Learn Forex Trading – The Basic
Daily Forex Signals | With an average turnover of over 7 trillion dollars per day, forex is the biggest financial market on the planet. It is essentially a marketplace for all currencies, worldwide. Currencies will be traded on the forex markets, much like stocks which are traded on the stock exchange.
One difference between the two assets is that during fx trading sessions, currencies will be traded over the counter – whereas stocks will be traded on more centralized exchanges; Currencies are traded during four main forex sessions, these are; the London session, the New York session, The Tokyo session | Sydney session.
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Particularly when the UK | NY sessions overlap; the vast bulk of fx trading is usually carried out during these two sessions. Transaction fees will usually be lower when trading within the London and New York overlap period, as that’s when the market will be at it’s most liquid.
Forex Currency Pairs
All presented in pairs, currencies can easily be divided into three main categories;
Major Pairs: The most liquid pair here is probably EUR/USD. Major currency pairs are essentially currencies which will be traded against the USD; other pairs includes; GBP/USD and USD/JPY.
Minor Pairs: Sometimes called cross pairs, these pairs offer less liquidity when you are trading, as they do no trade against the USD (for example GBP/EUR or CHF/EUR)
Exotic Pairs: Linked with currencies from developing worldwide economies like Turkey, South Africa and Brazil . Sometimes exotic pairs can be referred to as minor pairs
Ultimately, the US Dollar plays a very important role in the forex trading arena. Such pairs come with low levels of liquidity and volatility and typically come with the tighter spreads.
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The overarching concept of forex trading is to speculate on the future direction of a currency pair. If you speculate correctly, you make money. If you don’t – the opposite happens.
For example:
- Let’s suppose that you are trading GBP/EUR
- The current price of the pair is 1.1776
- You think that GBP will increase in value over EUR, so you place a ‘buy order’
- A couple of hours later, GBP/EUR has increased by 1.3%
- You are happy with your profits, so you decide to cash in by placing a ‘sell order’
As per the above, you made a profit of 1.3% by speculating that the price of GBP/EUR would go up.
The beauty of the online forex signals trading scene is that you can set your own risk. For example, had you staked $800 on the above trade, you would have made a profit of $8. Had you stakes $7,000 – your profit would have stood at $80.
Learn Forex Trading: The Spread
Every single market has a spread of some description; The spread the difference between the asking price and a bid price.
Learn Forex Trading – The Basic
If you are using a base currency which is in high in demand USD, you will find that the fx spread will usually be smaller than that of a less commonly used currency.
This is a classic case of supply and demand. Bear in mind that in this instance the broker in question won’t need to charge you a higher spread, because they shouldn’t have any problems at all selling off the dollars they just bought.
Trading Suite Tools
Each forex broker will have trading tools – otherwise referred to as technical indicators. These can be found on the platform’s ‘trading suite’.
MACD: Meaning ‘moving average convergence divergence’, this tool will spot new trends based on moving averages. Trends are where the money is in forex.
Bollinger Bands: This technical indicator might aid you in spotting the direction in which a trend will go. An indicator will outline a channel around an assets price movement. Channels are relative to a moving average and standard variations.
Average Directional Index: In order to establish how strong a trend is, you might use the ADX. Trends will always be either up or down, a negative directional indicator will be displayed as -DI, and a positive will be +DI.
Relative Strength Index: This momentum oscillator will measure the change of price movement as well as the pace of rising and falling stock prices.
Ichimoku Cloud: Commonly referred to as the Ichimoku Kinki Hyo, this one is a multifaceted indicator which offers trading signals, trend direction info, assess momentum, both resistance and support.
Stochastic: This momentum oscillator is a good buy and sells indicator, looking at the history of a forex pair price, in order to envisage the continuation in direction.
Parabolic Stop and Reverse: Focused on short-term price reversal points helping you decide where to place stop orders.
Trading Platforms
Specialising in the forex market, the MetaTrader4 (MT4) platform can facilitate advanced trading, which holds dozens of technical analysis and is fully compatible with trading robots.
Fellow counterpart MetaTrader 5 (MT5) will allow you to carry out technical trading operations, and analysis in forex trading markets. MT5 was initially created to provide its traders with access to stocks, futures and CFDs.
What’s Leverage Trading in Forex?
The basic principle of leverage in forex trading is to enable you to trade with a greater amount of cash than you’ve currently got in your account. It’s worth noting that this can accelerate your losses, as well as winning trades.
The overall idea is that you are able to multiply your stake by a particular factor.
So, imagine you’ve got a balance of $2,000 – when applying leverage of 20x you would then be able to trade with $20,000.
To explain leverage a little further:
- Let’s say you wish to place an order on GBP/USD because you are feeling bullish on the British pound.
- The current price of the pair is 1.2625
- You’ve got $700 in your forex trading account, and then you apply for leverage of 20x
- Your ‘buy order’ is now worth $12,000
- Let’s say a few hours later, the price of the GBP/EUR has increased by 3%, as a result, you decide to lock in your gains and exit the position.
- Under normal circumstances, 3% on a $700 stake would result in gains of $13.
The Significance of Genuine Brokerage Reviews
One of the ways to do this is to read the reviews on the broker platform, to give you an insight into other traders’ experiences with the brokerage site in question. You can also check out broker reviews like ours which are unbiased and based on research done by experts. More on that later.
Choosing a Forex Trading Provider – What to consider
In the highly competitive forex broker market, you will find there are hundreds of platforms to choose from, with a large number offering UK traders their services at the click of a button.
