What is forex trading
Forex is the most liquid market in the world with around 5 trillion dollars traded every single day as average, and peaks of 7 trillion dollars on high volatile days. It is a market that never sleeps on a weekday, and there is always a bullish side for you to make money. Most brokers offer many currencies to be traded, from the US dollar, the king of currencies, to the Euro, Pound, and also the Japanese Yen you can trade almost every single currency in the world.
It works based on speculation that you are anticipating a move to one of the sides of a pair.
There are lots of techniques and information you should know before start trading. Strategies like scalping or trading the news, or money management such as risk tolerance or diversification can be the difference between making money or losing everything.
So, You should learn how to trade it right. But how to do it? Read here everything you need to know about Forex.
Forex Guides for beginners:
Currencies in the Forex market are your tools to make money. Every currency is unique and answers differently to the same situation. That’s why you should know what the majors and exotics are and what are the most important nuances of every coin. Also, knowing how a currency works will help you very much in your trade.
Major pairs: Popular in opportunities and trading
The most traded currency pairs in the world are called the majors. They represent the most significant percentage of activity in the forex trading market. Majors are the US Dollar, the British Pound, the Japanese Yen, the Swiss Franc, and the Euro.
The most popular pairs are called the four majors, as follow: the EUR/USD, the USD/JPY, the GBP/USD, and the USD/CHF.
As every currency has its particularities, every pair has behaviors differently. For example, the EUR/USD is the most popular pair in the forex market by far. You will always find liquidity, and usually, it is the most easily pair to follow. Brokers typically offer its trading with the lowest price and the smallest spread.
USD/JPY is also a top in liquidity. It is easily followed as a United States indicator that provides excellent opportunities for newbies. GBP/USD offer decent volatility, and as London is an important Forex hub, they allow the Pound to make great big moves that provide top opportunities.
Finally, The USD/CHF is a less volatile pair which is used as a stable index with a secure bank behind the pair. Usually, the USD/CHF acts as it is supposed to work.
Commodity pairs: more risks but stable coins
Commodity pairs, also known as minor dollars, offer high volatility and excellent opportunities, but the risk associated is higher than the chance offered by majors. Commodity currencies represent countries where the economy is highly linked to natural resources or commodities.
As an example, Canada has many commodities that have an essential effect on the economy. Resources such as oil, timber, or natural gas affect the economy, so, it is known that the Canadian Dollar is highlight affected by oil prices fluctuations.
The same happens in Australia and the gold mining industry down under, or New Zealand and agriculture.
So, the most popular commodity pairs are the USD/CAD, the AUD/USD, and the NZD/CAD. However, another set of pairs are importantly connected to commodities such as the USD/ZAR, USD/MXN, those pairs respond more in the line of exotic pairs.
Exotic pairs: More volatility but higher risk
Exotic pairs or emerging market currencies are the pairs which a coin from a country in development is involved. Examples are the Mexican peso, the Indian Rupee, the Russian rube, or the Singaporean dollar among others.
Of course, there are correlations between all of the coins and groups, but people usually group those currencies so they can learn and study about it. As every coin act differently, obviously every group and pair has different behavior.
Currency Pairs Guides:
- Majors: Why to trade major pairs
- Minor Currency Pairs: Best Pairs to trade right now
- Exotics: Know the most popular exotic pairs
- Most Traded Currencies & Most Volatile Currency Pairs
What impacts the price of a foreign currency?
So, what moves forex markets and how it does? It is a difficult question as the Foreign Exchange market is the most liquid market in the world, so, everything could affect the price of a currency.
There are two different mainstream kind of trader in Forex, the technical trader and the fundamental investors.
The technical trader is the one who only sees the chart to capture opportunities. Technical followers don’t follow the news or political developments, just the fluctuation in prices, demand and offer volume and levels.
