Before we get into the details about Forex trading, let’s first discuss what Forex means. Forex is a term that was derived from two words- “foreign exchange.”
It refers to the process of buying and selling of one currency in exchange for another. For example, if you stay in the US, and you wish to convert US dollars for Euros or vice-versa, then you are participating in the world currency trading market.
Things you should know about the market
Forex market is a crowded market with businessmen, and people from all over the world participate in the process of trading currencies. People usually say that Forex trading is not meant for the weak hearts. Before you enter this crazy world, there are a lot of things you will have to understand and learn.
It is easy to get lost if you are not aware of different techniques and terms. In fact, before entering any market, it is important to learn the basics of the market and how it works. The demand for the currencies can go up and down depending on other currencies. So, one can say that currencies are inter-related.
1. Forex Pairs
When you trade currency in Forex, they are supposed to be traded in pairs. They are also categorized as exotics, majors, or minors. Some of the major currencies traded in the Forex market are:
- USD: The US Dollar
- AUD: The Australian Dollar
- EUR- The Euro
- NZD- The New Zealand Dollar
- CHF: The Swiss Franc
- CAD: The Canadian Dollar
Any currency paired against the US dollar will be known as a major currency pair. On the other hand, currencies that are not paired with US dollars are known as minor pairs. Exotic currencies include- Hong Kong Dollar (HKD), the South African Rand (ZAR), the Norwegian Krone (NOK) and the Thai Baht (THB). When you combine an exotic currency with a major currency, it is known as exotic pairs.
2. Forex Quotes
When you step in to the world of Forex trading, you will notice that both the “ask and bid” are quoted. The bid price is the price at which you can buy currencies, and asking price is the price at which you sell these currencies.
When you purchase a currency, it is known as long trade. Profits are an easy concept in the Forex market; you have to buy currency at a low price and sell it at a higher price.
However, when you sell the currency in the Forex market and the price of the currency drops, you get a chance to repurchase it at a lower price. This will help you in earning profits on the difference. The exchange rate of a currency is what will determine the number quoted for the currencies.
12 Forex Trading Tips that you need to know
As already mentioned, Forex is not the market for inexperienced and amateurs. It is not for people who are weak at heart. Forex can cause huge losses to inexperienced and undisciplined traders.
It is not necessary that you will be in the same condition, but for that, you will have to take care of a few things. Given below are a few Forex trading tips that will help you in preventing financial disasters:
1. Understand your needs
If you are looking to earn profits, you must understand and identify the potential risks in the market. In order to recognise the market, you must first recognise yourself.
The only way you can gain insights and self-awareness in the Forex market is by making sure that your risk tolerance and capital allocation for the trade is not lacking or too much. It is important to maintain a balance between your goals and the risk you are willing to withstand.
2. Plan your goals
Once you know what you want from trading, it is important to frame a time structure and working plan in which you will work for your goals. If you never taste failure, how will you understand the real value of your success?
How much time will you need for the trial and error process? How much time will you take to learn to trade? What is your goal behind Forex trading? Are you looking to aim financial independence or just earn extra income? These questions will help you with planning your goals properly.
3. Choose the broker carefully
A lot of investors, especially the beginners ignore it. We cannot stress enough on the fact of how important it is to hire a broker for trading. Besides, not only is it important to hire a broker but also to make sure that you have chosen the right broker.
How can you do that? A fake or untrustworthy broker will invalidate all the gains that you have earned. Someone who has the expertise and a past record of satisfied clients will ensure that you have effective trading.
4. Pick your account type
Once you have chosen the broker, it is time you pick your account type. It is important for you to choose an account package that suits your knowledge and expectations. The multiple types of accounts offered by the broker will leave you confused at first, but the best you can start with is a lower leverage option.
If you have enough knowledge about leverage and trading, you will be satisfied with a standard account. In case you are a beginner, it is advisable that you must go through a period of study and practice how to use a mini account. The lower your risks, the higher your chances. So, make sure you chose in the most convenient way possible.
5. Start with small amounts
One of the best tips that we can give you is to start with small amounts and sums with low leverage. This will help in slowly adding up to your profits. There is certainly no hard and fast rule that larger accounts will help you in gaining more profits.
