How to trade Forex to earn faster: It’s true that Forex can bring you quick money, but it’s also crucial to fully understand its aspects and tricks first.
Forex is a golden game of foreign currency exchange, which is thriving rapidly. Foreign exchange can be described as the process of changing a given currency into another for numerous reasons, generally for commerce, tourism, or trading.
As per Bank for International Settlements’ recent report, the average daily Forex trading volume was over $5.1 trillion! Yeah, it’s a big game that can be started with little money!
There’s actually much to know, but rather than scanning hundreds of articles, we’ve narrowed the things down and fitted every single crucial aspect in this single article! After reading this Forex beginner’s guide, you’ll be knowing everything you need to set off for your Forex trading journey!
Sounds magical, but it’s actually true!
How to Trade Forex for Faster Earning?
After all, what is the Forex market?
Currencies are traded in the foreign exchange market is. Currencies are important to several people around the globe, no matter they realize it or not, as they do need to exchange the currencies in order to make foreign trade and business possible. Being a resident of the U.S., if you want to buy cheese from Italy, either you or that cheese company has to pay the Italians for the cheese in euros (EUR).
Now, that states, the U.S. importer would need to exchange the U.S. dollars’ (USD) equivalent value into Euros. A similar case happens while traveling. A German tourist in Egypt can’t pay in euros for viewing those pyramids because it’s certainly not the currency, locally accepted.
Hence, the tourist needs to exchange his euros for the local currency, the Egyptian pound, at the ongoing exchange rate.
One surprising aspect of this global market is that a specific central marketplace doesn’t exist for foreign exchange. Instead, currency trading is conducted over-the-counter (OTC) electronically, meaning that all transactions take place through computer networks between various traders across the world, instead of one centralized exchange.
The market stays open 24 hours a day, and five and a half days a week. The currencies are traded across the globe in the major financial centers of New York, Tokyo, London, Hong Kong, Singapore, Paris, Zurich, Frankfurt, and Sydney—across almost every major time zone.
So, when the trading day ends in the U.S., the Forex market begins there in Hong Kong and Tokyo. Hence, the Forex market can be highly active at any time of the day, and the price quotes changing constantly.
Trading terminology every Forex beginners should understand
Like several other trades, in Forex also, you can’t move ahead before understanding the terminology and properly absorbing the importance. Actually, if we just list them out, then there aren’t too many terms to baffle you. Just a handful are there, which you have to understand properly. So, here they are:
This type of Forex trading includes buying and selling of the real currency. For instance, you can buy a given amount of British Pound sterling and exchange it for Australian Dollars, and then you find that the value of the pound has increased, you can simply exchange your Australian Dollars for pounds again, getting more money in contrast to what you spent on the purchase originally.
This concept is a must for every single beginner Forex trader. The leverage is the capital provided to you by a Forex broker to increase the trades volume its clients can make.
- The face value of a lot or contract is equal to 100,00 units of the base currency. Talking about EUR/USD, it would be 100,00 euros.
- In case a person is using a 1:10 leverage rate, having 1,000 euros in his trading account, he can trade a currency pair with a USD ten thousand position size.
- In case the trade goes successful, leverage will maximize the profits by a factor of 10. But don’t forget that leverage also manifolds your losses to the same extent.
Hence, you should use leverage with caution. If your account balance goes less than zero euros, negative balance policy will support you, if offered by your broker.ESMA ( European Securities and Markets Authority ) regulated brokers do offer you this protection. With the help of this protection, your balance cannot sink below zero euros. Hence, you won’t sink in the broker’s debt.
Before you begin something new, keep a tight grip over fundamentals. Let’s look at trading tips every beginner Forex trader should consider before involving himself in the currency pairs game.
A pip can be described as the currency pair’s base price or 0.0001 of the quoted price, but that implies only on non-JPY currency pairs. For example, when the bid price of. So, when the bid price for the GBP / USD pair goes from 1.300005 to 1.300007, that represents a difference of 2 pip.