Despite it being a somewhat new phenomenon for retail clients, online forex trading has become progressively more popular in the past few years. As a result of this, there is a substantial number of brokers and service providers available at your fingertips to learn forex trading.
Before deciding which broker you opt for, you will first need to learn forex trading from top to bottom.
With this in mind, we’ve put together a guide to all things forex; This includes everything from the types of currencies you can trade, leverage, market orders, risk management tools, and more
Learn Forex Trading – The Basic
With an average turnover of over 5 trillion dollars per day, forex is the biggest financial market on the planet. It is essentially a marketplace for all currencies, worldwide. Currencies will be traded on the forex markets, much like stocks which are traded on the stock exchange.
Choosing a Forex Trading Provider – What to consider
In the highly competitive forex broker market, you will find there are hundreds of platforms to choose from, with a large number offering UK traders their services at the click of a button.
To make things a little easier for you, we have compiled a list of things to keep an eye out for when making your decision.
Legislation and Regulation
A good place to start is to check that the broker you are considering has a legal remit in order to take on UK traders. It is compulsory for brokers based in the UK to have an FCA.
If the broker is licensed by the FCA, you can be safe in the knowledge that the platform is conducting its business according to UK and EU legislation.
Segregated forex funds
The vast majority of online forex brokers now ensure that segregated funds are the norm. As such, this is something you might want to look out for when selecting your broker platform.
Deposits and Withdrawal Options
When it comes to depositing into your forex broker account or withdrawing your profits, your experience should be fast, simple, and also transparent.
Customer Service/Support
Customer support is a vital part of having a good experience with any company. Whilst the majority of forex brokers offer a great customer support service, it is always advisable to do some research before making your final decision.
Low Commissions and Trading Fees
This one’s self-explanatory, but forex brokerage fees can vary quite wildly. Nevertheless, fees typically come as a ‘trading commission’ – which is a percentage multiplied by your stake.
Other Points to Consider
- Multiple forex pairs: Again, the more options the better – especially when it comes to trad able instruments. While some brokers might have a few pairs, others might offer a surplus of 100. You can check this before signing up.
- A good variety of technical indicators: These statistics and overlays will aid you in making better trading decisions, due to the insight they provide. As such, make sure your chosen broker offers heaps of technical indicator and advanced chart reading tools.
Ultimately, it’s always advisable to check the terms and conditions, fees, stats and reviews before you steam in.
Best Brokers to Learn Forex Trading Within 2020
If you are just starting out in the world of online trading, it is imperative that you use a broker that is tailored to the newbie investor. Taking all of the aforementioned metrics into account – below you will find a list of the best online brokers in 2020 to learn forex trading.
Learn Forex Trading – How to Get Started
So you’ve chosen a forex broker you are interested in signing up with, but don’t know where to start? We’ve compiled a simple list of step by step instructions to get you trading in minutes.
Step 1: How to open an account
Once you’ve selected your preferred platform, you can visit its web page and begin the process of opening your account. Like with most new accounts or anything you need to sign up for, you are going to need to enter some personal information to get the ball rolling.
This part is pretty standard; you will always need to enter your full name, date of birth, contact details (usually mobile number and email), residential address, and in this case your tax status.
As well as your tax status, you are going to need to provide your broker of choice with some other information, in relation to your finances.
Generally speaking, the financial information required of you will be your net worth, your regular income, and your employment status. The forex broker will need this information in order to provide you with a real-money account, as well as the right products, tailored to your financial situation.
Step 2: Previous Trading Experience
Here you are going to have to answer some questions (usually multiple choice), based on your previous trading experience.
Essentially, regulated forex brokers will need to make sure you know what you’re doing.
You might find that you are unable to trade on with margin if you fail to answer some of the questions correctly.
Step 3: Identity verification – KYC
Next, you will need to prove that you are who you say you are. Commonly called KYC, or Know Your Customer, confirming your identity is an absolutely essential part of signing up to any broker.
Whilst brokers will usually request scanned copies of documentation when proving your identity; depending on local regulations, some brokers will actually verify your identity via video. In either case, you will need to make sure you have your passport, or national identification ready.
In the case of video verification, an external fully verified provider (& EBH partner) will conduct the video, on a verified platform at the end of your registration process. Video verification will require an operator, and therefore will have certain hours when it is available, usually normal business hours.
Proof of address usually requires just one document, from a list of accepted documents. Usually, a copy of a bank statement or a utility bill (electricity, water, gas or even a phone bill) will be sufficient when confirming your address.
Once your identification has been verified you officially have an account and can begin the next step, which is to add some funds to your forex broker account.
KYC processing times can vary, but if you feel like you have waited too long for confirmation, you can always contact the broker’s customer support team, and they will be happy to chase this up for you.
Step 4: Deposit Funds
As soon as your identity has been verified by the forex broker, you can deposit some funds into your account.
If you have a specific payment method you need to use, you should always check that the particular broker accepts such a payment method, as they do vary.
Managing Risk Efficiently in Six Steps
With a bank transfer, for example, it may be a few days before your deposit is cleared. A few payment methods usually accepted are; Debit/Credit cards, bank transfers and e-wallets.
Step 5: Begin Trading
Managing Risk Efficiently in Six Steps
Before you make an actual transaction, a great way to prepare for your first forex trade is to start with a demo account.
This is a sensible way to avoid the high risk of practising using your real trading funds, and also helps you familiarise yourself with the platform when it comes to the real thing.
Once you’re at the stage where you have opened an account, verified your identity and added funds by depositing some money into it. – now, it’s time to start trading with real money It’s a good idea to start with very small stakes, as it makes sense to get your head around how everything works before taking any major risks which you might regret later.
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