Why learn FOREX Trading and how to get started in FOREX Trading

 

Why learn FOREX trading

Forex trading requires little starting capital. You can start trading with a $100 account or even less but I recommend a minimum of $100.

You can do forex trading while having a full-time job or even as a full-time student.

The forex market is open 24 hours a day so you can easily schedule your trading.

You can do it anywhere, because all you need is a smartphone and an internet connection.

How to get started in FOREX trading

As a beginner, you need to understand that there are two types of trading accounts.

That is:

   1. A demo account, which you will not be using real money to trade but fake(paper) money.

   2. A live account, which you use real money to trade.

When you are getting started, you should first open a demo account to better understand the basic concepts of Forex trading.

How are trading accounts opened?

To start forex trading, you need to install a trading platform. The best free platform is an app known as MetaTrader 4. The app is available for both android and iOS.

The app is commonly known as MT4. The app contains all the tools that a trader needs to do forex trading.

But first, the app will need to connect to your forex trading account.

But where do these forex trading accounts come from?

Trading accounts are provided by Forex Brokers, but when you open the MT4 app, you are provided with a demo account with real-time currency data by the app itself.

Who are Forex Brokers?

A Forex Broker is not a person as some might imagine. A Forex Broker is a company and a financial service provider that lets you buy and sell currency.

The broker is like a middleman between traders and the interbank(network of banks) where currency exchanges occur.

The broker provides access to the market and sends the currency data to the trading platform, while the trading platform allows you to analyse the data and perform trades on real-time. 

Brokers allow you to either open a Demo account or a Live account with them.

How to get or choose a Retail Forex Broker

To get a Forex broker, you just perform a simple search on Google to look out for REGULATED Forex brokers in your country.

The broker should be regulated to ensure that they are genuine Forex Brokers.

All reputable and regulated brokers have their websites where you are guided as you fill in your details to open either a Demo or a Live account.

After you have created your account, most probably they will reach out to you via a call, email or text.

Even if they don’t, they will have specified the platforms(app), most probably MetaTrader 4 or their own app, where you will link your account and start trading!

Where do brokers get their currency prices from

First, you need to understand that the Forex market is a decentralized, over-the-counter(OTC) market, so it is not exchange-based like the stock market e.g. in US stocks(shares), there is the New York Stocks Exchange(NYSE).

This means that currency prices may vary slightly across banks and brokers.

Regulated and reputable forex brokers base their price on the prices of other Forex participants, mostly big banks. The forex broker collects these prices in real time within milliseconds using software bots(robots), to find the best available bid and ask price for currencies.

Regulated and reputable brokers cannot show incorrect currency data or mess up with the prices because they are constantly monitored and will never risk losing clients(traders).

How money is made in forex trading

Forex traders make money by speculating on currency prices. That is, whether a certain currency will rise or fall in value against another currency.

If they speculate that a certain currency will rise in value against another currency at a specific time, they will buy it, and if they speculate that it will fall, they sell(short) it.

If their speculations come true, they can make huge profits within a short duration, depending on how they placed their trade.

A real-life example of making money by buying using this method is when you buy a product at a low price then sell it at a higher price.

A real-life example of making money by selling using this method is when you sell a product at a high price then buy it back at a lower price. This is commonly known as short-selling or simply shorting.

How are forex traders able to correctly speculate on currency prices?

Forex traders use two types of Forex data analysis to correctly speculate on currency prices.

Namely:

1. Technical Analysis
2. Fundamental Analysis

What is the difference between Technical and Fundamental analysis

Technical analysis involves the use of Forex Charts(Graphs), Technical Indicators and other tools, all provided by the trading platform to understand price action.

Fundamental analysis is the analysis of the impact of political and economic factors on the relative value of a currency.

To be able to learn and apply those two types of analysis, you will have to:

1. Know how to read a currency quote for a certain currency pair.
2. Learn the fundamental Forex terminologies and some simple calculations behind them.
3. Understand what a candlestick chart(graph) is and interpret it.
4. Learn how to use MetaTrader 4. That is, placing trades by either buying or selling currencies in the platform so as to make money.
5. Know about risk management in trading.

In my website, you will be able to learn all of the above.