Whatever money we retain in the trading account while opening a trade is called Margin. Several Forex brokers offer their customer access to leverage because of the normal average “Retail Forex Trader” shortfalls the crucial Margin at trade at a volume, greater enough to generate a good profit.
The term CFD means “Contract for Difference.” It’s a contract we use to represent the movement in the financial instruments’ prices. In Forex terms, this indicates that rather than buying and selling huge amounts of currency, you can benefit yourself from price movements without requiring to own the asset itself. Besides Forex, CFDs are also available in bonds, commodities, stocks, indices, and cryptocurrencies as well. In all of those cases, they permit you to trade in these instruments’ price movements without having to actually buy them.
The difference between the purchase cost and the sale cost of any currency pair is what we call spread. The spread is often low for the majority of the popular currency pairs. Sometimes it’s even less than a pip! The spread tends to be pretty higher for those pairs that don’t trade that often. The value of the currency pair needs to exceed the spread before a Forex trademark itself profitable.
Golden Tips on How to Trade Forex
1.) Know the Markets:
We certainly can’t overstate the significance of educating yourself before entering the forex market. Invest time to study currency pairs and concentrate on what affects them before you start risking your own capital; Undoubtedly, it’s an investment in time with the potential of making a good amount of money for you.
2.) Make a Plan and Strictly Stick to It:
A man without a plan is simply not allowed here! Creating a trading plan is undoubtedly a necessary component of successful trading. It needs to include your risk tolerance level, evaluation criteria, methodology, profit goals. Once you’ve placed your plans properly, ensure that each trade you consider falls within the boundaries of your plan.
Remember: you need to be too smart before you place a trade, and you need to be most irrational after your chosen trade is being placed.
3.) Don’t hesitate to try a bit of stuff, but don’t try for too long:
There are dummy accounts available, where you can certainly try yourself out with unreal money. Setting a practice account is easy. However, as per our advice, the Forex scene isn’t that bewildering.
You can certainly pick up a Forex VPS plan and begin trading slowly, with all cautions in your mind. If you practice with dummy accounts, you’ll keep on hanging there for long, and it might even bring negative thoughts.
4.) Be Smart at Forecasting the Market Conditions:
The majority of straightforward traders prefer trading after trusting news and other financial data sources. The other group is of technical traders who trust technical analysis tools, including Fibonacci retracements and various other indicators to forecast the movement of the Forex market.
The third group is the biggest one (and the smartest one as well), who prefer the combination of both two mentioned before. Regardless of what style you follow, we recommend you to use tools to find and utilize the potential trading opportunities in rapid moving Forex markets.
5.) Know Your Limits:
Knowing your limits is very important if you really don’t want to sink in huge loss, which can further highly demoralize you. This is a simple yet highly critical aspect that can write your future success stories. You should know how much you wanna risk on every single trade, set your leverage ratio as per your requirement, and never surpass the limit of risking up to which you can afford to lose.
6.) Know Where to Set a Halt for Yourself:
If you are sitting and watching makes each minute of the day, you’re just exhausting yourself. Managing your risk and protecting potential profits by stopping and limiting orders is possible. It will get you out of the market at whatever price you set.
The helpfulness of trailing stops can’t be foreseen. They trail your position at a given distance as the market moves, and that’s the way it helps you protect your profits in case the market sets on reverse gears! The other fact is, placing contingent orders may not always limit your risk for losses.
7.) Check Your Emotions at the Door:
You have a position that is open, and the market is not going your way. However, you could make it up having a trade, which doesn’t fit with the trading plan you have. Just a couple won’t hurt, right? “Revenge trading” uniquely ends well.
Don’t permit your emotion to get into your trading plan for success. When you have a losing trade, never go all-in to try making it back in one shot; it’s ideal for sticking with the trading plan you’ve and make the loss in trading back a bit at a time rather than suddenly locate yourself with two crippling losses.
