With this article, we open our section for beginners and answer the question: “How to start learning trading for a beginner”. If you know nothing about Forex, but have heard something about this market and would like to try yourself in trading, this article is for you. We will try to describe very briefly the necessary steps that you should pass to become a successful trader.
What is Forex? The Forex market is a currency exchange. The word is deciphered as FOReign EXchange. The emergence of this market dates back to 1971 when the U.S. abandoned the gold standard, which led to a free change in exchange rates of different currencies. At the moment, the average trade turnover is $6.5 trillion a day. Think about these figures.
In the 21st century, anyone of legal age with an internet connection can access the currency market. This market has more than a hundred currency pairs, which are divided into major (majors), minor (minors), and exotics. Make buy or sell trades, use the right pairs, and your tactics. All you have to do is find the right broker, make your first deposit and plunge into the world of financial speculation.
Let’s go over the basics of trading step by step and tell you how to trade Forex from scratch.
Three aspects of profitable trading
In any market, whether it is the stock market with stocks and bonds, futures and options, CFD contracts, cryptocurrency exchange, or Forex – the same rules of profitable trading apply. Principles that every successful trader must follow to arrive at their goal. From the huge list of nuances which a beginner should know, there are three main aspects.
As you understand, it is impossible to make a profit on Forex from nothing, just opening buy or sell deals at random. Every trader must follow a clear set of rules, which he compiled for himself by analyzing the market in advance. When trading, it is necessary to know clearly when to enter the market, how to accompany the transaction, as well as when to close the position. Opening, modification, and closing of the order is your trading strategy.
As you learn, you will encounter a common problem – finding a working trading system. Unfortunately, you can’t just download some guide on the Internet and start making a profit right away. You can search for your “Grail” for months or even years. Moreover, what works for one trader may simply not suit you.
If we’re considering manual trading, then you’ll have to try all the main areas of market analysis: technical analysis, chart patterns, news trading, trading along with the trend and against the trend, Price Action patterns, channel trading, wave analysis, etc. The list of all possible trading methods is very long because this market is not one year old.
It’s worth realizing right away that you should have a trading plan or, as it’s also called, “Trader’s Diary” in the end. Finding and improving your strategy is difficult creative work that requires a lot of persistence.
Money management is no less important aspect in the work of any trader. A beginner must clearly understand the risks he/she is ready to bear due to a series of unsuccessful deals. Learning to correctly calculate trading lots and understand possible losses is not an easy task at first. Fortunately, there are auxiliary scripts for this purpose, such as Count trading lot, which will give you the necessary value of the lot, depending on the risk and Stop Loss. It is important to remember that for a conservative trader, the risk per trade should not exceed 1-3% of the deposit. But if you are just starting, limit yourself to 1%, greed will not do any good.
Perhaps one of the most difficult sciences is trader psychology. Not every person can learn to cope with his emotions during trading. A profitable trade causes euphoria and self-confidence of a beginner until he closes his orders at Stop Loss. A series of losing trades cause anger, denial, disappointment in yourself, your trading strategy, and the market in general. It is not without reason, according to statistics, that 95% of beginning traders quit Forex within several months. That’s why there are so many negative comments about trading on the markets on the Internet. They are written by people who couldn’t cope with their emotions. It’s up to you to decide if you can cope with your emotions in trading and join the 5% of people who make a steady income on the market.
Choosing a trading terminal
There is a wide range of trading terminals on the Forex market today. They are divided into paid and free. Here is a list of the most famous ones:
- Meta Trader 4
- Meta Trader 5
- Vertex FX
- FXCM TS2
In addition, there are browser-based terminals such as ZuluTrade, MirrorTrader, TradingView, R Trader, and others.
Anyway, in our opinion, the most widespread terminal is Meta Trader 4. It came out before its brother Meta Trader 5 but still has not lost its relevance among traders. Nowadays it doesn’t look so colorful and sophisticated, as its modern competitors, but, as they say, “an old horse won’t spoil a furrow”. MT4 is a free terminal with a lot of built-in classic indicators and graphical analysis tools.
Our team DaVinci FX Group trades only with MetaTrader and we are not even thinking of switching to other programs.
In addition to the convenience of using MT4, it has another important advantage: a huge database of scripts, expert advisors, and indicators written by programmers over the long period of existence of this program.
