Learning Forex made easy. Forex trading makes it easy for you to enter the world of Forex trading. You will be able to enter the Forex trading market if you follow our basic steps to learn Forex. Set goals, test tactics in a sample account, and log and evaluate your Forex trades to ensure you don’t overlook any important details. The most important thing is to stick to your own rules and to block out feelings as much as possible.
Learn the Forex trading Basics
Before you start trading Forex, you need to learn the basics of Forex. Or would you get into a car and just drive off without knowing the traffic rules? Nothing works without a piece of certain basic knowledge and understanding.
Forex is the trading of currencies. You bet on whether one currency rate rises or falls against another. Many factors affect and influence the exchange rates.
In addition, we recommend that you study the most important and most common Forex terms. You will learn what currency pairs, what a pip or a lot is, and what makes a good broker. In any case, you still have to learn what margin, leverage, stop loss, and take profit are.
Entering the world of Forex will be a piece of cake with this foundational knowledge. So learning Forex is not only fun but also awakens the desire to trade in you.
Find the right Forex broker
|EXNESS||CySEC, FCA, FSA(JP)||0.0||OPEN ACCOUNT|
|IC MARKETS||ASIC, CySec, FSA||0.0||OPEN ACCOUNT|
|ROBO FOREX||IFSC||0.1||OPEN ACCOUNT|
|FP MARKETS||ASIC,CySEC,FSA||0.1||OPEN ACCOUNT|
|INFINOX||FCA, SCB, FSCA, FSC||0.1||OPEN ACCOUNT|
Choosing the right Forex broker is a critical factor in trading success. You shouldn’t rush anything here, because a large number of providers makes it often very difficult to make a quick choice.
Features to check
- trade offer,
- trading platform,
- amount of the fees,
- customer service
Open a Forex trading demo account
After learning the Forex basics and finding your Forex broker, open a demo account. There you can not only familiarize yourself with the Forex brokers and programs but also learn to trade Forex without risk. However, not every broker offers a free demo account. Forex trading NZ explains how to find the right Forex broker.
With a demo account, you can refine your Forex strategy, test different Forex strategies, and thus learn Forex without risk. But a demo account is not only helpful for learning how to trade. Because even if you are already trading with real money, you can try out new strategies in the demo account and then apply them to the real account. Thus you can continuously improve your Forex trading.
Find Your Forex Trading Strategy
Every Forex trader has to find the right Forex strategy for himself. The search might be aided by textbooks, brokers, programs, and periodicals. However, only you can determine which Forex strategy is best for you and your personality.
Once you’ve found your Forex strategy, stick with it. Many traders get a bad gut feeling after the first few losses. Therefore you change your strategies, intervene in ongoing trades, and take ill-considered actions. As hard as it sounds, “feelings” are not a trading strategy and have no place in the world of Forex trading. After all, you have chosen your Forex trading strategy based on valuable and statistical reasons. So you should trust it even in bad times.
As mentioned above, a demo account is very helpful for testing and refining your Forex strategy. After all, you shouldn’t start trading real money until you are sure that your Forex strategy is good. Because also in the Forex trading world: “Practice makes perfect!”
Stay away from exotic currency pairs
Forex trading beginners should avoid trades with exotic currency pairs when starting. Since the currency rates of the exotic are often subject to large fluctuations and the spreads are usually very high, trades with exotic are more something for experienced Forex traders.
Better to limit yourself to the major currency pairs – the majors. The trades with these currency pairs often have lower spreads and the prices are usually not as fluctuating as with the exotic ones. So it can be said that trades with majors are the ideal start into the Forex trading world.
Documentation and analysis
Two of the most critical elements in trading success are documenting and analyzing your trades. Every deal must be documented and evaluated to see why it was successful or unsuccessful. Prepare questions that you will answer for each completed Forex trade. For example, these questions could be:
- Which Forex signals prompted me to make the trade at this point?
- Did I change my plan during the trade?
- Why did I change the plan?
- What do I do the same next time?
- What will I do differently next time?
- When could I have adjusted my stop loss or taken profit?
- How did news affect currency rates and did I interpret them correctly?
Once you have found a documentation and analysis system for yourself, you should, or rather you have to, use this system for every Forex trader. It doesn’t matter whether you made a profit or a loss on the trade. Because as the saying goes: “You learn from mistakes!” And of course, this also applies to learning Forex!
