How To Trade Forex. Forex trading is one business that is making waves nowadays. Many people want to make money via forex. But only few that begin to trade forex want to do the prep work needed to become a successful traders.
While trading forex has become easier now than ever before because you can trade online via the internet, but most novice traders still lose money.
CHECK THIS OUT >>> Trading And How It Works – Forex Trading
How To Trade Forex
However, there are combination of factors to lost in forex trading, this includes insufficient trading capital, unfamiliarity with the market, not trading according to a plan and failing to practice sound money management techniques to preserve trading capital, all these leads to loss. Keep reading this article to gather more information on How to trade Forex.
Forex Market Terminologies
The forex market is a world of itself and has some substantial differences to other financial markets, such as the stock or commodity markets. As a case in point, forex traders have even developed their own set of terminologies specifically for the forex market.
Before you begin trading in forex, there are some terminologies you need to acquaint yourself with. Lets see the few ones we selected below:
Two currencies in which the first, known as the base currency, is quoted in terms of the second, known as the counter currency. An example of a currency pair is EUR/USD that represents the EU’s euro quoted versus the U.S. dollar.
The net amount of a currency pair that provides exposure to movements in that pair’s exchange rate. Forex traders take positions to speculate on exchange rate movements.
A position in which one has net purchased/sold the base currency in a currency pair. Long positions are taken when you think the pair’s exchange rate will rise, while short positions are taken when you think the exchange rate will fall.
An acronym for “point in percentage” that represents the smallest change in a currency pair’s exchange rate. The size of a pip for most currency pairs is 0.0001.
Leverage is the size of a trading position you can control with a given amount of “margin” or money placed on deposit in your trading account to be held by your broker as collateral against trading losses. The maximum leverage ratio varies considerably among online brokers — ranging from 20:1 to 1,000:1 or more — and can depend on what jurisdiction you reside in.
The amount of the counter currency required in exchange for one unit of the base currency in a foreign exchange transaction. For example, if the EUR/USD exchange rate is 1.1700, it would cost $1.17 to buy 1 euro.
An estimated measure of the profit potential per amount risked. For example, a trader might use a 1:3 risk/reward ratio meaning that they are willing to risk $1 to make $3.
An intermediary firm that executes transactions in financial markets on your behalf. Retail forex traders open trading accounts with online brokers to trade currency pairs on margin.
An instruction given to your broker to execute a transaction for you. You might place an order to buy 100,000 euros versus the U.S. dollar at the prevailing market via your online broker’s trading platform.
All the above mentioned terms are a few ones you need to understand to enable you flow in the forex market.
Five Steps To Trading Forex
There are relevant steps which you need to begin trading in Forex. You can use the steps to prepare yourself on how to trade. Here are a few steps to trade in forex trading.;
Get Connected to the internet
To trade forex, you’ll need access to a reliable Internet connection with minimal service interruptions to trade through an online broker. You’ll also need to obtain a smartphone, tablet or computer to run a trading platform on.
If your internet drops while you’re trading, that can result in undesirable losses if the market moves against you.
Get an Online Forex Broker
You can probably open an account with an online forex broker no matter where you live. Just look for one that meets your requirements as a trader and will accept you as a client. At a minimum, the broker you choose should keep your money segregated from its own and operate in a well-regulated jurisdiction under the oversight of a reputable regulator, such as the UK’s Financial Conduct Authority (FCA) or the U.S. Commodity Futures Trading Commission (CFTC).
Open And Fund A Trading Account
After you have decided on a broker, you can deposit funds into a trading account. Most online forex brokers accept a number of ways to fund an account, including bank wire transfers, debit card payments or transfers from electronic payment providers like Skrill or PayPal.
Get A Forex Trading Platform
You will need to download or access an online forex trading platform supported by your broker. Most forex brokers either offer a proprietary trading platform or support a popular 3rd-party platform like MetaTrader4 and 5 (MT4/5) from MetaQuotes.com or NinjaTrader.
After completing all of the previous steps, you now have a funded forex account and are ready to trade. You can start first by opening a demo account funded with virtual money to test out the broker’s forex platforms and services before going live. Demo accounts are also beneficial for testing trading strategies and to practice trading without risking any funds.
