Forex trading has attracted so much attention in the past few years and the fact that you’re here in my site reading this article means you are also interested in it or at least you want to know what is it and how it works. Here in this article you will learn how to trade forex step by step.
I am sure you have seen those traders on the Internet who claim forex has indeed worked for them, how it made them rich over night, those traders who will use every opportunity they get to show off the lifestyle forex trading afforded them.
If you you want to know how it works, or you want to know the steps required to start trading then this article will teach you everything about forex trading.
Why people are interested in forex
You can work from home on your pajamas, or anywhere you want, you can simply just open your lap top or cell phone and login to your trading platform and start trading.
the primary reason most people want to know how to trade forex is money. I love money and im sure you do too, that’s why you are here, right? otherwise you wouldn’t be here on my side reading this post. It’s true, professional traders do make money, a lot of it.
Traders like Bill Lipschuts make millions of dollars in profit every year and I know you can too. However, like any other career, forex trading is not easy and most defiantly not a get rich quick scheme.
What is forex trading
Forex is an acronym for foreign exchange – The largest and most liquid financial market in the world with daily currency trading volume of more than $5 trillion, yes more than $5 000 000 000 000 is traded daily, at least $200 billion is traded per hour.
What is traded
When people say they trade forex or they want to learn how to trade forex, they simple mean they buy and sell different types of currencies through an online brokers or banks. Since currencies are traded in pairs this means you simultaneously buy and sell currency pairs.
Forex currency pair quotes
Currencies are always quoted in pairs, like EUR/USD, NZD/USD, CAD/JPY, etc…
The reason for this is because in any forex transaction you are simultaneously buying one currency and selling another. below is an example of a forex rate for Euro vs US dollar (EUR/USD)
The first listed currency on the left before the slash mark is called a base currency, while the second currency after the slash mark is called a quote/r currency In the example above.
If you were to buy the EUR/USD pair, this means you would be buying the base currency (euro) and simultaneously selling quoter currency (usd).
By buying this pair (EUR/USD) means you believe the Euro will strengthen against US dollar and if this is true, you would then make money.
The opposite is also true, if you were to buy this pair but then usd strengthen, you would then lose money.
You would buy this pair is you believe the base currency will go up relative to the quoter currency or sell this pair if you believe the the base currency will lose value relative to the quote currency.
When buying, the exchange rate tells you how much you need to to pay in units of the quote currency to buy 1 unit of the base currency.
In the example above, you have to pay 1.16685 to buy usd When selling, the exchange rate tells you how Many units of the quoter currency you get for selling 1 unit of the base currency .in the example above, you will receive 1.16685 usd if you sell 1 euro
The Base currency is the basic for the trade.
If you buy EUR/USD you are buying euro’s ( base currency) and simultaneously selling dollars (quote currency).
if you sell EUR/USD you are selling euro(base currency) and simultaneously buying dollar (quote currency) so basically this means whether you sell or buy a currency pair , it’s always based upon the first currency in the pair called the base currency.
This can be confusing in the beginning but once you start learning about forex you will see how simple it is.
Who participate in the forex market?
- Brokers and other related financial institutions
So, what about us? Individual traders like me and you are called retail traders ,and in orders for me and you to participate in the forex market we must first register through forex brokers or banks
how do forex traders decide when to buy or sell
There are two ways to go about buying and selling currencies The first one is called “fundamental analysis” The second one is called “technical analysis” .
Fundamental traders use economic reports, social and political forces that drive supply and demand. such as interest rate, inflation reports, employment growth, etc to make trading decisions Price move primarily based on supply and demand Whereas technical traders only use charts and indicators.
Both of these strategies are taught here on this side. You will find all the information you need to trade profitably.
which one is batter, fundamental or technical analysis?
Both fundamental and technical analysis are important. both options will make you money if you take your time to learn them. However, in my humble opinion, I find technical analysis to be the easiest, this way I don’t have to keep up with the rest of the world and read news all the time,it is just not my style.
I like to keep things simple. The only thing i am concerned with is reading the price on a chart. That’s me though. Like I said earlier, every trader is different.
There are many trading strategies out there, also on this website, just find the one that you prefer and like.
What is the best time to trade forex market
the forex brokers market operates 24 hours a day. this is established through the 3 major trading sessions:
- Tokyo session,
- London session and
- U.S session
The fact that forex market operates 24hours from Monday to Friday doesn’t mean it’s always busy all the time. Below is a table of the open and close times for 3 major sessions
If you look at the table you will notice that in between each session there is a period of the time where 2 sessions are open at the same time.
The best times for forex trading are those times of overlapping money center trading. From 2am to 4 a.m EST, both Tokyo and London sessions overlap, and from 8 am to 12pm EST, both the London and US overlap.
These are the busiest times during the market because there is more movement between the currency pairs when two sessions are open at the same time. Also, European session is the busiest session compered to other sessions.
Are these sessions important to you as a retail trader?
My simple answer is yes and no:
If you’re a scalper or a day trader then yes these sessions are important because when you trade, you only hold a position for few minutes or hours so you want to trade when there is volatility otherwise you would be wasting your time and money trading when there is no movement in the market.