8.) Keep It Slow and Steady:
Consistency is the key to trading. Every single trader has one time lost money. However, in case you maintain a positive edge, then there’s a better chance of trading to come out on top. Educating yourself and building a trading plan is good. Don’t forget the real test is sticking to the plan via patience and discipline.
9.) Don’t Be Afraid to Explore:
While frequency is essential, don’t be afraid to re-evaluate the trading plan you’ve in case things aren’t working as you thought. As your experience develops, your requirements might change; your plan must every time reflect your goals. Inc case your destination or financial situation changes, so should the plan you’ve.
10.) Choose the Right Trading Partner for You:
It’s crucial to select a trading partner that is perfect as soon as you engage the forex market. Expenses, execution, and customer service quality can all create a difference in the trading experience you’ve.
FOREX.com in currency trading is a worldwide leader and offers competitive pricing. Great customer service, guides that are helpful, and tutorials are what you’ll find helpful too. Also, you’ve got a sweet set of tools, to begin with, forex trading.
Forex Trading Strategies and Styles
There are numerous trading strategies you can use in forex trading. Some are counted to be more effective when contrasted to others.
You need to deeply research about these smart strategies in order to figure out which one fits you best in the upcoming time. Here are a few of the most popular strategies you can adopt:
- Day Trading Strategy: If you set your trade using this strategy, then normally it will be exited before the day ends. This can save you from unwanted damage from any negative events that might take place to happen overnight.
- Trend Trading Strategy: If you’re using this strategy, you’re bound to follow the trend to figure out the flow that the prices have been taking. Trend trading strategy, if practiced perfectly, can bring surprising benefits.
- Swing Trading Strategy: Traders use this strategy usually for trades that last one day to one week. Yes, you need to be patient here.
Besides the three major techniques mentioned above, there are numerous trading styles. These depend on the holding period of every trade and time frame. This includes position trading, swing trading, intraday trading, fundamental trading, trend trading, and technical trading.
What is a Currency Pair?
Generally, a currency pair is what we call the quotation and pricing structure of whatever currencies you trade in the Forex market. The currency’s value is a rate, and we determine it by comparing it to another currency.
Forex trades include the purchase of the first currency and the sale of the second simultaneously. However, when you look at any currency pair, you can conveniently think of it as one single unit, an instrument that you can buy or sell. Euro (EUR) against the U.S. dollar (USD) is an example of a currency pair, or most commonly determined as EUR/USD. It’s among the widely traded currency pairs out there.
In this particular pairing, the first noted currency (USD) is what we call the base currency, and we refer the second currency (EUR) as the quote currency. The currency pair indicates the quote currency’s amount.
You’ll need to buy a unit of the base currency. In case you make your mind to purchase a currency pair, you’re purchasing the base currency, and you’ll be selling the quoted currency. Now, when you sell that currency pair, you’ll be selling the base currency, and the quote currency is what you will be receiving.
“Bid” is the buy price of a currency, while the selling cost of the currency is known as the “ask.” The “bid” for any currency pair will let you know the quote currency’s amount you’ll require to obtain the base currency. While the other side, the “ask” for a given currency pair will let you know the amount you will gain in the quote currency if you sell one unit of the base currency.
Types of Currency Pairs
There are basically three kinds of currency pairs accessible across the globe; these are actually the major currency pairs, exotic currency pairs, and minor currency pairs. You should remember that many currencies are there as pairs as there are currencies in the whole world. The total amount of existing currency pairs vary alongside the currencies, which come and go.
Firms, for example, BWorld, provide you the opportunity of trading any existing currency pair in the world. Every single of the pairs of currency is categorized according to the number of volumes being traded on an everyday basis as a pair. Let’s get deeper into details regarding currency types below.
Major Currency Pairs
U.S. dollar (USD) is available on one side among all of the existing main currency pairs, either as the quote currency or the base currency. U.S. dollar is considered as the most traded pair of currency in the foreign exchange market.
The main currency pairs offer the lowest spread, too, and are popular as the most liquid. The EUR/USD pair basically holds 30 percent of the whole trade volume of the market of foreign exchange.