CHECK THIS OUT >>> Make Money Online Free – Steps on How To Make Money
Forex Trading Examples
The most actively traded currency pair in the forex market is EUR/USD, which consists of the EU’s euro quoted with the U.S. dollar. If you thought the EUR/USD exchange rate was going to rise from its current 1.1700 level, then you might purchase €100,000 against the dollar today at that rate. If the EUR/USD rate then rose to 1.2000, you could use this calculation to compute your trading profit:
€100,000 x (1.2000-1.1700) = $3,000
To then convert that amount of U.S. dollar profit into euros at the current 1.2000 exchange rate, you would use this calculation:
$3,000 ÷ 1.2000 = €2,500
Alternatively, if the EUR/USD exchange rate instead fell to 1.1400, then your trading loss would be:
€100,000 x (1.1700-1.1400) = -$3,000
That loss converted into euros at the prevailing 1.1400 exchange rate would be:
-$3,000 ÷ 1.1400 = -€2,631.58
Best Online Forex Brokers
Your local retail forex regulatory environment will often determine whether international online brokers will accept clients from your country. Check with a broker directly to find out whether they will accept you as a client and make sure they provide all the services and tools you require. Also, make sure the broker is well regulated in their local jurisdiction by a major regulatory authority and segregates clients’ money from its own.
Once you have narrowed your selection down to a few suitable brokers, look over their online reviews and see if they have a relatively satisfied customer base. If you don’t recognize the firm, then see how they compare to a well-known and regulated online broker by checking out this www.forex.com. Also, consider opening a demo account to try out its trading platform and services before you fund a live account.
Develop a Forex Trading Plan
Trading without a plan is like sailing without a compass. If you don’t know where you’re going, you’ll be lost battling the waves. So, aim to put together a forex trading plan that incorporates a trading strategy you have tested and found generally successful and easy to stick to.
A very important part of your trade plan should consist of your money management and risk assessment techniques. Appropriately sizing your trades in relation to the amount of money in your trading account can favorably affect your trading performance and help manage your risk, as can choosing trades with attractive risk/reward ratios.
Taking necessary losses promptly and bouncing back emotionally from trading losses are other aspects of trading you’ll need to master. Remember that a trader’s biggest enemies are hope and fear: Poor traders tend to fear getting out of a trade at a loss and hope the trade will return to profitability. They should instead be ignoring such hopes and reacting to the far more rational fear of having to take an even greater loss if they don’t take action.
To prevent a losing trade from exceeding your predetermined threshold of pain, either a stop-loss order should be in place or you should plan to cut your losses at the market if you’re watching it closely.
While developing a trading plan might take some effort, you can instead choose to join a social trading platform and copy the transactions of another trader in your account who has a well-established and profitable track record.
Get Pro on Forex by your Side
Registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade. Check out www.forex.com
You can also tap into:
- EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
- Powerful, purpose-built currency trading platforms
- Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program
Learn more on forex.com, their low pricing and how to get started trading with them.
Get a Highly Rated Forex Signals Provider
You can get offers from a highly rated platform with mentors who have 80 years of combined experience in the trading pits. They’ll help you decode real-time daily live streams using market analysis, trade signals and more. ForexSignals.com doesn’t stop there. You can access hundreds of educational videos and workshops and even individualized private sessions with mentors. Never trade alone join group you get daily from https://www.forexsignal.com.
Is Forex Trading Right For You?
No matter where you live, getting started as a retail forex trader is relatively easy if you have some risk capital, but trading currencies successfully requires considerably more than that. You’ll need to develop considerable market knowledge, a viable trading strategy within an overall trade plan, the discipline to stick to your strategy and the emotional resilience to bounce back from losing trades.
If you plan on meeting those requirements, then you have a decent shot at being profitable as a forex trader. If you don’t, then you can still participate by opening an account at an online broker that supports social trading and copying a successful trader’s transactions.
CHECK THIS OUT >>> How To Be A Forex Trader – Forex Trading