If you have been lately hearing much about the profits of Forex trading and it’s success stories, and wondering where to start making such profits, you might feel clueless about where to start.
So, make sure you know about these secrets behind successful Forex trading, from basic principles to advanced strategies from experts, so that you don’t lose a single penny while learning the part of making gains through forex trading!
What is Forex Trading?
Forex trading is nothing but trading currencies to make money. It’s about predicting which currency will go up or down and making profits through that. For example, if you think the Euro will go up against the U.S. Dollar, you buy Euros with Dollars.
If the Euro’s value rises, you sell your Euros for more Dollars, making a profit. Lately, forest trading has been highly profitable and preferred by investors as a profitable method of trading.
Besides making bets, forex trading is also used for hedging. This means protecting yourself from currency risks. For example, a company working abroad might use forex trading to avoid losses from exchange rate changes.
One advantage of forex trading is high liquidity, though which you can easily buy and sell currencies without big price movements. Another perk is leverage. This lets you control a large position in the market with a smaller amount of money upfront. But be careful! Leverage can also magnify your losses.
The forex market is global and gets affected by things like interest rates and how stable a country’s government is. If a country raises its interest rates, its currency might become more valuable.
On the other hand, if there’s political unrest or a weak economy, the currency could lose value. In short, forex trading reflects what’s happening in the world’s economies and governments.
Few Basic Forex Trading Principles
Be Realistic
This point is the most important thing to remember. Don’t be fooled by false promises. Ads touting 100% returns are unrealistic and dangerous. Make sure that you enter the market with clear expectations.
If you base your success on unrealistic expectations, you might feel like you’re failing even if you’re making some progress. This could discourage you and make you quit early. Remember, forex trading is inherently risky. Profits are earned by taking calculated risks. Forget about guarantees. There are none in forex! Anyone who makes this sure, is just being honest.
So before you build your system, know that your returns are going to be in the 25%-50% range per annum. They are not less by any means. At this rate, your money could double every two to three years!
You can potentially speed things up by using borrowed money (leverage), but only after you become a skilled trader. Take it slow and steady – that’s how you win in forex.
Keep It Simple
Many forex coaches try to impress students with super complex strategies much intricate, which feels like the pythagoras theorem. These might look amazing and intellectual on paper, but they often fall apart in real trading. For most traders, especially beginners, simplicity is key. Complicated strategies are hard to understand and even harder to execute properly.
This can lead to something called slippage, which basically means you don’t get the exact price you wanted when entering or exiting a trade. In the initial stages, say no to complicated strategies like straddle and reverse straddle.
Focus on simple trading and take it up one notch at a time. Another option is to keep practicing on a demo account until you become a more skilled trader. Then, and only then, move on to a real account with actual money.
Benchmark
The forex market, like any financial market, is a rollercoaster. There will be periods where everyone seems to be winning big, followed by stretches where everyone loses. These cycles are natural, just like the ups and downs of a business.
Because of this, focusing only on your absolute return (how much money you make) isn’t the best way to judge your performance. In a hot market, a 25% return might feel disappointing. But in a downturn, even a 5% gain is a win! The best way to gauge your success is to compare yourself to other traders.
Imagine your fellow traders as classmates. Focus on ranking within this group. The forex market is all about relative performance, not just raw numbers.
Feedback is an essential component of any Forex trading system. Unless you know how well or bad you are performing, how will you modify your strategies? How will you possibly know which strategies are working and which aren’t.
Don't Put All Your Eggs in One Basket
When building your trading system, avoid going all-in on a single trade. Instead, use a drip-feed model. This means starting with several smaller trades. Over time, analyze which trades are profitable and which are losing. Ditch the losers quickly and use that freed-up money to boost your winning bets.
Go With the Flow
The forex market thrives on trends. In the short term, these trends can be very powerful and difficult to fight against. Considering the leverage involved in forex, most positions aren’t held for long anyway. So, it’s generally not a good idea to try to pick a fight with the trend. However, learning technical analysis tools can be very helpful in identifying the prevailing trend and capitalizing on it.
Platforms and Tools for Beginners
eToro
Many consider eToro the overall best forex trading app for beginners. Widely used around the world with over 20 million users, eToro is a popular choice for new traders.
The app is available for both iPhones and Android devices and allows you to trade nearly 50 different currency pairs. Founded in 2007, eToro is regulated by several authorities, making it a safe (low-risk) option for trading forex and CFDs (contracts for difference). If you’re a beginner, eToro’s user-friendly design can make learning and exploring forex trading much easier.
Olymp Trade
This could also be a great option if you are a beginner. This platform focus on making it comfortable and easy to use for new traders.
The platform offers clear advantages, especially for those just starting out. If you would need a variety of educational resources, you can find them on their website and app, Olymp Plus. These materials can take you from knowing nothing about forex trading to having a solid foundation of knowledge to help you make informed trades.
These educational materials can transform a trader from having zero knowledge to having a good level of working knowledge to help him in trading. Since practice makes perfect, Olymp Trade provides a free demo account loaded with virtual funds so you can experiment with trading strategies risk-free.
Once you’re comfortable, Olymp Trade allows you to start a live account with a deposit as low as $10 and place trades for just $1. These features make Olymp Trade a strong contender for the title of best platform for beginner forex traders.
NinjaTrader
While NinjaTrader is geared more towards experienced traders with its advanced features, it can also be a great tool for dedicated beginners willing to put in the learning effort. Unlike some beginner-friendly platforms, NinjaTrader offers a free version with real-time data for practicing trades in a simulated environment.
This lets you experiment with their charting tools, technical indicators, and order placement features before risking real money.
Top Forex Trading Strategies for Proven Profits
- Breakout Strategy: A price level acting like a wall, either holding the price down (support) or keeping it from rising (resistance), a breakout strategy looks for these levels and aims to jump in a trade after the price breaks through them. The idea is to ride the price movement that often follows a breakout.
- Scalping vs. Trend Trading: Scalping is just like catching quick waves. Traders aim to make small profits frequently by entering and exiting trades very quickly, sometimes within minutes. Trend trading is more like riding a long wave. Traders try to identify the overall market direction (up or down) and hold positions to capture bigger price movements.
- Position Trading: This strategy is for much patient traders. They hold positions for weeks or even months, aiming to profit from long-term market trends. Position traders typically rely on fundamental analysis to identify these trends.
- Retracement Trading: Imagine a strong trend taking a quick breather, dipping slightly before continuing its main direction. Retracement trading looks for these pullbacks. The idea is to buy during the dip at a potentially favorable price, assuming the original trend will resume.
Conclusion
If you are still dubious about forex trading as a beginner and to make your first profits through it, you might have to find a mentor for better profits. But finding a mentor can be difficult. There are now thousands of people teaching trading. You don’t need a mentor to learn simple retail methods such as moving average crossovers, using indicators, etc.
You can learn those by yourself in one weekend. What you need to learn through a mentor, is how to trade the market manipulation and mean reverting algorithmic movement in today’s markets. How you trade based upon an understanding of market manipulation is more important than finding a strategy that works.
You need to use a trading system based upon the realities of the market. Hope this article was helpful to know better about forex trading and its principles, but it is important to research more about it in order to make profitable gains without loss.
Frequently Asked Questions
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