If you are increasing the size of your account through your trading choice, no worries. But, if you are doing it just for the sake of it, then there is no point in keeping pumping money.
6. Focus on a single currency pair
The world of Forex and currency trading is deep and wide; it is easy for beginners to get lost if they do not have prior knowledge about trading and exchanging money. Due to its chaotic nature and diverse characters, it is hard for investors to master the art of knowing all things.
So, in such a case, the best thing to do is start with a currency pair that you understand and with which you are familiar. Beginning with a currency that belongs to your nation is how you should start trading in the foreign exchange market.
7. Do only things you understand
It might sound effortless, but a lot of people fail to abide by this one and only important rule. If you are unsure about something, you should abort the mission. It is that simple. It is not a shame for you to know everything, of course, the market is huge, and not everyone can know everything.
You should never go against your critics whom you value and trust; it does not make any sense. Do not trade unless you are confident about the decision.
8. Being careful
It goes without saying and is mere common sense that you should not ignore the basic principles or act carelessly. People who have done this before have been doomed for years, and it has caused disaster to many traders in the course of history.
To be honest, nobody really knows where the currency pair will go in the next few hours; it is just an educated guess that everybody makes. Thus, the only value that you really know is the current value. Not much can be said about the price of currency pairs in the future.
9. Do not make a decision based on your emotions
An essential thing that you should learn before stepping into the world of trading is that there is certainly no place for fear, euphoria, panic, greed, or excitement in trader’s calculations. We do not deny the fact that you cannot feel emotions during the process, but you will have to master the art of minimizing its effect on your lives.
This is why we suggest you start with small amounts so that there is not enough risk in the beginning. Once you have learned how to handle risk, you can switch to larger sums. The key to successful trading is a logical approach, less emotional intensity, and best Forex trading tips.
10. Take notes on your success and failure
You don’t start trading directly, looking at the different fundamental and technical analysis of the price trends of the formulation of different trading techniques. You begin when you take your first step towards this path, the first dollar you decide to trade, and the first error that you encounter in calculating the currencies.
It is important to take lessons of your failures and successes if you want to move ahead in your trading life. Keeping a diary or notes of all your trading activities will allow you to analyze the mistakes and find out what works best for you and what doesn’t.
11. Automate the trading
We have already told you the importance of controlling your emotions and how it will ensure a profitable career. The best way you can minimize your emotions in the trading world is by automating the trading choices and trader behavior.
We are not asking you to buy expensive bots or technical strategies. All you have to do is to make sure that your responses to similar trading scenarios are similar in nature. This means there is no need for you to improvise.
12. Do not rely on Forex robots
It is easy to get tempted by looking at Forex robots, wonder methods, and other such untested products. They have become quite a buzz in the market these days, generating great profits for the seller, but little for the buyers.
The only way you will learn the art of trading and exchanging currencies is with experience and years of trading. Do not let these untested products determine or create intention in your creations.
Why should you invest in Forex Trade?
When a trader looks for a market to trade, the first things he looks for is an optimal trading condition and the best chance to earn a profit. There are several reasons why people across the world think that Forex market perfectly fits into these criteria, let’s look at a few of them:
1. You can either go long or short
While you can go short on other markets such as CFDs, short selling is one of the inherent parts of trading Forex. This is because you are trading one currency in exchange for another. The price of the Forex pair is how much one unit of the base currency will cost in the quote currency.
Your profits and losses will depend on the extent to which you get your prediction right, which means it is possible to earn profit irrespective of the direction in which the market moves.
2. The market hours
The best part about the Forex market is that it is open 24 hours a day, five days a week. You can start trading in the Forex market from 9 pm on Sunday to 10 pm on Friday (GMT). The long hours are because of the direct party transaction that takes place in the market.
3. Forex Volatility
The high volume of currency that trades each day translates to billions of dollars every minute. This will make the price movements of certain currencies extremely volatile. This way, you will be able to reap large profits no matter which way the market moves in.
The world of Forex is an interesting one, and if you are a pro-investor, you can earn large profits from Forex trading.
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Click on a system name to see this system with all the statistics in a large chart.
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