Forex Trading for Beginners

When a beginner hears the phrase financial market, he does not see much difference between the concepts of the stock market, stock exchange, Forex, markets for stocks, bonds, currencies, derivatives, etc. Therefore, it is necessary to clarify the situation with what the financial market really is.

First of all, it is worth understanding and remembering that the financial market is not a place for trading, but a whole system of economic relations that arose in the process of exchanging various goods and resources.

KEY TAKEAWAYS

• First of all, it is worth understanding and remembering that the financial market is not a place for trading, but a whole system of economic relations that arose in the process of exchanging various goods and resources.
• The price arises based on supply and demand at a certain point in time. Hundreds of thousands of transactions are simultaneously made in the currency market.
• In Forex trading, your main working tool will be a trading terminal. It is through him that the trader maintains contact with his broker and gives him orders to buy and sell financial instruments.
• Learn all the strategies that you come across on the web and in the forums. Choose the one that best suits your vision of the market and is closest to you in character.

What is Forex Trading for Beginners

To begin with, novice traders need to familiarize themselves with the concepts of "financial markets - stock exchange and Forex".

The financial market mobilizes and concentrates capital, lending, currency exchange and investment in the manufacturing sector.

The balance of supply and demand for borrowed capital forms the global financial market.

The financial market can be divided into types of goods that are the subject of bargaining.

• Currency market (Forex) - the main commodity here are currencies that are sold and bought by brokerage companies, banks and investment funds.
• Stock market - securities (stocks, bonds, bills, derivatives) are traded here.
• The commodity market is a place for trading in raw materials: oil, metals, agricultural products.
• The precious metals market is often included in the category of commodity markets. Precious metals traditionally act as a means of protecting financial reserves.

Every beginner is faced with the question: What is forex trading and how does it work. We are here to give you a push in the right direction.

How to Forex Trade for Beginners

Since the Forex market is over-the-counter, this circumstance does not involve the actual purchase or sale of currency, as in an exchange office.

So how do you start trading in the financial markets? Let's take a step-by-step walk through the financial markets. The beginning and the first steps in trading on Forex or other financial markets do not differ much from each other.

Forex for beginner can be a bit intimidating, but if you start learning your way in, it won’t be bizarre.

Let's see

1. Price Formation in the Forex Market

The price arises based on supply and demand at a certain point in time. Hundreds of thousands of transactions are simultaneously made in the currency market, up to 5 trillion dollars pass through the Forex currency market in one day. At some point when there are more sellers than buyers, the price falls. And vice versa when there are more buyers than sellers, the price rises. All this leads to constant price movement.

2. Basic Forex Concepts

• A deal is an act of buying or selling currencies. In Forex trading, you sell one currency to buy another.
• Base currency - the type of currency you are selling. The currency you buy is called the Quote currency.
• The Exchange Rate tells you how much you need to spend in the quote currency to buy the base currency.
• Bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. The Bid Price is the best price at which you are willing to sell your currency quotes on the market.
• Ask price is the price at which your broker will sell the base currency in exchange for the quote currency. The Ask price is the best available price at which you are willing to buy in the market.
• Spread is the difference between the offer price and the ask price.

3. Choosing a Broker

In order to start working on the Forex market, you need to decide on a broker who will provide you with access to the market. At first glance, it is difficult and often incomprehensible how to distinguish a bad broker with good advertising from a reliable partner with quality services.

4. Choosing a Trading Platform

The next step is to decide on the trading platform on which to trade in the future. A variety of trading terminals allows you to choose the most suitable option, taking into account the needs and preferences of the trader.

In Forex trading, your main working tool will be a trading terminal. It is through him that the trader maintains contact with his broker and gives him orders to buy and sell financial instruments.

In addition, if a trader plans to trade not only from his desktop, but also use various mobile devices and gadgets, then you need to explore the options, install and test the selected programs on your devices.

This is necessary so that the trader has the opportunity to access the market at any time, and he is able to carry out the necessary transactions.

The most common desktop platforms on the market are MetaTrader 4 and MetaTrader 5, NetTradeX.

5. Opening a Demo Account and First Practice

After choosing a platform, we determine the type of account. To begin with, it is better to choose trading on a demo account, which will help you learn how to open and close positions, set Stop Loss levels (a protective order placed by a trader to limit possible losses in the event of a negative development of a trading situation) and Take Profit (an order that will automatically close a transaction at when the quotes of an instrument reach a certain price level. Order parameters are set by the trader based on his forecasts or according to the rules of the strategy used. These orders can be placed not only at the opening of a transaction, but also later) , use charts and indicators.

Forex Trading Strategies for Beginners

In a highly volatile market where prices move rapidly, traders are in dire need of something tangible to rely on, here comes Forex trading strategies. Forex trading strategy is a technique used by forex traders to help decide whether to buy or sell a currency pair at any given time.

