Forex For Dummies 101 (All you need to know about Forex)
Forex trading has become more popular in the last decade; newbies have crossed over from other investment platforms to test the waters in Forex for dummies platforms.
Before fully engaging themselves in currency trading, the newbies are first taught that money can either be made or lost in seconds because the financial market trends fluctuate in a matter of days or even years.
The most important thing is that Forex for dummies platforms is always moving, providing a good currency trading and learning environment. Forex has over $ 4 trillion daily in the market, proving that it is the largest and most liquid market, with both experts and new traders.
Compared to previous years, trading has been simplified because it is done through the internet, but it is not as easy as you think because people still lose money. Many factors have contributed to the loss, including insufficient trading capital, unfamiliarity with the currency market, and poor money management, but through Forex for dummies, trading has been simplified.
Table of Contents
- Forex For Dummies – How To Trade Forex?
- Forex Financial Market Terms
- 5 Easy Steps to Trade in Forex Financial Markets
- Best Online Forex Brokers
- Forex Trading Strategy Types
- Forex Market Analysis
- Forex Currency Trading Tutorial
- Click Here to get Ezekiel Chew’s Free 5 Part Training (Official Page)
- How to Develop a Forex Trade Plan
- Final Thoughts
- Click Here to get Ezekiel Chew’s Free 5 Part Training (Official Page)
Forex For Dummies – How To Trade Forex?
Many Forex traders have invested and want to make money in the Forex market, but very few manage to do the prep work needed to succeed in their trades. Although currency trading has become more accessible than ever before, even the most experienced traders still incur losses.
Many factors affect traders, including insufficient trading capital, unfamiliarity with the market, not trading according to a set plan, and poor money management techniques to preserve trading capital have led to losses.
But, if only these inhibitory factors are eliminated, no one will be limited a chance of becoming a successful Forex trader.
Forex Financial Market Terms
The Forex market is unique and has some differences compared to other financial markets, as the commodity markets. As a case in point, the Forex market has its own set of jargon terms unique to the financial market.
If you dream of knowing how to trade Forex, ensure that you know basic Forex terminologies by reviewing the definitions for common terms used in the Forex market below.
These are two emerging market currencies, the first one, known as the base currency, is quoted in terms of the second, called the counter currency. For instance, EUR/USD is a currency pair representing the E.U.’s euro quoted versus the U.S. dollar.
Although some overseas markets allow the contact for a different tools, the U.S. does not allow it. For instance, buying a CFD for $10 and selling the position for $11 will enable you to get $1. If you sell short on that position, you will incur $1. This strategy would enable you to invest in the future without owning the product.
These are currencies of countries whose economy depends mostly on commodity exports. Examples include Russia, New Zealand, Canada, Australia, etc.
The net worth of a currency pair enables exposure to the movements in that pair’s foreign exchange rate. Traders take positions to find out the directions of the foreign exchange rates.
It is a financial tool that gets its value from other assets, for instance, other currencies. Forex derivatives are well known because they can take the values of two or more currencies and sell shares based on that value.
This is a position in which a trader has either net sold or purchased the base currency in a currency pair. If you think the net exchange rate will rise, you should take a long position, but short positions are taken if the foreign exchange rate falls.
Leverage is the trading position size you can manage with a certain amount of money deposited to your trading account to be held by your brokers to cushion them against losses. The maximum leverage ratio depends on brokers -ranging from 20:1 to 1,000:1 or more it can also depend on your jurisdiction.
This is an intermediary that makes financial transactions in the foreign exchange market on behalf of the trader. Retail Traders create accounts with trusted brokers to trade currency pairs on margin.
5 Easy Steps to Trade in Forex Financial Markets
Taking the following steps will prepare you for Forex trading:
1. Connect a device to the internet
A reliable internet connection is required to trade Forex via an online broker. A device is also required to access the internet, such as a computer, smartphone, or tablet.
It would be better if you also were careful when choosing an internet provider; poor networks can lead to undesired losses.
2. Find a suitable online broker
Opening a Forex trading account is easy no matter where you are. It would help if you found a broker who suits your requirements as a trader and will accept you as a client.
At a minimum, your trusted broker is required to keep your money different from his and operate in a well-regulated authority under the oversight of a recognized regulator, just like the U.S. Commodity Futures Trading Commission (CFTC) or the U.K.’s Financial Conduct Authority (FCA).
3. Open and fund a currency trading account
After deciding which broker you choose, you need to fund your currency trading account. Most online Forex brokers provide many ways of funding, including debit card payments or Paypal and bank transfers.
4. Obtain a Forex trading platform
You can either decide to access it online or download a Forex trading platform that is supported by your brokers.
Most Forex brokers prefer a popular 3rd-party platform like MetaTrader4 and 5(MT4/5) from MetaQuotes.com or a proprietary currency trading platform.
5. Start trading After completing all the previous steps
You now have a funded Forex account, and you are ready to go. Most platforms provide a demo account with virtual money to enable you first to test the platform’s services before any trading.
Demo accounts are also important since you can test your currency trading strategies and lean without losing money.
Best Online Forex Brokers
Usually, a local retail Forex regulatory body will determine if the international brokers will accept traders for your country. You should try working with the broker to find out if they accept you and make sure they provide all the essential services and tools you require.