On the other side, the fundamental trader is the one who follows the news and every social and political aspect that can affect a country. According to his belief, as a currency represents the value of a country, every element or news that can change the country affect intrinsically to the currency.
On the other side, there are a group of traders that follow technical studies and patterns but also watch economic releases and every bit of news that is happening in the market.
That being said, three significant forces move the forex market: Central banks, the news reports, and market sentiment.
Central Banks: As the supply and the creation of currency is controlled by central banks as well as the interest rate of reference, those institutions have the most significant impact in the currency valuation. Just remember tightening processes, quantitative easing, increasing interest rate, or just speeches that move the coin.
News and economic reports: Political, economic, and social events can move currencies as it shows how an economy is doing and how the country will do in the future. A strong economy with a stable political landscape will give strength to its currency, while bad economic news will push the money down.
Market sentiment: The indicator for excellent, as an essential economic lesson says that product value is what people believe it costs, it happens with currencies too. If people think a country is doing bad, no matter what economic releases say, they are going to sell that currency, and vice-versa.
Basic Forex Analysis
Are you a technical or fundamental analysis trader?
As mentioned before, there are two different mainstream kind of trader in Forex; one is the technical analyst, he who is the master of charts and doesn’t care about what’s going on in the world. He does believe in candlesticks, patterns, Fibonacci numbers, and money flow.
On the other side, the fundamental investor, the person who follow every bit of news and all speeches from politicians, economists, and policymakers. He observes, and I mean, he does follow the economic calendar, which is like his or her Bible, and central bankers are their prophets.
So, who are you? Are you a technical or fundamental trader? Maybe you would like to ask us about what is better in Forex trading, but it is all on you and what do you feel more comfortable.
However, if you ask us with a deep passion, we would say that a mix of fundamental analysis and technical reading is the best. You know it, identifying the mainstream patterns and sentiment market while knowing what is in front of you in the charts and where are the key levels to watch.
However, as mentioned before, it is all about you and your skills, trading time, and financial situation. Remember that your strategies should answer to your necessities and not vice-versa.
If you want to make money in Forex, you should do it right. Learn everything you should know to become a successful Forex trader here on our website.
Whether you are a fundamental or a technical trader, you should know some Forex basics, so let’s talk about that.
Take that short list as your initial 3-topic forex 101, but please go ahead and explore all the forex terms in our website. We have prepared a complete guide on what to know in Forex to make money, just follow the lead, and read more.
Pip: Pip is the smallest measure of a pair. It usually is as the fourth in a pair. For example, in the EUR/USD you have the price 1.1401, well one pip is the number 1. When the unit moves up to 1.1410, the pair just moved 9 pips to the upside.
On the contrary, if the cross fell to 1.1396, it just dropped 5 pips. Long story short, a pip is the 0.0001 of a pair.
Leverage: It is your margin, and it talks about the percentage increase you can trade from the value of your capital. Let’s say that you have 1000 in your account and the leverage established in your platform is 100:1, well, you are allowed to trade 100 times more than the amount that you have as capital.
The secret is that you are not investing 100,000 dollars, but only supporting the losses. So you are going to hold your position as far as your 1,000 dollars can afford losses.
Long and short positions: In Forex, and even in any financial market, you are long when you buy an asset, and vice-versa, you are short when you sell a currency. The exciting thing in Forex is that when you are trading a pair, you are always long in one currency and short in the other no matter what direction you are purchasing.
Let’s say that you buy euros against dollars. So, you are long EUR/USD, but at the same time, you are long euro, but short dollar. In the case you sell the EUR/USD, you are short euro, but long dollar.
How To Use Candlesticks
Candlesticks are the most popular chart in Forex markets; it was created in Japan around 1700 by a man named Homma.
Homma was a pioneer of market sentiment as he discovered that while there was a correlation between price and supply and demand of rice, markets were influenced by emotional factors and traders’ psychology.