Always be up to date
The Forex trading world is very fast-moving. Many different influences control the exchange rates and change them. Political news, for example, has an impact on the exchange rates of their countries. Any statement or action by a president is weighed on the balance and causes fluctuations in currency rates.
It is therefore of great importance for Forex traders to always be up to date. Many Forex brokers provide you with relevant information that serves as Forex signals. However, as long as you keep an eye on the news world and your trades, you can quickly respond to expected and unexpected news and make changes to your trades.
Plan your day and set goals for yourself for Forex trading
Even with Forex trading, nothing works without a well-thought-out plan. The more structured you work, the higher your chances of success in Forex trading will be. It is very important to strictly adhere to the plan. After all, what good is a good plan if you don’t use it?
Breaks should not be missing in your daily planning! Move away from your computer and cook yourself something nice or go out into the fresh air. If you’ve been too long in the nerve-wracking world of Forex trading, you need to be able to switch off. Free your mind from the Forex trading world and recharge your batteries. Set limits on how many hours a day you trade. The absolute maximum amount of time per day should be 9 hours.
Also, take breaks after each trade to come back down. That is, when you take one Forex trade right after you do the next one, your feelings will affect you. This creates the risk of over-trading and large losses.
Therefore, it makes sense to set daily and weekly goals for Forex trading. Base your plan on it and follow your own rules. For example, a daily goal could be to end the trading day after 3 successful / 2 negative trades. Weekly goals, on the other hand, can mean that you set yourself a loss and profit limit.
What is a currency pair?
A currency pair is the comparison of two currency rates. It is always assumed that you have a monetary unit of the base value, the first written, and how much you get from the currency, the second written. When you exchange one euro for 1.2000 US dollars (the exchange rate currency), you get a total of 1.2000 US dollars (the exchange rate currency) (the base currency). Therefore, the currency pair is always given in the currency of the quote currency. The value of the EUR / USD currency pair is given in USD.
The main currency pairs
The most important and most traded currency pairs are exclusively linked to the US dollar. The clear number one is the EUR / USD currency pair. Every currency pair has been given the name EURO in the Forex language world. Here we list the most important currency pairs including the technical terms:
|Currency pair||Technical term|
|GBP / USD||Cable|
|USD / CHF||Swissy|
|USD / JPY||yen|
|AUD / USD||Aussie|
|NZD / USD||kiwi|
|USD / CAD||Loonie|
Abbreviations for the major currencies
- US dollar ( USD )
- euro ( EUR )
- British pound ( GBP )
- Swiss Franc ( CHF )
- The Canadian dollar ( CAD )
- Australian dollar ( AUD )
- New Zealand dollar ( NZD )
- Japanese yen ( JPY )
What is a currency cross?
A currency cross is a currency pair that consists of the most important currencies but does not include the US dollar. These currency crosses are not traded as often as the currency pairs mentioned above, but they still play an important role in the financial market.
What are majors & minors?
You will often hear the terms majors and minors when trading Forex. The major currencies are grouped under majors – one speaks of the main currency pairs.
Minors, on the other hand, are those currencies that are not traded in this frequency and size and therefore only occupy a smaller area of the foreign exchange market (minor currency pairs). Well-known currencies here are the Mexican peso (MXN), the South African rand (ZAR), or the Russian ruble (RBL).
Forex beginners should start trading with majors. Since the exchange rates of the Minors are usually subject to greater fluctuations, only experts should trade with them.
What is an Ask or a Bid course?
The Forex broker shows two prices for a currency pair with the ask and bid price. The asking price is the selling price and thus the price that a trader wants to achieve when he sells his currency. So this is the best possible price that you can currently buy a currency at. The asking price is also known as the asking price, buy price, or offer price.
The bid rate is the opposite of the asking rate and describes the price that you can get for selling a currency. The bid price is also known as the bid price or sell price and is always lower than the asking price.
What is the spread?
The difference between the ask and bid prices is known as the spread. In currency trade, the broker receives this difference as payment for his work. The buyer pays the asking price, the seller receives the bid price and the broker is satisfied with the spread. The spread is always given in pips. Not all brokers work with a fixed spread, as this also depends on the liquidity of the market.
