If you are a beginner in Forex trading, you can easily be overwhelmed with all the guidelines, articles, and tutorials on the Internet. It's very difficult to choose your way to successful trading among a vast variety of tips and guidelines on how to get into Forex.
We want to present a guide for beginner Forex traders that will give the main ideas on how to start Forex trading in the most effective way and how to earn on purchasing and selling currencies. Professional traders have designed the Forex trader tutorial whose extensive experience helped optimize its structure and content. It offers all the necessary information to start your trading journey in 2022.
How to Get Started with Forex
To get started with Forex, you need to follow these steps:
- Initially, open a Demo account on Justforex;
- Second, install the MetaTrader 4 or MetaTrader 5 platform;
- Determine the amount that you can risk;
- Get your own experience;
- Start trading real money on the Live account.
A Demo account will help you to start trading from scratch. Its functionality is the same as the real account's functionality despite using virtual money. A Demo account will provide you with valuable trading experience.
You can get a new experience and learn all the particularities of the market by using technical indicators without risk.
If you want to learn Forex, we have prepared an extensive guideline on how to start trading.
- Learn about Forex. Forex is a project requiring specialized knowledge. To get started with Forex, you need to explore all the main terms used in the Forex market. You can study at courses, visit webinars, or video lectures offered by experienced traders.
- Create a brokerage account. If you want to learn Forex trading step by step, you need to start trading on the Demo account. Then you can start trading on a Live account. You may demand a period to go from the Demo account to the Live one. On the Demo account, you trade without spread. Therefore, you start losing real money because of the spread between the bid and ask price.
- Develop your own strategy. It allows you to create a roadmap for trading when you can predict and time market movement. An effective strategy is based on the real situation and finances. Forex is mostly a high-leverage environment. However, you can get a lot much more rewards than losing.
- Check your positions at the end of the day. Trading platforms provide a daily accounting of trades.
- Develop your resilience. Every day, traders face emotional roller coasters and unanswered questions, for instance, whether to hold onto your position more to get more profits or not, buy or sell a currency for that price or not, etc. A lot of questions can lead you to stress and emotional exhaustion. Therefore, it's very important not to get carried away by your trading positions and develop your resilience. You need to make decisions due to the analysis of the price trend instead of emotions and mood.
How to Open a Forex Trading Account
To get started with the Forex market, you need to open an account with a broker initially. A trading account provides traders with access to the Forex market and allows executing trading operations online.
A trading account resembles a bank account. With access to it, you can store, deposit, and withdraw money. Traders can apply diverse payment systems to deposit into their accounts.
For instance, Justforex offers its customers effective trading tools, profitable conditions, low spreads, high-quality support, easy-to-use functionality, and flexible leverage. In addition, you can choose among different trading accounts with different conditions, including Demo, Standard Cent, Standard, Pro, and Raw Spread accounts.
Here, you will find all the useful information on how to start trading with Justforex:
- Initially, you need to log in to your Back Office;
- Second, make a deposit by using a suitable payment method for you;
- Third, download a platform. You can choose between MT4 and MT5 trading platforms;
- Four, place an order in the MT terminal and start trading.
How Much Money I Need to Start Trading
If you are an ultimate newbie in trading, you can start trading on the Standard Cent account. It’s suitable for traders who have already traded on the Demo account but are not ready to trade on Standard or Pro accounts. You can deposit cents into this account.
While trading on the Standard Cent account, you will:
- improve your money management skills. Small amounts are the best way to develop new trading skills and get valuable trading experience;
- learn risk management;
- try real trading without investing huge amounts;
- test the Forex advisors;
- learn the services and conditions of the platform.
The Standard Cent account resembles the Standard account but allows studying trading basics without significant risks. This account allows you to trade without much stress and high losses.
A Brief Overview of the History of Forex
When it comes to the history of Forex, the first major transformation of Forex was in 1944. According to the Bretton Wood agreement, a new economic order was established. The dollar became a benchmark currency.
A new stage in the history of Forex was the Smithsonian Agreement, signed in 1971. In the USA, the dollar was pegged to gold at $38/ounce. However, in 1972, the European community tried to make currencies independent from the US Dollar. The European Joint Float was established by European countries, but it collapsed in a year.
In the 1980s, the US dollar became the world's reserve currency.
To learn Forex trading, you need to understand different strategies. There are four basic strategies used by professional traders.
Day trading belongs to the most popular active trading strategies. This strategy is a method of purchasing and selling assets during one day. Orders are closed within one day and aren't held overnight. Day traders hold multiple positions open within one day. This helps decrease the volatility level of the overnight market. Usually, this strategy is chosen by professional traders or market makers.
Benefits of the day trading strategy:
- You protect your order from overnight risk;
- Intra-day risk is limited. A day trader holds short-terms trades that last several hours. This allows protecting your assets from risks that can occur during the long-term trades.
- Flexible schedule. Day trading strategy matches people who appreciate flexibility in trading. An intra-day trader can open and close around 5 trades during the day.
Disadvantages of the day trading strategy:
- A trader should follow discipline rules. A day trading strategy requires discipline. Traders need to use a predetermined strategy and manage their risk by completing entry and exit levels.
- There are flat trades in the market. This means that a position doesn’t move within a day.