He, then, attempted to show market emotions in colors and candles painted in a chart. Candlesticks represent the violence of movements as well as volume and speediness. In this context, traders use candlestick patterns to take trading decisions based on changes that forecast the short-term direction of prices
So, a candlestick has the ability to show the opening and closing prices, the direction of the movement, and how the price has moved in the determined timeframe. Something hard to understand or identify with bars or lines.
As mentioned before, traders use candlestick patterns that occur regularly to anticipate short term movements. So, with a bullish engulfing pattern, as a sample, they can predict that the price will go up as bulls have taken the control.
Candlestick charts are the most popular in Forex as it provides much information, and it is more visual than others. Read more about patterns and how to read it our Candlestick chart section.
Because if you want to make money in Forex, you should do it right. Learn everything you should know to become a successful Forex trader here on our website.
- Candlestick Charts: Basics & principles
- Best strategies with candlestick patterns
- Candlestick Cheat Sheet
Forex Indicators: The blood of the foreign exchange
Forex indicators are tools that provide information to traders about what’s going on in markets, currencies, pairs, and even how other investors are trading.
As you may know it, trading in forex markets is not easy. It requires a lot of energy, time, and expertise to become a successful trader and to make money. Also, it would help if you understood all the synergies in the market as well in anything that can affect it.
That’s where Forex technical indicators come to the scene. Forex indicators are mathematical calculations based on volume, moves, open interest, exchange rates, among others as an attempt to understand what is happening in the forex market and to try to anticipate what will happen in the future.
There are thousands of technical indicators in the market, and traders have their favorites, but you should find what the best indicator that fits with you and your strategy is.
Common technical indicators include moving average, stochastic oscillator, Bollinger bands, volume, Relative Strength Index, or the Moving Average Convergence/Divergence, the famous MACD.
Many people use those and other technical indicators as part of their daily routine and technical analysis. You can find it usually in any platform, and you can customize it to fit even better into your strategy.
You know, what is right for everybody maybe is not the best for you. So, test technical indicators and find the bests for your trading in the Forex market.
Here in ForexTradersGuide, you can find the best indicators and how to use each technical studies.
Because if you want to make money in Forex, you should do it right. Learn everything you should know to become a successful Forex trader here on our Technical Indicators guide.
Learn Forex Indicators:
- Forex Indicators Basics
- Best Forex Indicators
- Best Technical Indicators for Automated Trading
- Bollinger Bands
- Moving average
- RELATIve strength index (RSI)
- Pivot Points
- All Forex Indicators Guides
Forex Signals: Here comes the Forex game
If done right, Forex signals are an invaluable source of money from people who really understand and know the investments market.
Basically, forex signals are trade ideas that experts deliver as a sort of trading recommendations.
The best forex signal services provide the information but don’t execute the orders. So, you should review it and then decide if you want to go ahead and invest your money on the back of that signal or not.
On the other side, there are automated softwares that provide recommendations based on thousands of calculations that the robot does in real time. Those programs are based on algorithms developed by programmers and forex experts that are found a sound system and they code it into a software.
Which are the best forex signals? Well, it is a hard question. It could sound dumb and obvious, but the best forex signals provider is the one who makes money.
Dumb right? Well, as the market is changing every day, a forex signal that worked yesterday can become a total waste of money tomorrow. Remember that past performance is not indicative of future results.
So, the best forex signal is the one who makes money now.
That’s the reason you should review all signal providers before hiring them. Check past performance, how they deal with people, and what are their reviews on the Forex industry.
It is essential for you to protect your money and to avoid scams. Also, at the same time, find the best way to make your money grow.
Best Forex Trading Strategies
Yes, you can make money in Forex if you do it right; however, to do Forex right you should know forex strategies that will develop your day to day and trade to trade performance.
There are many articles on the web claiming that one or another is the best forex strategy, but how we can determine what it is for sure?
First, I am sorry, but there is not a grail that will make a bunch of money for you instantly. The only way to make money in Forex is to know a strategy that fixes with you and to develop it until it becomes a part of you.