What’s a pip?
The smallest measured change in the rate of a currency pair is shown in pips. Pip is the abbreviation for percentage in point. As a rule, it is the fourth decimal place of the price. For example, if you buy EUR / USD for $ 1.1101 and sell it for 1.1105, you have made 4 pips profit on this trade. In the case of currency pairs with the Japanese yen (JPY), the second decimal place is already referred to as a pip, because the yen is of little value compared to other currencies.
What is a plumb bob?
The trading volume in Forex trading is given in lots. A standard lot is made up of 100,000 units of a certain currency. In the past, it was only possible to trade currencies in standard lots. In the meantime, the brokers have expanded the volume with mini, micro, and nano lots. These have a volume of 10,000, 1,000, and 100 units of the currency. The large volume is only necessary for currency trading due to the small rate changes of only a few pips. If you want to exercise caution at the beginning, use the small trading volumes.
What is the margin?
The margin is the security that has to be provided for trade and therefore, so to speak, the stake that you need for a trade. The margin results from the leverage and vice versa. If the leverage is 100: 1, the margin is 1 percent, ie you have to cover 1 percent of the trading volume via the trading account when the trade is concluded. Accordingly, the margin is 5 percent when the leverage is 20: 1 and 0.5 percent when the leverage is 200: 1.
What is a margin call?
If there are open positions in the trader’s account and there is a loss that has also exhausted the margin, the broker can call the margin call. The trader then has to top up his credit balance, otherwise, the positions will be closed and any profits can no longer be generated.
What is scalping?
With scalping, the aim is to keep positions open only for a short time and to generate small but large profits. The positions are kept open for a maximum of two minutes, often only a few seconds. If the intervals are longer than two minutes, it is termed intraday trading rather than scalping. Profits range from one to five pips per trade, so a large number of positions and leverage are required to make the strategy lucrative. The lot size is also decisive here. Of course, you can make substantially more money with ordinary lots than you can with a micro lot if you make 1 pip greater.
However, this strategy is not necessarily suitable for beginners. Since high leverage and large lot sizes are used, laypeople can use up their trading capital quickly. In addition, it takes some experience to cope with the nervous strain and some discipline to optimally pursue the strategy. Furthermore, “scalpers,” as practitioners of this approach are known, rarely use stop-loss or take-profit functions since determining them takes too long.
What are candlestick charts?
The most popular form of chart presentation among traders is the candlestick variant. As the name suggests, the prices are shown here in the form of candles. The candles have two different colors. Depending on the software, this is usually red for falling prices and green for rising prices. But black and white representations are just as possible as individual settings.
The bottom point of the candle shows the lowest price reached in this interval, the top point shows the highest price. The candle body shows the opening and closing prices for this interval. In the case of a “positive” candle, the upper edge of the body is the closing price and the lower edge is the opening price. With a candle that represents falling prices, it is logically the other way around.
Forex Trading Example:
Anyone who has ever gone on vacation and couldn’t pay in euros had to convert the cash to the local currency. For our example, let’s just assume that you traveled to the United States and needed US dollars. Then you went to the nearest bank before starting your trip and changed 1000 euros into dollars. Since the exchange rate at this time was EUR / USD 1.25, you received $ 1,250 for your 1000 euros.
After that, you flew to New York City for two wonderful weeks. But when you got home, you had exactly $ 125 in your wallet. Now one could assume that if you go to the bank, you should get exactly 100 euros again. But since the dollar’s rate against the euro rose during this period, the EUR / USD ratio also changed. This now stands at EUR / USD 1.11. This means that for one euro you no longer get 1.25 dollars as you initially got, but only 1.11.
However, this exchange rate development is an advantage for you, as you get more euros for one US dollar. At first, you would have received 0.8 euros for one dollar. This can be easily calculated if you divide one euro by the EUR / USD 1.25 rate at the time.
In our case 1 / 1.25 = 0.8. This means that at the original exchange rate you would have received EUR 0.80 for one US dollar. However, if we calculate with the current rate, you get exactly 0.90 euros for one dollar (1 / 1.11 = 0.90). If you add this to the $ 100 you still have in your wallet, the bank will give you 90 euros. In the end, this means that you have made a plus of 10 euros by changing the exchange rate of the currencies.