Forex trading strategies can be based on either technical analysis, fundamental analysis, or both. Strategies usually build on trading signals, which are in their essence triggers for actions. There are well known forex trading strategies that can be easily found or traders themselves can construct their own.

Types of Trading Strategies

There are many circulating Forex trading strategies in trading and sometimes it can be confusing which one to choose. Which one works? Below we will share with you the most successful ones.

These are forex trading strategies that work well during Forex trading executions

Swing Trading Strategy

Swing trading is a long term trading strategy, when trades are kept open from a few days to, sometimes, several weeks. Swing trading strategy’s essence is taking advantage of market big fluctuations "swings". Fundamental analysis plays an important role on longer timeframes.

Strong directional moves are often triggered by important or unexpected market news, such as corporate income statements or central bank meetings, which means swing traders need to be aware of market fundamentals.

There are ways to develop a reliable trading plan. Here are the most common swing trading techniques we’d like to share with you.

Scalping Trading Strategy

Scalping strategy is very popular in Forex trading. Scalpers focus on making profit on small moves that occur frequently and favour markets that aren't prone to sudden price movements.

Strategy involves opening a large number of trades in a bid to bring small profits per each. The disadvantage of scalping is that traders can't afford to stay in a trade for too long, plus scalping takes a lot of time and attention to find new trading opportunities.

For example a trader scalping to profit off price movements for Adidas AG Stock trading for $318. The trader will buy and sell a huge amount of Adidas AG shares, let's say 100,000, and sell them during price movements of small amounts. Price increments can be as low as $0.05 or less, making small profits from each share, but since purchase and sale are in bulk, profits could be quite solid.

Day Trading Strategy

This strategy refers to trading during trading day. Quite simple - all trades must open and close positions during the trading day. Day trading strategy is applicable in all markets, though it's used more in currency trading. When executing day trading strategy, trader monitors and manages open trades the market throughout the whole day.

Note, leaving positions open overnight fraught with loss of money.

This type of strategy is often news based, specifically scheduled events - economic news, statistics, elections, interest rates. Basically, one of the ways to execute this strategy is to pay close attention to news that can affect currencies, and act accordingly. That’s why more often than not day traders trade more actively in the mornings, since most news is released at that time.

Position Trading Strategy

Position Trading is a long term strategy, some call it “buy and hold” strategy. During Position Trading strategy traders usually use long term charts, from daily to monthly, and with a combination of other methods establish the trend of the current market. This kind of trade lasts from a few days to several weeks or more.

The main idea of position trading strategy is to determine the direction of the market and make use of. Minor market fluctuations aren't considered important since they don't create trends, hence no impact on position trading strategy, unlike Scalping where the whole strategy is based on it.

Since position trading strategy leans on fundamental analysis it's reasonable to monitor central bank monetary policies, political developments as well as long term technical indicators and macroeconomic environment.

Forex Trading Tips

Trading is a profession that takes a lot of time to learn and work hard. In the process of training, future specialists gain knowledge, comprehend the secrets of trading and gain experience.

Here are some tips for beginner traders that we would like to point out to make it easier for you to get started.

• Learn all the strategies that you come across on the web and in the forums. Choose the one that best suits your vision of the market and is closest to you in character.
• Each trading system has its own individual characteristics, a detailed study of which will help you reduce its "cons" and increase its "pros".
• Make a clear plan for the application of the system and always follow it in any situation.
• Learn from your mistakes. Carefully analyze what is happening in the market that went against your forecasts, and correct them in a timely manner.
• Be sure to put "stops". And when another of them worked, be sure to take a break from trading for a couple of days. Some errors arise from a banal overvoltage.
• Pay special attention to the 4-hour charts - they are usually the most profitable.
• Be sure to track the correlation of the main pairs.
• Treat trading like a job and make it a habit to withdraw a portion of the profit you earn every month.

Bottom Line on Forex Trading for Beginners

To develop effective trading skills, you need to read the books of many recognized authorities in the financial industry and spend a lot of time studying fundamental analysis, technical analysis and the relationship between these processes.

At the same time, there are many strategies that can be used in the "manual" mode and gain experience in trading on demo accounts, or you can use trading robots to make a profit.

The fact is that there is a lot to learn in Forex trading and beginners need to patiently follow the learning curve.

Was this article helpful?

Yes

No

Learn Trading with IFC Markets

IFCM Trading Academy

4 simple steps to learn trading

Forex Trading Books

Forex & CFD Trading Tutorials Library

Forex & CFD Video Tutorials

Video Tutorials for Beginners and for working with Trading Platforms (MT4, MT5, NTTX)

Trader's Glossary

Trading Terminology: Glossary of Forex and CFD Terms