How to become a professional US Forex trader
There is hardly a person these days who have never encountered the word Forex. Many advertisements and various articles tell how traders easily and simply earn huge money. On the contrary, some warn that Forex is a fraud and sooner or later you will lose all your money. Many people are sure that only the elite can do trading, and trading requires a big deposit and economic education.
In fact, it’s all wrong, you can earn on Forex. And you do not need to have any education related to trading or have a large amount of money – all you need to start is a desire. But you should not think that everything is easy and simple. Forex trading is hard work, and it is not at all easy to earn money. You must clearly understand that Forex is not a casino, and you should not treat trading as a guessing game.
Trading, like any other profession requires certain skills, knowledge and moral qualities. Trader must be able to make fast decisions, properly analyze his mistakes, constantly learn and improve. Before you start trading you should decide if you are ready to start trading on Forex, whether you will trade by yourself or you will give your funds for management. If you’re ready and have decided to trade on your own, then let’s continue.
Where to begin Forex trading
As you have already guessed, the trader’s income is the profit from the difference in the exchange rate when buying and selling currencies, shares and other assets. Or in simple words – buy cheap, sell expensive and the resulting difference is the profit. Since we are talking about Forex, you will be trading currency. Forex is a currency exchange market with huge daily turnover reaching several trillion dollars. This market is designed for the free exchange of currencies and no government can interfere in the process of making transactions.
All Forex transactions are carried out by such participants as central and commercial banks, brokers and dealers, insurance companies, pension funds and other financial institutions. And the question arises here – how to trade on Forex for a private person, how to become its participant? After all, a private person cannot directly enter into transactions in the foreign exchange market. The answer to this question is quite simple – you need a Forex broker. He will be your intermediary and will deduce all your transactions in the Forex market. Here we come to the first and very important step – the choice of a broker.
Choosing a broker
To trade, we need an intermediary, who will execute our trade orders. For these services he will take a certain fee, a commission. Forex trading services are provided by Forex brokers, dealing centers and banks. Generally, the choice is made among the many Forex brokers, because they have the most flexible and acceptable conditions for trading. This stage is a responsible one, because the chosen broker is the one where you will open an account and on the basis of his quotations you will conduct trading. When choosing a broker, read its reviews and find out how long the broker has been engaged in these activities. Study the trading conditions and the types of accounts they offer.
Registration and opening a demo account
After choosing a broker, proceed to the registration. This process is very simple, for most brokers it is enough to fill in one or two forms and specify your contact details. After the registration you can open an account. All brokers offer two types of accounts, demo and real, since you are a beginner, and you have no experience in trading, so naturally you can choose demo account.
What is a demo account, and what is it for? Trading on a demo account is done with virtual money, and it’s trading is almost the same as on a real account. First, demo account is needed for gaining practical experience, for assimilation of trading terminal, for choosing trading strategy, expert advisor or indicator. And if you lose this deposit, you simply open a new account and continue to master trading without losing any real money. Opening an account, as well as registration does not take much time; this process usually takes no more than 15 minutes.
Choosing a trading platform (terminal) and learning to use it
To enter the Forex market you need to install a special program on your computer – a trading terminal provided by your broker. The terminal is necessary not only for transactions. In the terminal you will carry out the technical analysis according to the chart, apply various indicators and scripts. In case of automatic trading – to launch trading robots in the terminal and to test them in the tester.
Brokers usually offer several types of terminals, but we will focus on the one, the most popular – Metatrader 4 and its later version – Metatrader 5. This program is absolutely free, convenient and versatile. You can use it not only for Forex, but also for Futures and Stocks markets. One of the main advantages of this terminal, – is the ability to create programs (advisors, indicators and scripts) working within the terminal, which will automate the trade or simplify it. For this purpose, the creators of the terminal provided its programming language MQL4 /MQL5, using it we can create our own trading robot, based on your trading system. A handy built-in strategy tester is another advantage of this platform.
Although this terminal is simple, all of its functionality should be studied at this step, without putting it off. Usually the full instruction on installation and on work with the terminal is given by the broker, if your broker did not give you this information, you can find the full instruction on work with the terminal on other sites in the network.
At this stage you already have everything you need: the terminal, charts and a demo account, and you can start learning how to trade. To begin with we have to understand how a trader knows when to buy or when to sell and when to sit and just watch the chart. We remember that Forex trading is not a casino game, and we don’t want to end up writing that Forex is a fraud. So, what helps a trader to stay in profit and find the right entry and exit points when trading? We have identified three main tools for this purpose.
- Technical analysis – today it is the most effective and qualitative type of analysis. This analysis is based on market patterns, as the market is cyclical and history is always repeating itself. When we use this method of analysis, we are looking for recurrent patterns of price movements in history, and based on these patterns, we are looking for market entry points. Charts and indicators help us in this analysis. An excellent assistant in the search of patterns is a trading robot. After writing the pattern in the code and running it in the tester, we will quickly determine whether we have found a real pattern or not.
- Fundamental analysis – this type of analysis is based on evaluation of national and international economic reports, news and the state of economies in general. In this type of analysis we do not apply a chart, we examine the economic data received and if necessary compare it with previous indicators, and we apply the results to our trading strategy. Basically, the time and date of release of all economic news and summaries is known in advance and published on economic calendar services, which certainly facilitates the fundamental analysis.
- Money management is an important aspect of trading, and you will hardly stay profitable for a long time without it. Professionally built capital management strategy will protect you from unnecessary risk and loss of deposit. Money management helps to calculate the safe size of deposit and the level of risk for each transaction.
You should develop your own trading strategy for successful trading. It should be based on technical and fundamental analysis, as well as on the rules of capital management. If you do not want to spend all day in front of the monitor analyzing the market, you can automate the trade. But in order to entrust the management of your account to a trading robot, the strategy should be adapted to the automatic trading, it should be easy to code.
You can borrow a ready-made strategy or a trading robot and use it as it is. You can find a good strategy or trading robot online. Your strategy must have clear rules for entering and exiting the market, the rules for calculating the risk for each deal and of course it must be profitable. When trading manually you should strictly follow your trading strategy, it is one of the main rules for successful Forex trading.
Opening a real account
If you have mastered the terminal and the basic Forex terms. You’ve developed or borrowed a trading strategy or created a trading robot and your demo account is steadily growing – then it’s time to move to a real account. Do not think that at this stage you can relax. This is the step where the psychological aspect of trading will be revealed. Here you will start trading with real money and several consecutive losing trades can easily throw you off. Continue to improve your trading strategy, develop new ones, learn to restrain your emotions when trading manually, and you will get results.