open trades, set the amount of limits, test strategies and tools. But there is hardly any top broker without training opportunities. When choosing a brokerage company, pay attention to the term of validity of the demo account. It is better to open an account at companies with unlimited demo. In this case you will be able to freely open transactions, test strategies and instruments in trading different assets, including stocks and securities.
- Margin Trading. Trading is actually a trader opening trades on credit, the size is called "leverage". A professional with big leverage can make a big deposit out of a small one, but novice traders should choose a brokerage company that provides different size leverage. However, concerning this way of trade it is necessary to notice that for beginning traders it is better not to open deals on credit at all. Margin trading is good for experienced users. It allows opening of deposit for minimal sum, but earning on it serious sums of money. When choosing a brokerage company pay attention not only to the leverage, but also to the amount of payment for margin trading, sometimes its price exceeds the benefits.
- Tools of analysis. In addition to the fact that the broker must provide a workable terminal with the tools of technical analysis, it should also have tools for the fundamental analysis - news, reviews, professional analytics, experts' opinions and so on. Fundamental analysis is the basis of successful trading that allows you to get serious amounts of profit. Exactly this analysis allows to predict rise and fall of prices on shares, securities, currencies, cryptocurrencies and other assets. Any news can have a serious impact on prices and profit amounts.
- Customer service availability. It is extremely important, especially at the very beginning of trading. The need to urgently contact the support will inevitably arise in every beginning trader. It should be available by email, phone and chat. The broker's representative must be fully competent and provide adequate information when it is needed. The necessity to contact the support service often arises in case of withdrawal of big sums to the bank card, technical failures and delays in payments.
- Blacklist. In addition, you can check if the broker is not on the "black list". Here you need to understand that he may be on such a list in one country, and in other countries of the world enjoy a high reputation. The problem here is that in the country where it is included in the "black list", it may not provide services to traders from that country, although this company is available on the Internet and may even allow registering an account and opening a demo account. As your professionalism grows, you may need to use Forex trading advisors (Fig. 5). Algorithmic trading is not allowed by everyone, so this point should be clarified.
- Trust management. This opportunity is interesting for those who consider trading more as a way of investing. In this case, the user entrusts his money into the management of a professional. He opens trades, receives profit and takes the predetermined amount of money. In this case the user needs to know how and where to find a good manager rather than how to trade. Although knowledge of the forex market is an advantage in this case. When choosing a partner pay attention to the price of his services.
- Trading platform. When a user enters the Forex market for the first time, he almost immediately learns that there are two main trading platforms in the market: MetaTrader 4 or MetaTrader 5. And most often they are provided by brokerage companies. They are criticized by many professional traders - some for the lack of necessary functions, and others for their overabundance - but most traders trade on them. MT are fast and easy to download to your computer, function as a mobile version, provide a lot of tools to implement any strategy. You can start mastering these platforms from the first day of learning how to trade, long before you choose a brokerage company. You need to understand how to set up a chart, how to create strategy templates, how to open deals, learn to use technical analysis tools, manage orders and so on. This will take a lot of time. When the MT is provided by the broker after opening the account, it gives the trader the data to enter.
Choosing a strategy
A strategy (Fig. 6) is a method by which a trader forecasts prices of traded assets (currencies, stocks, securities, metals) in order to make a correct bet on the outcome - price increase or decrease - in order to lock in the profit. It is practically impossible to trade effectively without a strategy. By the time the beginning trader gets to the demo account he already has an idea about the strategies at the exchanges and imitates trading according to one of them. Rather it is one of the popular strategies, Price action, Bollinger or some other with application of 2-3 most popular indicators that are built in terminals initially.
Strategies can be long term, medium term and short term. Intraday strategies, scalping and any strategy that opens on a timeframe of 1 minute (or even less when pipsing) to a maximum of one week are short-term. This is the most difficult method of trading that requires constant concentration, ability to handle tools, to accurately predict the price change. Meanwhile, most traders are trying to trade on short-term strategies. Indeed, short-term strategies allow fixing profit every day, that is what most beginning traders count on. But in most cases they fix losses every day if they do not have appropriate experience and professionalism. And in the case of scalping, the loss can be fixed within a few hours.
