Each day, billions of dollars change hand in the forex market. It is an industry that is still blooming; everybody has to start at some point, which is why in this guide, we discuss in detail about forex trading for beginners.
Forex Trading Tips for Beginners 2021
A few things that beginners perceive as overwhelming are numbers, charts, pips, and other fancy words they hear for the first time. When trading forex, we deal with charts, numbers, pips, rates, and many other things. It is okay not to understand how to analyze the information in the forex market. You should not expect yourself to become successful in your very first trade. Forex trading seems difficult from the outside, but you will easily understand it once you start making trades. In this article, we’ll talk about all the things that go into forex trading for beginners, so you will be on your way to becoming a successful trader when you end up reading it.
Why do people perceive forex trading as something so difficult?
To give you a clear idea of how big the forex market is, the total amount of trade happening per day sums up to more than a trillion dollars. Since such a large amount of trades are happening per day, people get the idea only rich people with their bevvy of experts can trade forex. There is a saying do not judge a book by its cover, that is what you should do in terms of forex. Everyone is capable of trading forex with modern technologies.
The one thing which differentiates between seasoned forex traders and beginners is how expert they are. A person who is trading for 2 years can be more of an expert than a person who is trading forex for 3 years. Expertise depends upon how knowledgeable a person is on forex trading, not how many resources they have or the tools they invest. Some people are just as successful trading from their homes as others are from their big offices. At the end of the day, the forex market does not discriminate and is the same for everyone. More often than not, the person who can make the right trade will be successful at the right time.
The fundamental thing about Forex is buying and selling. You are buying one currency and selling others, one currency that is being bought at one time might be the currency which is being sold at a different time. If the majority of the traders in the forex market are selling one currency, you will also want to be selling it. The sellers and buyers are constantly changing the direction the market is headed.
A successful trade for you will be where you predicted successfully where the direction of the currency value would go and you were able to sell your currency pair in a profit. This forex trading concept sounds very simple, doesn’t it? But implementing this concept when doing a live trade can be difficult during the initial stage of your forex trading career.
In the forex market, the possibility of success is open to anyone, but the chances of failing are also there. To find success in this field, you will need preparation, almost no one had success in the forex market without preparation. If you do not do your homework, you will have a hard time finding success here.
One of many forex trading tips for beginners is to learn and understand the forex trading basics before starting to trade in the forex market. Think of the time you put into learning about forex as an investment. Most importantly, the knowledge you gain about the forex market will make the path to finding success in forex trading easier. Plus, the obstacles beginners face when they start trading will be much less if you understand the forex trading basics well.
Now, if you ask me whether trading forex is easy or difficult? Well, it’s easier for beginners who have invested the time in getting proper forex trading training, and those who rushed to start trading without learning the forex trading basics will face more difficulty.
The reason you should consider forex trading training!
The main reason you should consider trading forex is to see it as an opportunity to invest your money in the right place. The general rule of thumb is each year the value of money decreases by 2%. With time the value of your money will decrease. Inflation is constant and will decrease the value of your money with time.
But other commodities like rent, living expenses are on the rise. So, personal expenses are an uphill battle if you are thinking of the long run. If you have a constant income of $50,000 per year for ten years, the value of money when compared with year 1 and year 10 will not be the same. Your salary at year 10 will be worth 20% less than what it was worth during year 1.
Now, what happens when you have just cash sitting on your shelf for 10 years? It will lose its value and will be worth 20% less. This is why; if you learn the forex trading basics and start investing your money on forex you will make a profit instead of your savings losing their worth.
Learning about Currency Pairs:
When you start your forex trading training, you need to understand about currency pairs. In the forex market, trades are done by trading currency pairs. In a currency pair, there is a base currency and a quote currency. For example, EUR/USD is a currency pair, where EUR is the base currency and the USD is the quote currency.
What are pips?
Pip is short for point in price. In a forex market, a pip is used to measure the change in currency pairs. Any currency pair quotes consist of five decimal places. The difference between the Ask price and bid prices is often termed as pips.
For example, the Ask Price is 1.0234, and Bid Price is 1.0232.
The difference between Ask Price and Bid Price is 1.0234-1.0232 = 0.0002. The value can be called 2 pips.
These small pips are what makes you a winner or loser in the forex market. The pips for a single trade can be very small, but when you consider it for millions of trades, that number is much larger, equating to huge profits or losses depending on your trade side.
What are spreads?
Spreads are very similar to pips but are not pips. They are the difference between the purchase and selling price of a currency pair. Currency pairs having low spread are positive signs, whereas currency pairs having higher spread are not good. Because currencies that are traded regularly have a lower spread, but currencies that are not traded frequently have a much higher spread. To profit from a forex trade, the currency pair’s value has to be higher than a spread.
What is Margin?
Margin is the amount of money you deposit for you to secure a position as a trader to make trades. Margin is more like collateral which you put to make sure your account can handle the trade-in case it suffers in a loss.
It is important not to put everything you have on margin when making a trade. Because knock wood, if you lose, everything you put as your margin amount will be wiped clean. There is a margin percentage provided by your forex broker. Make sure to calculate the margin using the margin formula when trading.
What is the leverage?
Knowing about leverage is a must for a forex trader. Leverage is the amount of capital that a forex broker provides to help its customers make trades at a higher volume.
What are long trade and short trades?
When you are buying a currency with the hope that its value will increase and you will be profiting on the difference between the purchase and sale price is known as a long trade.
When you sell a currency and expect the value to decrease, you can buy it back again at a lower price. You make a profit from the difference it is known as the short trade.
Important things to remember when forex trading!
Do not overcomplicate your trading:
There’s a lot of information that you need to intake and analyze when trading forex. Most people see all this new information and think it is rocket science. But in reality, we are making a mountain out of a molehill. Do not overcomplicate when learning to trade, keep a simple mindset which will help you implement what you learn easily.
Practice your trading plan:
You can take your trading plan on a test drive by opening a demo account. This allows you to test your plan in real market conditions without risking any of your own money.
Know when to stop:
when you’re trading forex it is important to keep yourself in check. Do not be greedy and lose all your money on a trade hoping for a higher profit. Take a safer approach so you do not suffer an unbearable loss.
These were some of the forex trading tips to help encourage forex trading for beginners. If you want to know more about forex trading join free forex education course.
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