A beginners guide on What is forex ~ forex options trading demo account
Forex is the world’s most traded market characterized by high liquidity and the ability to transact on leverage or borrowed money that is used to increase the value of a position which would otherwise be valueless. It is attractive to most players who come in both for short term or long term speculation. The forex turnover is placed at about US$4 trillion per day. That is what makes it so lucrative and a pulling magnet for those desirous of quick returns. There are a lot of things concerning forex that one needs to know, either as a by the way or by having a mastery before starting on the journey of trading on a real money funded account.The trading hours
The forex market operates 24 hours a day for five days a week. You can open and close a position between Monday and Friday at either profit or loss. Most trading happens between the period when the London Stock Exchange and the New York Stock Exchange are open. The overlap between the New York and London sessions is normally for about 4 hours. This overlap is regarded as the noisy and high volatility session due to the fact that London and New York constitute the largest trading volume. The Asian Session is regarded as the less noisy session as it is characterized by few data coming out. Data refers to the economic news that affects the movement of currency pairs depending on its level of significance. The Asian session overlaps with the London session for about an hour.
The major market players
The major players in the trading of forex are large institutions such as banks and hedge funds. This is the group that determines currency volatility. It explains why during public holidays in major world economies the markets rarely move. Institutional traders account for the biggest buyers and sellers of currencies online and in its ranks includes both long term and short term trading experts. There are also retail traders and that is where most individual traders fall in. Retail traders are short term investors with a small sized portfolio compared to the banks. Most retail traders hold micro accounts, mini accounts or standard accounts. The standard account is the best place to belong if you consider yourself a professional trader within the retail hierarchy. However it is better to practice through a micro or mini account before funding a standardized account. Incubating an account from micro to mini to standard is probably what you should aspire to achieve when you begin live trading.
The chart system
In forex traders mainly look at charts to make their trading decisions on whether to buy, sell or stay out altogether. The forex chart system includes line charts, bar charts or candlestick charts. All these types of charts reveal the market movements but the candlestick chart reveals the most information that enable good decision making when contemplating to either enter or exit a trade.
Below are the three chart types on the EURUSD weekly timeframe
The line chart
The bar chart
The candlestick chart
Candlesticks are an advanced charting system and every trader must master how to interpret them in order to trade successfully.
The timeframes
Forex can be traded in timeframes as low as the one minute to the monthly timeframe. The timeframe you choose is determined by your style of trading. If you are a scalper, that is a trader who hopes to take very many trades within every few minutes then you will probably prefer the one to fifteen minute chart timeframe as compared to the daily to the monthly chart timeframe. On the other hand, if you seek to hold your trades for longer periods exceeding a few days or weeks then the higher timeframes should be your preserve. Forex beginners tend to blow up their capital trading the lower timeframes with the twisted logic that it is the way to make more money. But the few that gain ground are those that discover very early in the day that one correct trade in the higher timeframes is better than too many trades taken in the lower timeframes. The higher timeframes for those with the mastery is like a diamond mine that never gets depleted.
The EURUSD one minute timeframe chart
The EURUSD monthly timeframe chart
Note that in above EURUSD charts, the monthly chart has more relevant information for the trader compared to the one minute timeframe chart. Whereas you can not tell where the exact trend for the EURUSD pair is on the one minute chart, it takes less that a second to realize that the trend is down when you look at the monthly chart timeframe.
The trading platform
Forex is traded either on a trade station provided by a forex broker or on a meta trader 4. Trade stations are customized depending on the broker you have opened an account with. The universal trading platform is however the Meta trader 4 that is provided by nearly all forex brokers around the world. The Meta trader 4 has functionalities that enable you to control the risk amount per trade. These include control tabs like the entry and exit button, the trailing stop and the stop loss button and the take profit button. The problem with the trailing stop on the meta trader 4 is that it only trails your profits when you are logged onto the internet. That is one great advantage that the trade stations customized by brokers have over it.
