Welcome to our new series made for all the beginner forex traders. We are very well aware that there is a lot of resources online where you can learn forex trading for free such as Babypips or Investopedia,
so even that internet is literally flooded with information about trading, we are going to make a series without any nonsense teaching you all the core basics about forex.
In upcoming weeks we are going to dive deep into basic terminology, different trading strategies, guides of using different trading platforms and basically everything you should know to become a profitable forex trader.
Also what is worth to mention is that even though there are people who are actually charging money for these types of information, what I will show you here on our Blog is going to be posted for free.
I know that this is not for everyone and a lot of people who are following us are already more advanced. If you are one of those and you actually want to learn more advanced forex trading strategies we teach around price action you can either Get our Free 4-Day Trading Course or you can consider joining our Academy where you are going to get access to 26 trading lessons teaching you everything about Market Manipulation, trading Supply and Demand and many more. Also, you will be part of our private trading group where we share daily analysis and live trade calls.
What is Trading?
First of all,
The term “trading” simply means “exchanging one item for another”. We usually understand this to be the exchanging of goods for money or in other words, simply buying something.
When we talk about trading in financial markets it basically means the same thing. For example, if you are trading stocks. You are exchanging your money for shares in the company.
If the value of the shares goes higher. You can sell them later on for more money. This is trading.
In the chart above you can see the example that if you bought, for example, one Tesla share on 1st of November 2016 where the price was hovering around $190 per share and you sold it a few months later on June 1st, 2017. Price was at $360 per share and you would be doubling your money.
Whether is good to buy or sell different stocks, currency pairs or anything else if topic for another time once you are going to learn the basics of technical analysis.
We are going to leave stocks now and start to learn forex trading, but in the near future, we are also going to publish articles about stock options and cryptocurrency trading so make sure to watch our site for daily content.
What is Forex Trading?
Obviously, forex trading is little more complex than just buying apples in the store so it takes little bit more time to learn forex.
In forex trading, companies use different currencies to buy goods in different countries. To be able to get the goods, they have to obtain foreign currency first.
This big companies (banks) are exchanging huge amounts of currencies for others.
Usually, they are manipulating the market. Good thing is that we teach people how to spot this type of manipulation and profit from it. This won’t be a topic in these free tutorials but you can learn about it in our Academy.
Supply and Demand Trading
In my humble opinion, understanding supply and demand trading are the only things you really need to know to be a profitable trader, you won’t need any shiny indicators, know crazy patterns and stuff like that. Of course, there is a lot of things that will improve your trading performance, but when you will understand how supply and demand work, you are already going to be a
We are not going to take a look at supply and demand from a technical perspective here, but you can learn the basics in our Free 4-Day Trading Course.
When currencies are exchanged they have certain price – Exchange rate.
As with every other thing in the world, the
If there is high demand for a particular currency – for example, many people or companies want to change their domestic currency for the euro – the value of the euro will then increase and the exchange rate will change against other currencies.
Say you live in Europe and go on a holiday to the United States. You will want to exchange euros for US dollars. At the time you do this, you get $1.40 for one euro. You exchange €500, therefore receiving $700.
After two weeks, you head home, but you still have $250 left. As you have no use for dollars anymore, you change them back into euros.
You notice though, that the price of the euro against the dollar has changed – the exchange rate is now $1.30 for one euro, so you get approximately €190 back. Had the exchange rate stayed at $1.40, you would have only gotten €180 back. Therefore, you have actually made money.
Let’s say that you changed your €500 into US dollars and got $700, but you did not spend any money at all and came back with $700. After the exchange rate changed from $1.40 to $1.30, instead of getting €500 back, you actually receive €538.5. You have gained €38.5 simply from holding your money in dollars while the exchange rate changed. This is essentially how we trade in the currency market. We buy a certain amount of currency, hold onto it until the exchange rate fluctuates, then change it back once the exchange rate has fluctuated, making money in the process.
Benefits of Forex trading
There is a lot of benefits in forex trading, I picked some of the most used from internet and gave a little explanation to it.
“You can trade from your home or anywhere you have an Internet connection. You can trade from your PC, Tablet or Mobile.”
If I could give advice to any beginner forex trader, stay out from mobile phone trading. Trading from your phone is many times used as scam tactic making the trading extremely easy job, this is very far from the truth and you should stay away from anyone who tells you that you can just trade for minutes per day from your mobile phone.