Also, ensure that has proper regulations by a legally approved regulatory authority and segregates clients’ money from its own. Having narrowed down your choices to a few suitable brokers, find out if their online reviews are customer satisfactory.
Before any funding, you should open a demo account to test its services, and if they are good, you can begin currency trading.
Check out our list of the 7 Best forex brokers here.
Forex Trading Strategy Types
Now that you have your Forex trading account with a trusted broker, you should put up strong currency trading strategies to boost your success in the market. One or more strategies could be compatible with your personality and level of market experience.
The strategies listed below are popular among retail traders and have led to many traders realizing their potential.
This strategy is very active, and the scalper aims at making profits in a very short time. This strategy requires the scalper to monitor the market trends regularly.
These trading strategies enable traders to enter and exit their positions throughout the day but are closed when a single trading session has ended. Therefore day traders refrain from other risks which may occur due to taking positions overnight.
3. Swing Trading
This trading strategy involves buying low and selling high; swing or momentum trading involves getting into and out of the market whenever you are signaled by technical momentum indicators such as the RSI. Swing traders usually take overnight positions.
4. Trend Trading
This trading strategy is a long-term strategy and involves estimating intrinsic value and predicting future trends. These traders wait for their profits until the end of the trends.
Forex Market Analysis
Experienced traders have known how the market trends are rapidly changing and how to make better trading decisions. Each of them has a market trading analysis that guides them. Some of the strategies are listed below.
1. Technical Analysis
Technical analysis is a form of listed market examination used by traders to forecast future market trends and find the best trading opportunities depending on charts and computer graphs.
Technical analysts speculated that past trading might predict an asset’s future value. This form of analysis is very important in determining the short-term market moves.
2. Fundamental Analysis
Fundamental analysis is a way of giving value to an asset by trying to determine its intrinsic value. Fundamental analysts usually examine important financial and economic factors, as well as other quantitative and qualitative information. Fundamental traders usually depend on economic calendars to guide them.
Forex Currency Trading Tutorial
We’ve got one of the most experienced traders and mentors, Ezekiel Chew – who is the man behind the scenes. He trains banks and trading institutions and makes six figures a trade on his own. We asked him to brief us on how to trade Forex and what you need to do to be a successful Forex trader.
Ezekiel Chew is also the founder and chief trainer at the widely popular Asia Forex Mentor.
According to Ezekiel, there are three things you should do to become a successful trader:
1. Familiarize yourself with how to read the charts
Price action is the best way you can learn how to read the charts; most professional traders have applied this and have become successful. Knowing how to read charts will enable you to understand how and why the market is changing and which factors are contributing.
Therefore, you will understand which strategy to apply at which particular point.
2. Use a proven Forex trading strategy or other valid trading strategies
Some strategies have been comprehensively tested and have been proven to work consistently. This strategy is the only way to gain the confidence to apply the strategy during the lull periods.
3. You should have a solid trading system
Not only is a trading system that is defined by the business behind trading but also by the technical aspects. A well-structured trade that is in line with the trading plan has been proven to work. Most traders think that successful trading is about strategies, but the system itself greatly impacts becoming a successful trader.
Most importantly, Ezekiel has an important trading mantra –“Win big, lose small” that guided him and his students. This strategy reminds you that you should have a mathematical probability behind each trade. It would be best if you worked to ensure that you win big and lose small. In the long run, you would have won the trade. To learn more about how Ezekiel trades, you can join his free 5 part training series here where it shows you how to beat the market with mathematical probability.
How to Develop a Forex Trade Plan
Trading without a plan may lead you to a dead-end — if you fail to understand your destination, then you’ll be lost battling the waves. So, make an effort to build a Forex trading plan with a tested and approved trading strategy which is easy to apply.
Risks assessment techniques and money management is very important part of your trade plan. It would be best to carry out your trades according to the amount of money you have in your account. This strategy can favorably affect your trading performance and help manage your risk.
Determined traders should take losses positively to avoid losing hope and feel motivated and as a lesson to work harder and achieve. Remember that a trader’s worst enemies are hope and fear: Desperate traders tend to fear incurring losses at the end of the trade.
They should therefore ignore such hopes and react to the far more rational fear of getting greater losses if they fail to take action. To control the number of losses you incur, either a stop-loss order should be in place, or you should make a point of cutting down losses by watching it closely.
Creating a trading plan might be a tiresome task. Instead, you can decide to join a social trading platform and copy the transactions of another client who has an established and profitable track record.
It doesn’t matter where you live; starting as a retail Forex trader is relatively easy if you have invested some money to start trading. However, trading currencies successfully requires considerably more than that.
You are required to have reasonable market knowledge, the discipline to stay to your strategy, and the ability to cope with emotional terms of losing trades and a viable trading strategy within an overall trade plan.
If you can meet those requirements, you have a great potential of being profitable as a Forex trader. If you don’t, then you try again opening an account with a trusted Forex broker that supports copy trading.
Most of all, Ezekiel Chew’s Asia Forex Mentor has a famous trading slogan that elaborates clearly a simplified mathematical probability required to tackle each trade. “Win Big, lose Small”
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Author: DLM Editor
Life tips and life hacks for happiness and prosperity.