Before you can start to learn how to trade forex there are a couple of basic things that have to be in place for you to be able to start your trading career.
1. Get Forex Charting
You can register a free demo account with brokers like avatrade, plus500, and other which will all include free forex charting. You need the charts to make decisions based on your trading system or technical analysis. Without some type of charting you are basically blind, and will not be able to effectively trade.
2. Register a Forex Demo account at a Broker
Usually if you have registered at any of the above mentioned institutions you will already have access to a forex broker as well as forex demo account. All good forex brokers these days offers a free demo trading account where you can practice your trading strategy with “play” money before you will risk your real money.
You will also learn how to enter orders, close positions and all the ins and outs of a trading platform on a forex demo account. This is crucial to know exactly how you’re trading platform works before risking any real money.
3. How are you going to trade? Which Forex Trading System are you going to use?
Only when you have charting as well as a demo account in place can you start to look for a forex trading system, and decide how you want to trade forex. There are many different strategies for trading forex ranging from day trading to swing trading.
When learning how to trade forex it is crucial that you try different forex trading systems, and by doing this you will be able to find the strategy that you are comfortable with. Some people like trading many times per day, while others prefer trading only once in a couple of days.
Here are some different forex trading styles that you can try:
– Scalper – Many different trades per day taking only 5 – 10 pips per trade.
– Day Trader – 1 to 5 trades per day taking 10 – 50 pips per trade.
– Swing trader – 1 to 5 trades per week sometimes taking trades overnight.
It is crucial that you discover the trading style that fits your personality and that you are comfortable with.
For example – I am a day trader who takes between 1 and 3 trades per day, and I am very comfortable and successful with it.
The only way you can discover for yourself which type of trader you are is to try all the different trading styles for yourself for a period of time.
Then you will quickly discover what type of trader you want to be.
A scalper that takes 5 to 10 pips of profit many times per day will never be comfortable trading once per day like an intraday swing trader. It will drive him crazy to sit and wait for that one pre-determined trading opportunity.
The point I am trying to make is that the mistake most of these over hyped trading systems make is to try to make one trading system be the “one size fit all” for all people.
4. Which Forex trading sessions are you going to trade?
When are you going to trade?
The forex market trades 24 hours per day and it will be just stupid to try to trade all 24!
There are basically 3 major forex sessions which are the following:
– Asian – Starting at about 19h00 EST
– European – Starting at 02h00 EST
– US – starting at 08h00 EST
My advice would be to pick one of these sessions and trade that.
I personally trade only the European session, and I am usually done and made my target within 2 to 3 hours.
5. Which Forex Trading pairs are you going to trade?
What are you going to trade?
There are a lot of different currency pairs, and when I just started trading I made the mistake of trying to trade a lot of pairs at the same time.
Do not make that same mistake!
You can only focus and do proper analysis on one and at the most two pairs at the same time.
The problem also is that most of the pairs actually move in some type of correlation with each other – so the possibility is there that you can compound your loss if you trade pairs that correlate with each other.
My advice would be to pick one of the majors –EUR/USD, GBP/USD, USD/JPY and USD/CHF.
The best currency crosses to trade are the GBP/JPY and EUR/JPY.
Pick one and trade it well. Personally I only trade the GBP/USD
6. When are you not going to trade?
I have learned the hard way that there are certain times that you should not have an open trade in the forex market.You are in the profit on a trade and then all of a sudden price will go in the wrong direction taking you out on your stop.These very sudden and violent movement in the forex markets are caused by news events.
The key is that it is very difficult to predict the direction of the movement, and it is a wise trader that stays out of the market at these times.Some “gurus” suggest that you should trade the news, but it have been my experience that this is not a good idea.
- Forex Trading Basics important to Trade Currencies
- Forex Made Easy – simple way to make money
- What Exactly is Forex
- Forex Definitions
- A Beginner’s Guide to Forex Trading