The best forex strategy is the one that adapts itself to your trading skills and personal situation — not vice-versa.
In Forex, there are strategies for people who have the whole day to trade, but also for traders who only have a few minutes every day. Also, for people who see the long-term and others who love to check the charts every minute.
Let’s check with Forex Traders Guide the most essential strategies in the Forex sphere as an initial approach to the chapter of strategies but understand that every method is a world itself.
- How to choose a good Forex strategy
- Most popular strategies in Forex
- Day Trading
- Trading the News
- Swing trading
- All Forex Strategies Guides
How to choose a reliable broker
Choosing the right broker for you could be the difference between being a successful trader or losing money in every trade. There are some topics to consider before even looking for a broker and, obviously, before picking one.
Topics starting from regulation and markets covered until latency and robots supported are crucial for your trading life. So, please pay attention to it.
However, what you should understand at the very beginning of your search for a good broker are yourself and your needs. The broker should fit with you, not vice-versa.
Are you a long-term trader or a scalper who needs to open and close several traders every day? It will be essential for your fees.
Second, a reliable broker should be well regulated. Checking what is supervising the broker is essential for the safety of your money. Avoid brokers registered in banana republics and with no regulation behind them.
Hidden fees, spreads, and processing costs are essential to your trading life too. Check how much the broker will charge you for every trade and how much it is going to take from your money in every withdraw or deposit. Always check the fine print.
Finally, check the platform and test everything you can in a demo account. Also, talk with the customer services. It will give you a sense of how the broker considers its users. They should always be willing to help you and make all needed effort to solve your doubts.
Do you want to choose the right broker for you? Read more Forex Traders Guide tutorials and articles and visit our broker comparison table to know what is going on with forex brokers.
Find the best Forex broker for you:
What is Automated Forex Trading
Forex is one of the most volatile markets in the world, with thousands of trading opportunities every single day. However, a human being is not capable of taking advantage of all of those opportunities. So, what people can do?
With the advent of the technological revolution, experts around the world joined forces with programmers to solved that problem and developed trading systems and forex robots that can process thousands of bit of data in real time, build signals, and execute trades.
Today, traders can make money consistently in Forex, but still have a life. With the proper robot or algorithmic trading, you can cover many markets in any timeframe. Imagine, your opportunities will be exponentially multiplied comparing with your manual trading.
However, it is complicated to choose the right forex robot or algorithmic strategy. So, here in Forex Traders Guide, we have developed a powerful tutorial on forex robot. Because if you want to make money in Forex, you should do it right; so does with your robot.
How to choose the right Forex robot
When it comes to talking about Forex robots, it is essential to understand how it works and what is the team behind the software. The offering is vast, but knowing how to choose the right Forex robot is crucial.
In the financial world, there are a bunch of experts advisors, trading robots and algorithmic softwares that claim they can make thousands of dollars and even millions while trading just 10 minutes every day.
Is that true? Well, we can not say if they are telling the truth or just lies, but promising an exact amount of money is something reckless, to say the less. So, how you can know which is the right robot for you?
First, as always in the Forex market, any strategy, broker, system, and guru should adapt to you, not vice-versa. First, you should understand what do you need and what do you want. Then, go ahead and look for a robot.
When picking a forex robot, you should check how the robot works and understand how it makes money. Obviously, you are not going to know the secret sauce, but understanding the principles of the algorithm always will help.
Also, know the team behind the software, are they reliable and well-known people? Check the track record and how they lose money; because everybody loses money time by time.
Check the platform. Open a demo account if available and see all the features. Read reviews and opinions and talk as much as you can and ask as many questions as you can think with its customer service, it will give you a notion of the company.
Find the best Forex robot for you:
Finally, check the tutorials and reviews Forex Traders Guide have prepared to you.
You know, education, research, and practice is the very real grail.