NO if you are a swing trader like me, I don’t really care much about volatility and sessions because I hold my trades for days,week or even months.
What are the best days to trade the forex market
As you can see: from Tuesday till Fridays afternoon is where the most movement is seen. Mondays are usually slow and Fridays are usually busy until 12pm EST Based on this information, if you’re a scalper or a day trader, it’s best to trade when 2 sessions are overlapping also during the week from Tuesday until Friday afternoon.
How to trade forex
- first thing to know about forex is that it takes money to make money. You must be willing to risk your money. If you hate to risk your money, you probably want to stay away from the forex market.
- you must know that you will not get rich overnight. You have to learn and master the financial market, the basics, the behavior of the price, trading strategies and that will not happen over night
Step by step guide on how to trade forex
Step 1: learn the basics
- The first step toward forex trading is education. If you are interested in forex trading, you got to learn first. Research online, you can buy e-books and read if you want, find a mentor to teach you(if you can afford one) or you join my private room here and I will personally teach you everything and make sure you become a professional trader.
- Know different types of markets that can be traded. Understand fundamental analysis. Learn about technical analysis and decide which one you prefer.
- Master your trading platform.
The best part is that all the information you need to trade successful can be found online. You can find a lot of free information from this side too.
Make sure you read these following articles they will help you with basics.
- How many losing trades in a row can your trading account handle
Step 2: choose your trading style
Do you want to to be a scalper, day trader , or swing trader? What trading strategies do you like most? Do you want to trade forex full-time or part-time? These are some of the questions you need to ask yourself before choosing a trading strategy.
If you’re straggling to choose between swing trading and day trading, this article here will help you decide
There are thousands of trading strategies out there. Make sure you find the ones that works better for you and follow them. Don’t try to move from one strategy to another.
I don’t know about you but I like to keep things simple that is why I use trading strategies like support and resistance,trendlines, channels and patterns.
You can choose from these trading strategies:
- How to trade double tops
- How to use Fibonacci tracement
More trading strategies can be found in the strategy category.
Step 3. Choose a reliable forex broker
Now that you have become somewhat familiar with how the forex market works, you know the rules you should follow no matter what, the trading strategies, and whatnot. It’s about time you choose a forex broker to test everything you have learned so far as a forex trader.below is a list of top 20 most reliable and recommended forex brokers
Before you open an account with an online broker, make sure you read this post: 10 important questions to ask your broker before open an account with them.
Step 4: Open a demo account with your reliable broker
Demo trading is an important step in the forex trading learning curve. Sadly, most traders do not take demo trading serious.
There is lot to learn from demo accounts. Demo trading is a bit like the flight simulator in aviation. It is a test of the real thing. Therefore, traders should take every aspect of demo trading seriously, In fact, the first and most important rules of demo account is to treat it like live account.
you can trade with real conditions but not your own real money, because it is absolutely risk free.
Demo trading is the best way to get to know the ins and outs of trading and to put your trading strategy to the test. You can discover your strengths and weaknesses as a trader and also master your trading platform.
If you can’t afford to open a $50, 000 live account, Don’t open a $50,000 demo account.
As a demo trader, your job is to simulate the real thing, so create an account with the same starting balance that you would start with when you begin live trading.
Problem with big demo accounts like 50,000 is that you will make a lot of profit, sometimes you will make $10,000, $15,000 or even more per trade then once you go live you open a $1,000 account and expect to make the same profit you made on demo then you start using bigger lots sizes. This is the best way to blow your account.
- Trade as you would trade in a live account. Do not open trades for the heck of it.
- Apply position sizing on each and every trade you place on you demo account.
- If you’re a fundamental trader, trade the news the same way you would trade a live news event on a live account.
- If you’re a technical trader, apply the same rules you would use on a live account.
- Have a trading plan and follow it as you would on a live account.
- Trading with a demo account before trading with a live account is crucial for new traders.
The following articles will help you master your MT4 platform.
Step 3: Going live
Now you have practised on a demo account, you know the things you shouldn’t do
- You know how to calculate position sizing.
- You have a trading plan and follow it no matter what.
- you know how to use your trading platform, how to place your orders, how to change your templates, etc…
- you have chosen a reliable broker you can trust with your money.
Now that you know the important things you should know, it’s time to deposit your money into your trading account and start trading.
Ideally, your first live account should not contain more than $2000. starting with $2000 or less in a live account is pure delusion. Practice emotional control with your first small deposit. Feel what it is to win and lose trades with your own money.
By the time you have gained some measure of experience in this regard, as well as a few other things that you can only learn by live trading, if you can double or triple your money without breaking any of your trading rules you can then confidently step up your trading capital knowing that you can handle it.
Going live is the most difficult part in currency trading. Most people can make money on a demo account but once they start trading real money everything changes.
I know a lot of traders that have been trading forex for years yet they can’t make money consistently- they keep making money here and there but end up giving it all back to the market because they can’t control their emotions, they get greedy, they want to get rich quick, etc…
These are the reasons why I decided to create a private room to help both new and advanced traders to trade profitable
If you would like to join other traders in the private room, please make sure your read this post here to find out what is it all about, what’s happening in the private room and how to join it.
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