The major currency pairs incorporate:
Minor Currency Pairs
The minor currency pairs are too common and referred to as cross-currency pairs or just “crosses.” These currency pairs do not contain the U.S. dollar. The minor currency pairs are popularly known for having slightly wider spreads and also are not as liquid as the main currencies.
However, still sufficiently liquid markets. Recently, for obtaining the desired currency, you’ll first need to convert the currency you have into U.S. dollars, after that, into the other currency that you desired to obtain. With the minor currency pairs’ introduction, there’s no requirement to conduct such a stretchy process.
Minor currency pairs that are most actively traded incorporate the three major currencies that are non-U.S. dollars. These currencies are the UK Pound, Euro, and the Japanese Yen.
Exotic Currency Pairs
The exotic currency pairs are basically built up of those in the emerging markets. There’s a big difference in this type of currency pairs’ liquidity in comparison to the other two. The exotic currency pairs’ spreads are much wider too. Exotic currency pairs are normally made
up of one main currency & one currency of an emerging economy, for example, Hong Kong, Mexico, or Singapore.
High Risks Every Forex Trader Must Know About
There are different sorts of risks, which you should be aware of in case you’re a forex trader. The following are some of them.
- Leverage Risk: Leverage can offer to be both advantageous and risky. The greater your leverage, the better your profits. However, remember that your losses might also enhance the higher your leverage gets.
- Interest Rate Risk: The moment in which a country’s interest rate enhances, after that, the currency will strengthen. The boost in strength might be attributed to the investments’ influx in that country’s assets as with a stronger currency; greater returns can be more likely. However, in case the interest rate goes down, the currency will weaken too, which might result in greater investors withdrawing their investments.
- Transaction Risk: This risk is the exchange rate risk, which can be associated with the time varies between the numerous countries. At the beginning and end of a contract, It can take place sometime in between. During the 24-hour, there is a chance that exchange rates probably change even before you sell a trade. The currencies will be traded at different prices, too, at different time periods during the hours of trading. The transition risk enhances the bigger the time difference between entering & settling a contract.
Best trading systems
Now that you know the beginning process of trading in Forex, the next step in forex trading is to select the best Forex trading system for starters. Fortunately, investors, banks, corporations, and speculators have been trading for decades in the markets, which means there is already a set of Forex trading strategies to choose from. These include:
- Currency Scalping: Scalping is a kind of trading, which consists of purchasing and selling currency pairs in too short periods of time, normally between a few seconds & a few hours. This is a too practical strategy, which involves making a huge number of small profits.
- Intraday Trades: Forex intraday trading is a fantastic conservative approach, which can suit starters. It is concentrated on four-hour/one-hour price trends. Trades might be opened between one & four hours. Generally, they concentrate on the major sessions for every Forex market.
- Swing Trading: Swing trading is basically a medium-term trading way that concentrates on huge price movements in comparison to scalping or intraday trading. In other words, in Swing trading, traders are able to keep a trade open for days or even for weeks. This sort of trading is undoubtedly a great option for traders who trade like a complement to their everyday work.
Trading platform for Starters
In addition to selecting a broker, you must also research the currency trading software and platforms they provide. The trading platform is basically the central element of the trading you have and your major work tool. When evaluating a platform for trading, and even more so in case you are a starter in Forex, ensure that it incorporates the following elements:
Do you trust the trading platform you have to offer you the results which you expect? To trust the accuracy of the quoted expenses, the data transfer speed, and the quick execution of orders are crucial for trading Forex successfully.
Although, if you plan to use strategies in the short-term, such as scalping. The info must be accessible live, and the platform must be accessible at entire times when the Forex market is open. It’ll ensure that you can take benefit of any opportunity, which presents itself.
Will your funds & personal info be secured? A reputable Forex broker and also a good Forex trading platform can take steps to make sure the security of your essential info, along with the ability to bake up all key account information.
It will segregate your funds too from its own funds. In case a broker can’t demonstrate the steps that they’ll take to secure your account balance, it’s ideal for searching another broker.
