Over the past couple of years, more and more people have been asking 'how I got started' in Forex as a beginner? My journey as a trader has been a pretty steep learning curve.
So I've put together some Forex trading beginners tips for you.
My Journey To Currency Trader
Having no prior knowledge of trading, I remember receiving an email inviting me to a seminar from a broker (Saxo Bank).
I found it interested and was intrigue about the concept of learning to trade as I needed an additional supplement to my monthly earnings.
That very evening I went home without any real knowledge on how to use the trading platform, I set up an account and had a £10,000 demo account to trade with.
Within a few weeks I had increased my demo account balance to £12,000!
What stuck in my head was the potential earnings I could make as a trader!
Did ‘curiosity kill the cat?
It was a truly draw dropping moment when I realised the profits started to dwindle as back then I really didn’t know what I was doing as a forex novice. Not knowing how the FX market functioned, where to buy or sell, I really didn't understand the terminology - I jumped in with absolutely no clue as to how to read the Forex charts or whether my decisions were right!
The Decisions We Take!
Live is all about making decisions, these decision will either push us forward or slow us down. It's true what they say, life's full of - 'life changing opportunities and they come to us in all types of guises'. One of the best decisions/choices that I made in life was to learn to trade the Forex markets.
A beginner with no prior knowledge, needs to consider learning to trade markets with an open mind.
There are various steps you need to take in order to become a successful trader and call yourself a professional.
What you'll need to know as a trader
Before you get involved in any business or organisation, it be would always advisable to research or gather information before you start your journey. With learning Forex trading beginners level, you may get confused as there are so many varying types information on the internet.
If trading the Forex markets will need you to learn the terminology and how to read a chart properly.
Before you even start to open an account, there are terminology you will hear from day to day in the markets. Its important that you understand these basic terms
We travel to various countries from time to time on holidays or even purchase goods and services on the internet. Understanding how the exchange rate works is important to the money we have in our pocket.
For example, you want to travel to the US and you are planning to exchange your British Pound to one US dollar, you need to know the exchange rate. As of writing, the exchange rate is 1.3310, therefore if you have £1,000, this would worth, $1,331.
There are several currencies which are traded in the Forex markets, but to give you a flavour, we are going to focus on the major currency and their nicknames. These terms would sometimes be referred to on special news events such as Bloomberg, Reuters, CNBC and other news.
The terms "bull market" and "bear market" describe upward and downward market trends, respectively, and can be used to describe either the market as a whole or specific sectors and securities.The names perhaps correspond to the fact that a bull attacks by lifting its horns upward, while a bear strikes with its claws in a downward motion.
However the market travels in three modes, up, down or sideways. When the market goes up is often described as Bull Market or going buy (long). When the market goes down, its often described as Bear Market or sell (short) Sideways...?
“PIP” stands for Point In Percentage, so how is money made in the markets? More simply though, a pip is what we FX traders would consider a “point” for calculating losses and profits. Money is made when the market goes up or down.
When trading 10k units of currency, each pip is worth about one unit of the currency in which your account is. If your account is in USD, for example, each pip (depending on the currency pair) is worth about $1. In a micro lot, or 1k trade, each pip is worth roughly 1/10th the amount it would be worth in a mini lot, so about $0.10.
Therefore, if the British Pound is £1.3310 to the US dollar, and the market goes up to £1.3350, it means you would have gained 40 pips. A pip increase or decrease happens when the market move in an incremental value of pips. And the great thing is you can also make money when the market goes down.
The spread is the difference between the bid and the ask quote, or to put it another way, the spread is the difference of points between an offer price and the demand price. For example, the bid price of the GBP/USD is £1.3310 and the ask price is £1.3314, there is a 4 pip difference.
When you place a trade to go long (the bull) on the GBP/USD at £1.3310, before you can make a profit the market has to go up. The price action needs to get above £1.3315. A trader always have to cover the spread before profit can be ascertain.
Imaging opening an account with £1,000 or investing in your business with £1,000 capital start up. Having leverage will increase your gains. Well, how does that work? A part of trading is opening a trading account with your broker, he has the ability to offer you 100:1 to up 500:1.
If you have a leverage of 100:1, it means you have over £100,000 in your trading account to trade with. can you image if it's 500:1. Not many businesses will give you this opportunity to use your brokers money.
Why Trading is Good Way of earning extra income?
Often times, we hear in the news that trading the Forex and stock markets are very bad and you will lose money. Guess what, the banks, fund managers and large institutions have been using this vehicle of making money over the years. A prime example was Brexit, the news was so bad that a lot of people were very nervous about their investments and business.
However, we are a few months post-Brexit and the UK economy is no way worse than it was a couple years ago. The British pound dropped over 15% in one day, behind that a lot of traders were making money. Provided you have the knowledge,, education and experience you can make money whilst the market is going up or down.
Earning an extra income whilst you learn Forex is very doable. On a daily basis there is always an opportunity for you to earn profits. Another reason why forex is a good way to earn an extra income. You can start with a low capital, unlike other business or the stock market you have to deposit large amount.
With foreign exchange markets, you can deposit as little and gain a lot by using the leverage given to you by the broker. A broker is someone you can deposit your capital, which allows you to open an account. Utilizing the leveral by the broker you could earn 100:1 or up to 500:1 on your account. however, it should be noted that you an lose the same.
An education allows you to minimise your risk so you don't lose money, but start making small but consistent profit
Tips on becoming a successful trader
Unlike other business, to become a successful trader require a certain type of character and criteria. If you are one who is fearful, to be honest trading is not for you. You have to be able to take risk. Risk s a part of the trading business that you will need to assess on a daily basis.
Trading is very simple and can actually be taught to a young children, as the principles are very simple. People make trading complicated when they started to add other factors and over analyse the charts. There are three challenges that would overwhelm a trader. firstly when he is making money, secondly when he s losing money and when he is flat.
To become a successful trading you have to be able to manage these emotions, develop a good trading strategy, with good risk management and discipline.
How do I get started with Forex?
I know what you may be feeling.. So we've talked about trading and you're probably feeling very keen to get started.
- Firstly, you have to create the desire to continue to trade no matter if you win or lose in the market, this needs long term determination. Trading is a skill and needs to be developed, just as a footballer, singer, an artist would work on their performance so must you.
Accessing the right education and a mentor will assist your trading trading journey.
- Secondly, you need to have a broker who is able to offer you the best spread in your trading account. A broker who is regulated by the financial authority in your country.
Forex Trading Beginners Guidance
You may still have some question before you start your trading journey. Not to worry, trading takes sometime to learn. As they say, 'Rome wasn't built in a day' - likewise with trading. To be successful you have to acquire consistency, self-discipline, use appropriate risk management tools, and have a trading psychology.