If you can’t decide which one to choose, we recommend you try several terminals before you start trading on a real account.
Choosing a brokerage company
The second important step to start successful trading is the choice of a Forex broker. There are a lot of such companies and each of them is trying to entice clients with a lot of attractive conditions, low spreads, swap, and commission, signal, and investment accounts.
Although the Forex market is an over-the-counter market, it is still regulated by specialized organizations. They license brokers to trade in certain countries or regions and monitor the observance of all trading conditions and interests of both traders and brokers. The most famous regulators are NFA, CFTC, FCA, ASIC, CySEC, MFSA, IFSC, SFSA, KROUFR. There are a great many of them and there’s no sense to take a look at each of them in this article.
In Russia, since January 1, 2016, the main regulator is the Central Bank, which issues the corresponding licenses. At the moment, only four brokers are licensed in Russia: Alfa-Forex, VTB Forex, Finam Forex, and PSB-Forex. Unfortunately, these organizations cannot boast of high leverage and low spreads like their competitors abroad. Therefore, most traders from the CIS choose foreign brokers.
It is necessary to choose a broker thoroughly because your income will partly depend on the conditions of this company. Generally speaking, a good brokerage company is a real partner for the trader in his work. We have tried a lot of brokerage companies and we have made up our opinion on the most interesting ones where we continue trading in the section “Recommended brokers“. It’s impossible to recommend 100% one company because it all depends on your trading strategy, initial deposit, method of deposit/withdrawal, etc.
Choice of trading account type
Most of the brokers we know have very flexible trading conditions, which allows you to start trading in the market with almost zero deposit.
As a rule, there are three types of trading accounts:
- A demo account is a demo account created for a beginner to get acquainted with the terminal, learn how to open and close their first trades, to test the trading system they have found. This account is needed only at the beginning of your way and does not require any real money investment. You will trade on a virtual account. Some brokers allow earning real money on such accounts by organizing various contests. You can open a demo account with any broker you like because there is not much difference between them and such a concept as requotes and slippages are usually absent on the demo account. In addition, many brokers allow you to create a demo account right in the terminal, without having to register on the website.
- A real account – or as it is also called “live” – is designed for real trading. You should move to it when you already have some idea of the market. Money is made on it. The best conditions for trading on the real account are provided by brokers Alpari, Tickmill, IC Markets, Ice-FX.
- A cent account is a copy of a real account, with one caveat: the size of a trading lot is 10 or even 100 times smaller than on a real account. If 1 pip change of 1 whole lot costs $10 for a real account, then on the cent account that cost will be $1 or 10 cents (depending on the broker). Cent accounts are especially attractive to newbies who are not willing to risk a lot of money. The best conditions for these account types are offered by FortFs and Roboforex brokers.
We recommend that you start your training on a demo account, but don’t spend too much time on it. In 2-4 weeks, after you understand the principles of opening trades and study the terminal, you will need to move on and start trading for real money. The minimum deposit on Forex is only 5$, for a cent account, this is more than enough. That way you will learn to control your emotions when taking profit and loss, develop a core and begin to pump your trader psychology.
In addition to all of the above, there are investment accounts. They are for those who want to try themselves as investors by investing in successful traders. Accounts with an opportunity of investment are called PAMM, MAM, RAMM, etc. Not all brokers have these accounts. Here is the list of brokers, through which you can invest: Alpari, Ice-FX, InstaForex, RannForex, etc.
Our team has open PAMM accounts, the profitability of which you can read in our section “PAMM/signals”.
A variety of real accounts
Yes, it’s not enough just to open a real account. You need to choose one that is suitable for your trading. As a rule, modern brokers have at least 2 types of real accounts: classic (standard) and modern under one of the names STP, ECN, NDD, or DMA. They differ in execution, as well as commissions, spreads, leverage, etc. All this variety is impossible to fit into one article.
Searching for a trading system
If you do not have free time to trade manually, it is worth considering algotrading – the use of proprietary Expert Advisors, whose code is already incorporated all the necessary algorithm of the program.
The search for a profitable system can take quite a long time. As we said above, many fail to find it and quit Forex forever. The main thing to keep in mind when searching – the system must be convenient for you. You should clearly understand all of its rules and follow them. Decide on the time when it is convenient for you to trade – every 5 minutes, an hour, or once a day. Or maybe only trading during a certain trading session suits you. In the end, the final choice of TS depends on the timeframe.