Independent Account Management
Any Forex trading platform needs to permit you to independently manage all your trades and your account without having to ask permission from your broker to take any action on your behalf. This makes sure that you can act with the market’s rapid moves at an exact time, capitalize on chances, and convert opportunities to profit as they pop up and control any open position.
Does the platform arrange embedded analysis for you, or does it provide the tools for independent technical or fundamental analysis?
Several Forex traders trade with the help of technical indicators and certainly can trade much efficiently and more effectively in case they’ve got the access this info within the trading platform, instead of having to abandon the platform to find it. Certainly, it needs to include charts updated in real-time and full access to the latest market data and news.
Forex Trade For Beginners: Golden Lessons
Price and Quote
While trading Forex, you’ll see Ask and Bid prices, about which you need to have knowledge.
- The bid price is at which you can sell it.
- The asking price is at which you can purchase the currency.
One of the considerations you should store in mind while learning Forex from scratch is that you’re free to trade both long and short. However, you should load yourself with an awareness of the risks related to dealing with a complex product.
Here, you are purchasing a currency expecting that its value will elevate in nearby future and make a profit on the margin between the buy and sale price. For instance, when you are executing a buy order, you hold a position pretty long in the underlying instrument you bought i.e., USD/JPY. Now here, you’re expecting the US Dollar to climb up against the Japanese Yen.
You sell a currency expecting that its value to decrease, and you can purchase back at a lower cost, benefiting from the difference.
The cost at which a given currency pair trades is dependent on the ongoing exchange rate of various currencies in the pair (such as AUD/USD), or the second currency’s amount that you would receive in exchange for a first currency’s unit (for instance, in case you could exchange 1 GBP for 1.51 USD, the buy/sale price your broker provides will be on this number’s either sides).
In the case of the method brokers, gross profit is by gathering the margin between the buy and sell costs of the currency pairs (which we call the spread); the upcoming logical question shooting up is: How much can a given currency be expected to shift? This pretty much depends on the liquidity of the currency or how much it’s purchased and sold simultaneously.
The most liquid currency pairs have the highest supply/demand in the Forex market. It’s the importers, exporters, traders, banks, companies that generate this supply/demand. The most considerable currency pairs, as you can expect, are most liquid.
For your knowledge, the EUR / USD currency pair moves 90-120 pips on a normal day, and it provides the most chances for short-term trading. In comparison, the AUD / NZD pair shifts just between 50 and 60 pips a normal day, besides USD HKD currency pair moving just a sluggish average of 32 pips per day.
Considering the value of various currency pairs, you’ll notice most of them have five decimal points. The most considerable Forex pairs are the most liquid. However, there are also certain changes between minor and exotic currencies, mostly if you’ve got some specialized knowledge regarding a given currency.
You can see, there are three sorts of options available to traders rolling on with the MetaTrader platform, which you view the exchange rate indicated by live Forex charts. These are candlestick charts, bar charts, or line charts.
While using the MetaTrader platform, you can conveniently choose between these different sorts of the chart by choosing View -> Toolbars -> Standard option. You’ll find that a line chart links the time frame’s closing prices you’re viewing. Hence, the line connects the closing price of every single trading day.
OHLC bar charts
Here comes the OHLC(open-high-low-close) bar chart, which indicates a bar for each time frame a trader is viewing. Hence, while viewing the daily chart, every single vertical bar will represent one day’s worth of trading, and that’s very easy to understand. The bar chart is unique and offers much more in comparison to the line chart, including the open, close, low, high, and values of the bar.
You’ll notice a dash on the left representing the opening price, while the dash on the tight is there to represent the closing price. The bar’s high indicates the max price the Forex market traded during the chosen time period. The bar’s low indicates the lowest price the Forex market traded during the chosen time period.
The green bars are called buyer bars because we see a closing price above the opening price, while the red bars are called seller bars because we see a closing price below the opening price.
