Last Updated on 17/07/2019 by Ochoche David
Forex trading become one of the best way to make 6-7 figures easily from home or any place of the trader comfort.
Do you want to start a profitable forex trading?
Or are you already in it and not making profits?
If your answer to any of those questions above is YES, then here is a details guide for you to master Forex trading like pro.
Are you ready to start racking the huge profits? If YES then let’s begin………………………..
What is Forex trading and how does it work?
Forex trading is the act of buy and selling currencies.
It’s always done by banks, central banks, investors and of course individual like you.
Traders buy pair of currencies and sell it in the future to make profits.
This is how forex trading work, you use one currency to purchase another currency.
That’s brought the idea of currency pair in. Instance of currency pair are EURO/USD, USD/JPY, GBP/USD and lot more.
The value of the currencies is driven by economic, political and environmental factors such as wars, natural disasters or national elections.
Now that you have known what forex trading is and how it work.
Before we could get started, let’s discuss some basic terminologies in forex trading such as forex market, Forex broker(s), currency pair, forex positions, forex chart and forex widgets.
What is Forex market?
According to Wikipedia, forex market is a global decentralized or Over-the-counter (O.T.C.) market for the trading of currencies.
Forex market also known as forex exchange market, where traders, financial institutions, and investors trade world currencies.
It’s a global market where foreign currencies are trade.
Trading is conducted over the inter-bank market; an online platform through which currencies are traded 24 hours a day and five days a week.
According to FXTM, forex market is one of the largest trading market with global daily turnover estimated to exceed $5 trillions (USD).
What is Forex broker?
Forex brokers are online platforms that is use to have access to the inter-bank to conduct trades.
It’s a platform that you will create your trading account.
Below are some example of Forex brokers:
√ Olympic trade.
Before choosing your forex broker, you need to consider a reliable, effective broker with at least 5 years track record.
Understanding currency pair or what is currency pair?
Currency pair simply means you use one currency to purchase another currency.
All transactions made on the forex market involve in purchasing and selling of two currencies that’s called currency pair.
You use EURO to buy USD (EURO/USD) which the EURO is the base currency and the USD is the quote currency.
Take a look at this image below.
✓ Base currency: Base currency is the first currency that come first in the currency pair.
✓ Quote currency: Quote currency is the one that appear last in the forex currency pair.
What are the most traded currency pairs on the forex market?
In forex market, they’re seven most traded currency pairs. They are:
EURO/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CHF and USD/CAD.
Categories of currency pairs
Currency pair are categories into three:
1. The major currency pairs
This category of currency pair are the most traded currency pair.
In the Forex trading history, 80% of trading account fell into this category and the other two categories share 20%.
2. Minor pairs: The minor pairs are the currency pairs that are not include USD.
They’re usually less liquid and more volatile than major currency pairs.
3. Exotic pairs: It’s a combination of smaller economic currencies with another smaller currency or pair with a major. Eg USD/NGN.
That’s all about currency pairs and if you still need more understanding about currency pair, do feel free to leave your question below
A position is a term used to describe the process of trading whether it’s going up or down.
Type of position in forex trading
➡A long position: This simply means a trader have bought currency and expecting it to increase.
For instance, you bought EURO/USD at 1.0912/1.0914 and sell back to the market when the price increase or higher than the price you bought, it said to be close and trade is complete.
➡A short position: It is the process whereby a trader sell currency and expecting it to decrease.
This trader expects the currency to depreciate and plan to buy back at a lower rate if it does.
Understanding forex charts
Forex charts is also known as candlestick or Japanese candlestick chart.
It’s the form of currency chart that provide a physical demonstration of the worth of a currency against each others.
The chart display the high, low, opening and the closing price.
Type of forex charts
image source. pixabay.com
There are 3 type of forex charts. I’m going to list them and not only that, I’m going to explain how each of them work.
- Candlestick chart
- Bar chart
- Line chart
➡ Candlestick chart: candlestick has three points, open, wicks and closing points.
It display the relationship between the open, high, low and closing prices.
If the candlestick is filled then the currency pair closed lower than it opened.
If the candlestick is hollow then the closing price is higher than it opened (price which means profits).
➡ Bar chart: Bar chart in forex trading isn’t actually the same as the bar chart you use to know.
It show the high, low. Open price as well as closing price.
It’s a little bit easier to understand than the candlestick chart and a little bit complex than line chart.