Short-term strategies require careful study and training on a demo account. It is also desirable to have an impressive deposit of $1,000 or more. Medium-term strategies imply holding positions within a month. When implementing such strategies, traders check their positions a couple of times a day. Therefore, such strategies are used by those for whom the Forex market is an additional source of potential income. From a month to a year, long-term strategies are developed, the trader opens a couple of deals and monitors them occasionally. If there is profit from such strategy, it grows for a long time, in any case, the trader fixes rarely. A trader, proceeding from his aims and abilities, can borrow a strategy from the Internet where they are presented in abundance or develop a strategy by himself when he works out his individual trading style. Before using a strategy, it should be tested on a demo account or with the help of tester programs.
С signals The signals are generated by various indicators and graphical patterns, etc. Signals are generated by various indicators, graphic patterns and so on. But signals can also be provided by third-party providers. For an experienced user, trading on signals from a reliable source helps to make transactions faster and earn more. In this case, experience is needed in order to determine the reliability of the source and evaluate the significance of the signal. Signals show when a trade can be opened, can recommend the type, show the entry price, where to place limits, and so on.
The trader can receive signals via SMS, email, messenger - virtually any way. Professionals can submit their signals for such trading method as copying - a less experienced trader literally copies them to his chart. Signals can be paid and free - and paid signals are not always better, but they are still considered to be more accurate. The price of signals can reach hundreds of dollars, but they also do not give a full guarantee of profit on the market. And the free ones are in demand among those who have suffered the first losses and are looking for signals which are more accurate than the ones they have defined by themselves. In most cases, relying on signals also leads to losses, because most signals are either useless or fraudulent.
Therefore, the main task for those wishing to trade on third-party signals is to determine the source of reliable signals. At first glance, reliable signals can be provided by brokerage companies, but this is not entirely true. They can promise good signals plus compensation for losses from wrong signals. But in fact, they make money on losing trades and are definitely not interested in everybody winning trades. Therefore, it is better to check the signals on a demo account first. Signals can be just a marketing ploy that is supposed to induce a potential trader to open an account for a large sum and start trading - based on the signals.
There are specialized companies - providers of Forex signals. Most of them just sell signals that do not work. Usually such companies have cool websites with rave reviews from rich clients. At the same time, the signals are quite affordable. If you have doubts about the provider, it is better not to contact him at all. But if you really want to, you can conduct a thorough check - if the provider is a crook, he probably already has a lot of negative feedbacks.
Fraud in Forex
Forex is a dynamic, liquid market, which attracts many traders willing to help beginners with "Forex trading". Unfortunately, a huge number of different kinds of swindlers is a characteristic feature of this market and a beginning trader should be able to recognize them. Almost every aspect is mastered by cheaters. They can present themselves as a brokerage company with a perfectly acceptable website with trading functionality whose only aim is to collect large sums of money. Scammers can send trading signals that absolutely guarantee profits in the market. A popular method of deception is to sell "profitable" advisors and trading robots, fantastically profitable trading strategies and so on.
It is not easy to recognize a fraudster, but there are a number of signs to pay attention to. For example, if profit is guaranteed, it is a scammer - a broker in principle cannot guarantee the result of trading, especially he cannot guarantee the 100% income and moreover the income by some sum, like "from 1000 dollars a month". Almost all of the top brokers do not even offer trading as an alternative way to earn money, because it is also a deception, because the results of transactions for each individual user are unpredictable. In the same way any statement that there is no risk in using any tool, strategy, etc. is a deception. Forex is a risky market by definition, this is its basic characteristic, and the ability to calculate the risks is a basic trader's skill. In any case, if any market player promises something that sounds or looks too good, it is a fraud.
It is highly unlikely that a bona fide broker will request a money transfer at the first contact. Real brokers have quite a few good, useful free features. And at some point will definitely mention the disclaimer and the risks of investing in the forex market. Also brokers don't ask for passport data, bank account information, don't appeal to police, tax and other security agencies. If there is even the slightest doubt that this broker is a fraudster, you should not contact him, let alone open an account with real sums. It is also not recommended to deposit from the main bank card, it is better to have a separate account to deposit on the exchange.
But if you really want to, you should at least do some thorough research on the Internet. Or better yet, just choose a well-known broker from the top ten of the popular rating of exchanges. With forex robots and advisors, everything is a little more complicated. They are not necessarily made by crooks. For example, in the MT4 and MT5 markets there is a huge number of quite bona fide advisors, but if you look at the reviews, most of them do not work. For paid testers, you can collect feedbacks, so as not to waste even small amounts of money. And you can check the free ones on the tester, - in the same MT5. You can also check questionable strategies.