The forex market never sleeps. It is open 24 hours a day during weekdays and can suit your daily routine.
This is true. Especially if you are more of swing trader and you use online higher timeframes you can trade anytime you want, but if you have time for a day trading then you should focus more on different trading sessions from another. For example, you are going to find more trading opportunities in London and New York Trading session over the Asia trading session. You are going to learn more about trading sessions and type of traders later in this article.
You do not need a huge budget to get started. As little as $150 is enough to begin trading and building your account over time.
A lot of forex brokers offer to open the account with a very small amount. You can build these small account overtime, but if you want to really make some money you should consider saving up some money first. Trading with a small amount is good because you are putting some skin in the game, but for example, when you are going to master our forex trading strategy we teach in Academy you are going to be able to make around 10-30% per month, so it is big difference if you are starting with $200 or $2000.
Trading forex will not make you rich overnight, yet it can provide an income stream alongside your normal job. It can even turn into a business, depending on how much time you are willing to invest.
Why Trade Forex?
The foreign exchange market, which is usually known as “forex” or “FX,” is the largest financial market in the world.
Compared to the “measly” $22.4 billion per day volume of the New York Stock Exchange (NYSE), the foreign exchange market looks absolutely ginormous with its $5 TRILLION a day trade volume. – source babypips.com
Because a Forex market is so huge, people think it cant be manipulated, this is very far from the truth.
What is traded in
Simple answer is money. Of course everything is done online so you are not buying or selling anything physical.
Same as with buying shares, the price of the currency is usually a reflection of the market’s sentiment on the current and future health of its respective economy.
So if you are buying New Zeland dollar (you are long), you are basically buying a “share” in New Zeland Economy.
We have 3 different categories.
Forex Majors – All the currencies are crossed with the dollar. EUR/USD, GBP/USD, USD/CAD, USD/JPY, USD/CHF, AUD/USD and NZD/USD.
Forex Crosses – Currencies without pairing with the dollar. Eg. EUR/GBP, AUD/JPY, NZD/CHF etc..
Forex Exotics – Other Currency pairs such as USD/DKK, EUR/CZK, USD/SGD
Forex Market Size
You already know that every day there is $5 trillion dollars traded in the Market
Unlike New York Stock Exchange (NYSE) the Forex Market has neither a physical location nor a central Exchange
Forex is considered as Over-The-Counter (A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor.)
This means that the spot forex market is spread all over the world with no central location. Trades can take place anywhere as long as you have an Internet connection.
Forex Speculation – One important thing to note about the forex market is that while commercial and financial transactions are part of the trading volume, most currency trading is based on speculation. In other words, most of the trading volume comes from traders that buy and sell based on intraday price movements. The trading volume brought about by speculators is estimated to be more than 90%.
Who is Trading Forex?
|Session||Major Market||Hours (GMT)|
|Asia Session||Tokyo||11 p.m. to 8 a.m.|
|European Session||London||7 a.m. to 4 p.m.|
|North American Session||New York||Noon to 8 p.m.|
Best Times to Trade:
When two sessions are overlapping. These are also the times where major news events come out to potentially spark some volatility and directional movements.
The middle of the week typically shows the most movement, as the pip range widens for most of the major currency pairs.
You can find a most trading opportunities in London and New York Session.
Worst Times to Trade:
Sundays – It is not a bad idea to trade right after the
Friday and Monday – In those days price action is usually not as good and in the middle of the week, but it does not mean that you should not be trading at those days at all.
Holidays – everybody is taking a break so there is less volatility in the market.
Major news events – High impact news can occur some unpredictable moves in the market. Especially when you are a beginner forex trader you should avoid these events.
Type of forex traders
Scalper – Using lower timeframes. In and out market very fast. Hardest to master requires a lot of time but can bring huge profits.
Daytrader – Using Low to Medium Timeframes. Looking for opportunities during the day.
Swing Trader – Using Medium Timeframes. Holding on the trades for days/weeks. Suitable for people with jobs .
Position Trader – Using high timeframes. Holding positions for months/years. Requires huge starting capital.
I hope you really enjoyed the article, in the next part I am going to show you the
If you want to learn the basics of my trading strategy, get Free 4-Day Trading course.
Or you can Join the Academy to get access to full forex trading education including 26 trading lessons and access to a private trading group where we share daily market reviews and live trade setups using price action in trading.