In both of the cases, the OHLC bar charts will help you in identifying who is in the grip of the market, whether they are sellers or buyers. These bars lay the platform of the upcoming chart known as candlestick charts. It’s a highly popular type of charting for Forex traders.
Japanese rice traders first time use Candlestick charts in the 18th century. They are identical to OHLC bars as they also give the low, close open, and high values of a given time period. The difference is that candlestick charts consist of a box between the open/close price values.
That’s what we call the ‘body’ of the candlestick. According to several traders, candlestick charts are the most visually appealing while viewing live Forex charts, and the majority of the Forex experts also agree with that.
They are highly popular because they provide a huge variety of price action patterns which various traders use all over the globe. You can prepare well with the demo trading to understand these charting. Once you ripen, your trading results will speak for themselves.
Trading Platform For Beginners
Besides choosing a broker, you also need to study the overview of currency trading software and also cherish the platforms they offer. Besides the main work tool, we can call a trading platform the central element of your trading.
When you’re evaluating a trading platform, or you’re fresh to the Forex market, ensure that it includes the elements mentioned:
Is your trading platform trustworthy enough to make you feel that it will offer your expected results? Being able to trust the trading platform’s accuracy of the quoted prices, data transfer’s speed, and the instant execution of orders is compulsory to earn by trading Forex successfully. It becomes even more important if you’re in a mood to use very short-term strategies, for example, scalping.
The info needs to be available in real-time. Besides that, the platform should always be available when the Forex market is open. Hence, you’ll be able to take benefit of any opportunity that shows itself.
Will your personal information and funds be protected? A reputed Forex broker and a reliable Forex trading platform will take all measures to ensure your information’s security, besides providing the back up for all key account information. It’s also going to separate your funds from their own funds.
It’s better to choose another broker in case a broker fails to demonstrate the process they’ll follow to protect your account balance.
Analysis: MT4 and MT5
MT4 and MT5 are the most convenient to use multi-asset trading platforms available out there. You can access both platforms through numerous devices, including iOS, PC, Mac, and Android, as well as web browsers via the MetaTrader WebTrader platform for MetaTrader4 and MetaTrader5.
These are agile, highly responsive platforms providing real-time market data. Besides that, these platforms provide advanced charting capabilities as well as automated trading options. These are highly secure, which highly helps new Forex traders.
MetaTrader 5 is the latest version. It consists of a range of additional features, such as:
- Free-market data, market education, and news
- A Mini Terminal offering full control of your account with just one click
- Access to thousands of financial markets
- The option to download tick history for numerous instruments
- 38 built-in trading indicators
- Actual volume trading data
Forex Trade for beginners: What makes you a successful earner?
Well, even if you’ve understood everything well and determined to work accordingly, you can’t attain success without the right resources. It might happen that your Forex tutor advises you to practice Forex on your system, but as per our advice, doing that will neither make you a geek nor bring you a good profit.
Now, if you say that you’re 100% ready to rock the Forex trade, then we appreciate your valor, but along with that, we also recommend you to be perfectly armed.
It’s true that even if you have done all the settings perfectly, you still fail, just because you chose a hosting plan which didn’t provide the right resources to meet your Forex trade’s need, such as Latency, ping, etc. Forex is all about pace and perfection. If you’re left behind in either of them, you won’t earn as much as you deserve!
A good Forex VPS plan can’t just help you out in speed and perfection, but also bring you high-end comfort in several ways! So, grab Accuweb Hosting’s Forex VPS highly affordable plans today, and begin writing your success story!
You need to be strict to business and not hesitate to spend a few bucks per month. Remember, getting deep is important! You need to purchase a Forex VPS plan so that your trade never stops! There are tons and tons of advantages of depending on Forex VPS hosting rather than relying on your personal computer.
Most importantly, Accuweb’s Forex VPS is the best in the world, and it costs much cheaper than you think! You’ll never miss crucial deals because of internet issues, power outage, etc. and you’ll have the ability to access your Forex account from various devices and from anywhere you want (where internet reaches).