Investing in the foreign exchange market for beginners along with all the attractiveness and potential of earnings can be risky and dangerous. As a beginner trader, you may feel overwhelmed by the mass of information available and unsure where to start. To make the most of your online Forex business experience, you need to know what Forex is and how it works. We've talked about forex structure and Forex contracts in previous articles, so if you haven't read those articles yet, we suggest you first read articles about forex market structure and CFDs.
A guide to forex trading for beginners can be one of the best ways to start earning money from financial markets. In this guide, you will learn the basic terms and concepts of Forex and the key points to start trading in this market are discussed.
Forex stands for Foreign Currency or so-called foreign exchange market. So the commodity traded in the Forex market is the currencies of different countries, this includes simultaneously buying one currency and selling another currency, so traders can benefit from exchange rate fluctuations.
Earning money through foreign exchange relies on analyzing and predicting future volatility in the market.
For people looking to start working in an attractive world of Forex trading, the main goal should be to gain the ability to understand the market mechanism and its impact on exchange rate changes and of course how to use this information to make informed transactions.
To fully understand the mechanism of the foreign exchange market, beginners to this market must study continuously, attend seminars and training courses, or choose a professional trader as their mentor. Below, we discuss some of the basic principles of forex trading, beginners should have sufficient control over these principles before trying to make money in the (Forex) currency market.
Key Points
The first important point to achieve success in Forex trading is to be aware of different ways of trading the market, in the Forex market unlike traditional markets such as stocks there are two main ways to make money from the market, buy currency and sell currency.
When buying a currency, the trader hopes that the value of the currency he buys will increase before deciding to sell it. On the other hand, when selling currencies, the trader hopes to redeem the currency at a lower cost and make a profit.
The second important point is to learn about the types of analytical style in the market, let's see how traders use analytics to identify profitable opportunities. There are two main forms of analysis that traders use to find futures trends in the Forex market, fundamental analysis and technical analysis. Of course, these two methods themselves contain very broad subsets, which we will address in a separate article.
In general, fundamental analysis focuses on global economic factors that can affect the value of countries' currency. Those factors that can affect the value of money include interest rates, inflation, economic growth and unemployment.
On the other hand, technical analysis focuses on price patterns, price indicators and other techniques for studying and analyzing behavior and price trends to identify potential trading opportunities. Examples of technical indicators that can help traders identify potential trading opportunities include moving averages, Bollinger bands, relative strength index (RSI) and stochastic.
Main activities before the start of trade
1- Creating a Trading Strategy
Developing a good trading strategy is an important first step to ensure the success and profitability of Forex trading. This strategy should clearly specify your financial objective of each trade, the amount of risk, as well as the points and conditions of entry and exit. Also, creating a long-term trading goal of trading activity can help you protect yourself from the risks of trading regardless of risk management rules, the temptation to over-trade and your capital.
Creating an effective strategy requires calculating potential risks, using the appropriate risk-to-reward ratio, transparency at entry and exit points, as well as adherence to trading strategy rules. In addition, your trading strategy should determine how you respond in any possible scenario according to market conditions.
2- Find a suitable broker
In order to choose a suitable broker, different points should be taken into consideration, including broker approvals, broker's background and reputation, deposit and withdrawal methods, speed of execution of a broker, transaction cost, ancillary services, and finally the broker's support.
2-1. Look for a broker that is approved and supervised by your country's financial institutions or international entities, including the Financial Conduct Authority (FCA) in the UK or the Commodity Futures Trading Commission (CFTC) in the United States, etc.
2-2. Check the opinions and rankings of other clients of that brokerage and make sure that the company has a good rating on the survey platforms.
2-3. Look for brokerages that offer a range of financial instruments such as currencies, commodities, indices and stocks.
2-4. Compare broker fees, commissions and other trading fees. Make sure you choose a broker that offers competitive prices and fees. These costs, however small in the long run, can have an important impact on the outcome of your trading.
3- Use demo account
After getting the necessary information about trading methods as well as choosing the right strategy for entering the Forex world, you should try your trading strategy in the trial environment before investing and make sure it is profitable, of course, one of the faster ways to do this is to test the strategy, which will show you the trading result of that strategy quickly in the selected timeframe but at the time of beck, the trader's psychological factor test is not considered and an unrealistic result may be displayed to you.
In general, all beginner traders should use a demo account before investing real in the Forex market, given that the demo account allows users to become familiar with the trading platform and gain experience in the trading process without risking funds, learn how to control and manage their emotions in the face of different market conditions, understand the concepts of leverage, their trading strategies to test and develop and most importantly, to stay disciplined.
Conclusion
Forex trading can be a challenging but valuable endeavor. As a beginner, it is essential to take time to understand the basics of how the market works, how to buy and sell currencies and different types of transactions. Following the tips mentioned in this guide will help you become a successful Forex trader. It is necessary to approach the Forex market with caution and ready yourself with knowledge and expertise. On the other hand, by opening an account on the copycat platform, you can copy the trades of professional traders and, along with your training, observe the way professional traders trade and make profits like them.