Where to look for this trading system? Naturally, on the Internet. There are many sites where the authors of the project offer their ideas.
Our advice – skip surfing exactly on informational sites and start analyzing the Forex market at once on the forums. There are about 10-15 large and worthwhile forums on the subject of Forex, where users share their ideas about the trade. For example Russian TLaP forum or foreign ForexFactory, Donna Forex, SoeHoe. The advantage of the forums is that users leave their real comments under each topic, so you can immediately understand if this is a working TS or another rubbish. A lot of garbage on the Web, unfortunately, and you need time to learn how to filter it.
If you do not have free time to trade manually, then it is worth considering the algotrading – the use of authors’ advisors, whose code already contains the entire necessary algorithm of program actions.
Our trading tips for beginners
Some of our tips and tricks before you start trading. They may seem banal to you, but believe me, these examples of actions really do exist. Let’s look at the typical mistakes of a trader:
- Never take a loan to trade in the market. The first rule of any business (and Forex can also be classified as a business) is not to start your business with borrowed funds. In case of failure, you will be left with debts that are not so easy to repay.
- Do not borrow money from friends and relatives, and do not ask them to invest in your trade, promising to multiply the money invested. In the end, you can lose not only money but also break up relationships with people close to you.
- Do not trade with your last bit of money. You should only deposit the amount you are willing to part with, not the last of the family budget.
- If you use technical analysis, your trading system should not contain more than 5 indicators. There is no need to turn your chart into the swag.
- Whether you trade manually or with an EA, create monitoring of your trades on MyFxBook. It’s free and doesn’t take much time. That way you can analyze your trade more thoroughly and find its weaknesses.
- Get a “trader’s diary” for manual trading. Preferably a notebook or notepad. There you will write down the rules of the trading system point by point and follow them, comments on each transaction, notes, and other information that you will be able to analyze in the future and make the right conclusions.
- Don’t buy the garish advertisements from info businessmen, whose goal is to make money off of simpletons and gullible people. We think that at least once in your life you have come across ads on the Internet, where, supposedly, a successful trader earns millions, drives an expensive car, and is photographed on the beach with beautiful girls or a stack of money. Believe me, 9 out of 10 of these guys live at their mom’s apartment and know how to use photoshop. If this example of advertising is familiar to you, you should learn to filter out such ads and just send them to spam.
- Do not buy expensive courses and training in forex trading from nonfiction authors. There is nothing behind them but water. This is another kind of info business – the sale of books in pdf format on the Internet. These “works” are written on their knees and mostly just duplicate quotations and thoughts of really successful people. Don’t buy the air. Yes, there are exceptions to the rules, but they are few. A little life hack: if you still need some course from an info businessman, then look for it on torrents, perhaps it has been lying there for a long time and is waiting for you.
- Do not subscribe to paid signals for manual trading. Paid signals, which are issued in the form of a report will not make you a successful trader, because even if the author of the signal trades profitably, you must sit at your computer 24/5, monitor and manually repeat all his transactions, which is sometimes impossible. Plus, you and the author will have different brokers and account types, so slippage, spreads, etc. will do their job. If you still dare to subscribe to such closed groups/channels, then ask if the author has a real confirmation of the profitability of his trades on MyFxBook or FxBlue monitoring. There is no? Let’s turn around and leave.
The last tip does not apply to auto copying trades with the help of specialized services. There you always see the author’s trading history, so you can clearly analyze the pros and cons of his trade.
By the way, our trading signals are delivered on the MQL5 server, you can find them here.
Unfortunately, people say it is true that there is a lot of free, but at the same time meaningless information about Forex on the net. Advisors, indicators, trading systems in free access, which are described as 100% working “Grail” turn out to be nothing. But this does not mean that paid products will not. Take care of your money and avoid swindlers.
To summarize, it is also worth noting that trading is not a casino, the market is not about playing and win/loss, but about working and earning/losing. There is no red and black, but meaningful buying and selling. Ideally, the goal of almost every beginning trader is to turn this hobby into a main and profitable job to earn money online, which, at the same time, will be enjoyable. This dream will have to be followed gradually. Do not let yourself be deceived by the huge amount of false material on the web, take your time and study the market step by step. Our site will help you to do it!
Profits to you all!