Some traders consider position trading as a buy-and-hold strategy. However, it can be considered as an active trading strategy. Position traders use longer-term charts. An order can be open from several days till several months. Position traders want to earn on both hikes and falls of the price trend. When the volatility level is high, a trend strategy is difficult to implement, and its positions are reduced.
Benefits of the position trading strategy:
- High profits. Position trading allows using high leverage since the possibility of losses is less as compared to other types of trading.
- A low level of stress. While using this trading strategy, you don’t need to check your position on a daily basis.
This strategy is used by traders when the market is highly volatile. They hold positions open for more than a day but less than trend trades. This type of traders uses a combination of technical and fundamental analysis. Usually, they open their positions for more than one session. However, this period doesn’t last more than a couple of months. Sometimes, swing traders close their positions during one trading session while the volatility of the market is very high.
Benefits of the swing trading strategy:
- Swing trading is suitable for busy people who don’t have a lot of time. You can trade using this strategy as a hobby. However, each swing trader needs to be aware of how trading patterns work.
- Multiple trading opportunities. Swing traders open short-term and long-term positions.
Disadvantages of the swing trading strategy:
- Significant losses. Position traders tend not to pay attention to minor fluctuations that can result in significant losses.
- If the trading position is held for a long time, a swap can reach a huge amount.
If you are looking for the fastest trading strategies used by active traders, pay attention to scalping trading. Scalpers identify and exploit bid-ask spreads that are a little wider or narrower than typical spreads.
A scalping trader doesn't try to exploit large moves or trade big sums. They monitor small moves that occur frequently. Using this strategy, you trade small volumes by increasing the frequency of their trades. Compared to swing traders, scalpers prefer quiet markets without sudden price movements.
Benefits of the scalping trading strategy:
- Overnight risk doesn’t threaten your assets. Scalpers close their positions within a few minutes at maximum.
- Flexibility. You don’t need to spend all your time in front of the screen if you use this strategy. Therefore, scalping trading can become your hobby.
- Multiple trading opportunities. Scalpers can open several positions simultaneously.
Read more: Forex Price Action Trading Guide in 2022
Learn About the Currencies You Trade
All the currencies are traded in pairs. You sell one currency and purchase another one in the Forex market. Almost all currencies are priced out to the fifth decimal point, the smallest price movement. However, currency pairs that contain the Japanese Yen (JPY) as the quote currency are priced to the second point.
There are three main types of currency pairs that successful Forex traders need to know. This list contains major, minor, cross, and exotic currency pairs.
Major currency pairs are the most actively traded ones on the market because they contain the USD.
The list of major currency pairs includes:
The major pairs are considered by traders as the most heavily traded ones that drive the global Forex market.
Minor currency pairs are less traded. Due to less liquidity in the market, they often experience more wild swings. This means that their spreads are often wider than major currencies.
Minor currency pairs include currency pairs:
Cross currency pairs are also minor currency pairs without the involvement of USD. For instance, GBP/JPY, EUR/AUD, and others. Historically, any trader converted their original sum into USD to trade one currency for another. The cross currency pairs were designed to miss the first step of going to USD. It sounds like something usual today. However, at that time, this broke the business functionality completely.
In addition, there are exotic currency pairs in the Forex market. Exotic currency pairs are rarely traded if they are discussed in the context of mainstream financial circles.
Exotic currency pairs include:
- and others.
While choosing a strategy, you need to pay attention to the characteristics of the minor and major currency pairs and how they differ from each other.
Manage Risk and Emotions
If you learn Forex trading for beginners, you need to learn risk management. It involves calculating losses that you are ready to face to make a profit. While learning risk management, you find out how to protect your deposits from losses and control your emotions.
If you want to learn how to trade Forex, you need to know this information. The main rule of trading is to start with small trades. While taking a hot bath, anybody doesn't jump in a straight way. Initially, you test the water temperature. Trading doesn't differ from taking a hot bath. You don't need to enter the market with your entire position. Initially, you need to test the market with a smaller trade before taking your full position.
There are two types of Forex brokers, including regular brokers and broker-resellers. Regular brokers interact with their clients while broker-resellers act as intermediaries between customers and a more prominent broker.
A broker is a mediator between an investor and a securities exchange, a place where financial assets are traded. Therefore, you need a broker to trade for you. For their services, brokers charge fees.
Before starting to choose a broker, you need to answer a few questions, for instance, whether you are looking for a long-term retirement fund or a short-term retirement, what strategy you want to use, etc.
To choose a broker, pay your attention to the following characteristics:
- A level of reliability;
- Account minimum;
- Pricing and execution;
- Tools, education, and features;
If you want to learn how to trade Forex successfully, you need to learn about the Forex market. Visit webinars, online lectures, courses, read professional articles and other materials as much as you can. Secondly, you need to choose a broker offering profitable conditions, effective trading tools, and extensive guidelines. After that, you need to choose a strategy among different strategies, including day, position, scalping, and swing trading. Then you need to choose a type of account among different ones, including a Demo account, Standard account, Pro account, and Raw Spread account.
Starting trading on Forex, you need to get valuable trading experience on the Demo account without losses. In addition, if you want to learn FX trading, you need to learn risk management and control your emotions. This is an extensive guide on how to trade Forex for beginners.