The forex broker
The brokers are mostly market makers. This means that they are always trading against you. They do this because it is the only way that you can get to enter a trade on time. So that if you buy the EURUSD pair from them, they must respond when you decide to sell. They have liquidity providers which feed them with every move you see on your charts. You’ll notice that if your broker is a bank the execution will be faster than when using the typical market maker. Make sure you use a regulated broker. Avoid brokers that are non regulated and who work under white labels. These are mostly retail brokers who cant pay and wont pay any claim. They are scammers in other words. We have recommended trusted huge and trusted brokers in articles such as why you should be trading with more than oneforex broker.
The costs you pay for entering a trade
Normally you pay your broker something called the spread. It is the amount the broker charges you for entering a trade and it does not matter that the trade closes in profits or loses. The spread is paid immediately you enter a trade. That is why if you take a trade today you will notice that your account will be on the negative until after a few moves. The spread for the major currencies is lower compared to those of the cross currencies. You also pay the broker the roll over fees. This is fees paid if you hold a trade overnight to another trading day. Depending on the currency pair you are trading and whether you have bought or sold, there are occasions when the broker pays you for every trade held overnight.
How much money should you start trading with?
This depends on your level of experience. There is no one size fits all in this regard. It also depends on how risk averse you are. Where are you getting your trading capital and how will your life be if you lose. One thing I can say for certain is that your trading capital cannot be a loan or house rent or your children’s education fund.you can start with US$ 100. That is not bad. Some people start even with US$ 10 and manage to build it up. We have a nice article relating to the amount of money top open a forex account with. It is titled how much money should one start tradingwith? You should read it. We have argued in that article that you don’t have to be rich to trade forex. At the end of the day money management is what counts. Open a trading account with NORDfx and trade both forex and binary options for only 10 dollars.
How to fund your forex trading account
There are many ways to use while funding your trading account. We have written a lot on this subject on articles such as howto fund your forex account and why you should not fund your trading account byway of a debit card. If you read any of those two articles you will know why we recommend faster ways of funding an account. The wire transfer method is safe, but it is not fast and at times leads to double bank charges. The cost is even high if you hold a trading account that is in denomination that is different to your bank’s currency denomination. If you want to deposit by wire transfer, your forex broker will give you details about the ban account to send the money to. Credit cards and debit cards are faster but when they get lost it can lead to unnecessary headache. If you read those articles you will find out why we approve of Neteller.
Can it be taught?
Forex trading can be taught but only by the experts. We have written on this subject- please read can forex trading be taught? and whyforex in the books is a falacy? These two articles go deeper into what you should look out for when seeking out for a forex tutor. Our take on this issue is that even though forex trading can be taught you are better off mastering it by yourself. You are your best tutor when it comes to learning how to trade forex. Remember that you do not need any academic qualifications to trade the markets. Most of forex is just pure common sense. Read you do not need a universitydegree to trade the forex market.
The advantage
The advantages that come with trading forex are immense. With great experience you can turn it into your sole source of livelihood. People make thousands of dollars per trade per day. It is a kind of work that relieves you from the duty calls associated with the traditional jobs that over time turn you into a whimp of routine. You are your own employer and you trade when when it suits you. And by the way you don’t have to resign your current job to trade forex. With a nice trading idea all you need is a few minutes every day to check how your open positions are holding. If you choose to open a trading agency then that is a different story. You might need to be present at your station for the better part of the day to serve your clients. If you don’t know the meaning of some of the words that I am using here then you should read forex jagons for the forex beginner.
The disadvantage
The forex market is unforgiving to those who don’t know what they are doing. Don’t come and try guessing with the markets. You can lose your entire investment in minutes if you are not familiar with the correct trading hours and the all important aspect of money management. Another disadvantage with forex is that because of its high profitability, it has attracted very many scammers clothed either as professional traders or forex brokers. To help you be on the look out we wrote six tips on how to avoid a bad forex broker and how forexbrokers are turning the trading of forex into a scam.
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