Forex Trading for beginners
Forex is a market for inter-bank currency exchange. In this market people buy and sell currency, with large organizations, corporations and banks (including the state central banks) having the largest share of transactions. The total daily turnover of the Forex market is now about 6 trillion dollars. Notice that this is just one day of trading. Therefore, the market simply does not notice the private traders, who are trying to earn their first million there.
What do you need to start trading on Forex?
You can get access to the Forex currency market only through a broker. At this stage it is important to choose a broker seriously, because the result of future trading depends on it. The next question that newbies have: How much money do I need to start trading Forex?
Most of the major brokers have a minimum amount for opening a trading account — $100. Before opening a real trading account we recommend you to try trading on a demo account first, it allows you to master the technical aspects of trading, to get used to the trading terminal. But do not think that trading on a demo account is absolutely the same as real-money trading. In addition to the emotional component of making decisions about opening/closing trades, there are also technical differences (slower execution of orders, etc.). So, if you have mastered the technical aspects of using the trading terminal on the demo account and want to continue studying Forex, it makes sense to switch to a real account with a minimum amount. Now let’s analyze step by step how to start trading on Forex.
How to start trading on Forex: Step-by-step guide
- First you have to register with the broker. During registration honestly fill in your data. When you open the real account it is important to fill in the real data which you can confirm. This is in your best interest. Be sure to write down in a safe place the username and password issued by the broker to access the trading platform.
- After the registration you need to download the trading terminal Meta Trader 4 (the most simple and widespread). Download it only from the broker’s official website, because it contains important settings for a particular broker.
- After installing the trading platform, start it and enter the login and password given to you by the broker. If you suddenly forgot your accesses, they should be on the email specified during registration.
- To get acquainted with the trading platform you should study additionally various video courses, which can be easily found on the web.
How Not to Lose Your Deposit on Forex
One of the most important questions for the beginner investor: How not to immediately drain the initial deposit in Forex? In fact, it is enough to adhere to several rules.
- The first few days of trading do not open trades more than 0.01 lots (this is the minimum possible volume for most brokers). A 0.01 lot is 1000 units of the base currency (at the rate of 1 lot = 100,000 units). Therefore, opening a deal in the EUR/USD pair, the cost of price change by 1 point will be equal to only $0.1. Therefore, if the market is characterized by sharp jumps in quotations (volatility), when opening a transaction you must plan to what price your account can afford to wait out the drawdown, and to determine the point of forced closure. Make sure you always have at least 50-70% of available funds. If you do not have free funds (margin call), to maintain the current positions, the broker will be forced to close all or part of your transactions.
- The second thing that will help save your deposit is the installation of stop-losses. Setting stop-losses is the most effective protection against force majeure situations (computer, internet problems, etc.). For the first time, we recommend setting stop-losses no further than 100 points from the current price.
- Do not play against the market, you will not change it anyway. If the trend is stable, you should not open trades against the trend, expecting a reversal.
- Do not open many deals on one pair. If there is a strong negative trend, you may not have enough time to close them.
- If you fix more than 3 losing trades during the day, take a break in trading at least until the next day.
- Take your time! Understanding the market is not formed immediately, give yourself time to get used to it.
How to choose a broker
How to choose a broker for trading? It seems to be a simple question, but the complexity is in its simplicity. First thoughts: compare commissions, trading conditions offered, read reviews. But profitable commissions can be only an advertising action, trading conditions of many brokers are similar, and reviews are 90% written by the brokers or competitors.
What you should pay attention to:
- the type of account and the speed of order execution. STP broker — takes the trader to liquidity providers, ECN broker — takes the trader directly to the international market, bypassing liquidity providers. It is considered that ECN-broker processes orders faster, but it is impossible to know how the orders are actually processed. By the execution type, the Market Execution is considered better than the Instant Execution — faster speed, no slippage. But there are no guarantees that the broker’s conditions are the same as the reality. The order triggering conditions are determined in practice;
- limitations of trading strategies. Some brokers put restrictions on the minimum transaction time or on the maximum profit limitation. There are restrictions — there is a reason to think;
- commissions. They are individual for every account with every broker (spread, swap, etc.);
- sum of deposit and minimal lot;
- trading instruments. Since most traders work with the most liquid currency pairs, this question is not the most important;
- availability of a free demo account (some brokers are only available after making a deposit). Please note: successful testing of a strategy on a demo account does not mean you will get the same results on a real account.
The most ambiguous way to choose a Forex broker. On the one hand, it is impossible to ignore reviews, on the other hand, they are so often manipulated that it is very easy to believe the deception. Tips on how to evaluate reviews:
- check it for uniqueness. Fake reviews are copied to different sites under different names, because no one thinks that it would be logical to publish them under one name;
- compare the dates of reviews. Abrupt jumps in the publication of reviews in certain periods — a signal of their unreliability;
- if a review lacks specificity, you should not trust it;
- you can analyze the history of the authors of reviews on forums. Random authors can be ignored.
How much can I earn trading Forex?
A beginner, who has not yet faced the practice and the first losses, but who read motivating articles from brokers about how easily and quickly you can earn billions, will tell you about billions. A little bit more experienced trader, because of his unsuccessful studies with pseudo-teachers, who made lots of mistakes and lost a lot of money due to ignorance of fundamental analysis, can tell you that it is possible to earn only small money. And only a practicing trader, who has devoted hundreds of hours to education and thousands of hours to practice, can give you a more balanced answer.
The range of earnings in Forex
Depending on your level of professionalism and initial budget you can earn from $10,000 to $500,000 or more per month on Forex. The practice and experience of many successful traders confirms that by trading on the exchange, you can really provide yourself with a quality or even luxurious living. As for the question «How much can you earn on Forex» straightforwardly, without reference to time, we can answer exactly — as much as you want: it can be $0, it can be minus, it can be +$300,000 or +$300,000.
If you really set ambitious goals in earning on Forex, then the question of how much money you can have here should be put aside for you at first. What is the difference between those who lose and those who earn?
The first ones are chasing the fast money and constantly thinking about how they will become millionaires tomorrow. Of course, there’s nothing wrong with being ambitious, but only if it doesn’t turn into euphoria, which makes you ignore the obvious things. For example, in euphoria you can fall for sweet promises of pseudo-trader’s teachers about fast earnings, and as a result lose money not only on the exchange market, but also on expensive education, which will be an empty shell.
Do you want earnings in trading, measured in tens and hundreds of thousands of dollars? Then put emotions and a desire to be rich tomorrow aside and with a sober head set a goal to become a professional. How to become a high-level professional — that’s the goal and that’s the question you need to ask yourself when you intend to earn on Forex.
How to become a professional in order to earn good money? This question is more correct and the answer is concrete — learn from professionals and practice. Ideally, find yourself an individual teacher, who trades by himself and who already has the money on the exchange, of which you are only dreaming.