Here is the example of Bar chart.
➡ Open: The Little horizontal at the left side is the open price.
➡ Low: The button of the vertical line show the lowest price of that particular time.
➡ Close: The horizontal line at the right side of the bar indicate the closing price of that period of time.
➡ Higher: The top of the vertical line show the highest price of that particular time.
That’s all what Bar chart is all about. Let’s move to the last type of forex charts.
➡ Line charts: Line charts is the simplest chart to understand for beginners.
It’s a simple line that move from one closing price to another closing price.
Here is the example of line chart
When connected, it’s easy to identify a general price movement of a currency pair throughout a time period and determine patterns.
Forex widgets can help you to improve your forex trading experience.
Some of this widgets are: Live rate feed. Live indice quotes, commodity quotes and market update.
Forex trading tools
For you to conduct proper forex trading, you need some tools to execute it.
Some of the tools are:
Economic trading calendar, margin Calculator, pip calculator, profits calculator, foreign exchange currency converter and trading signers.
If you need to know more about forex trading tools check (this page on Forextime.)
How does forex trading work?
Forex trading work this way; it’s the process of buying and selling of currencies in other to make Profits.
The price of one currency is linked to another. So that trader can work with two currencies.
Which know as currency pair that we discussed above. Eg. EURO/USD.
Where the EURO is the base currency and the USD is the quotes currency.
The difference between the two currencies is where your profits or loss lies.
Take a look at this image below once more.
I hope you have understood what Forex trading is and how it works.
So let’s move to how to choose the right forex broker or platform.
How to choose forex broker or platform?
Forex broker is at times refer to as forex trade platform. We have already discussed what is Forex broker is, above and if you may forgot, scroll up to forex broker.
Factors to consider before choosing a forex broker
1. Security: The number one thing to consider when choosing a forex broker is their high level of security.
You can’t just hand over your money and documents to a person who claims to be legit.
Before putting your money in a broker, make sure that the broker is a member of the regulatory bodies.
➡ Switzerland: Swiss federal banking commission (SFBC). And many more.
2. Deposit and withdrawal: This is another crucial factor to check.
A broker has no reason to make it complex for you to withdraw your earning at any time you desire to.
A good broker will allow you to deposit and withdraw funds without any impediments.
3. Education: Good forex brokers has a special educational section on their website for beginners to master their platform.
This type of broker really make life easier for forex trading beginners.
4. The cost: Every brokers have their transactions charges. So you need to compare the transactions cost of difference broker before opted in to any broker.
If you need to know more factors, you can do that on this page of babypips.com.
I hope by now you have known what is Forex trading and how does it work.
Before you go, I have quick Forex trading tips for you.
Forex trading tips
1. Don’t jump into forex trade because your friends are doing it.
Make sure you understand how to trade fully before getting started.
2. Choose your forex brokers carefully.
Broker like Forextime and Apari are reliable platform to trade on. They’re the brokers I’m using myself.
You can create your own account with them, but if you create your trading account with them, you are at your own risk.
I have no hand in any outcome of your trading with them.
3. Start with small capital and later increase your account with the profits you would make.
4. Plan trading: for you to make profits or conduct a successful trading, you need to plan.
Schedule your time to trade, set a goal, and let that goal to be your target or aiming point.
5. Open a demo account with your broker and use that demo account to master the trading platform before starting the real trading.
6. Be patience: Patience play a big role in every aspect of life. It also play a big role in forex trade.
Patience is required when you’re learning forex trade anf how to conduct trading.
In fact every aspect of it, because forex trading is a game, you may loose or win.
7. You must be a risk taker: Forex market is ful of risk. So for you to be a successful forex trader, you must be a risk taker.
Forex trade is a game, whether you gain or loss don’t give up on it.
Head on, every successful Forex traders are risk tolerance.
8. Get a mentor: To get a mentor would be the best difficult thing to do.
But if you eventually get a genuine mentor, your forex business would skyrocket 95%.
If you need more tips on forex trading, you can read this article on forexfraud.
Here you have it all, forex trading shouldn’t be a new thing in your ear👂.
You can now start your trading like professional.
If you have any questions or contributions, feel free to leave a comment below and help me share this article.
Are you ready to trade?
Open account with Forextime here. And I wish you best of luck with your forex trading business.
For more tips and advice on Investment and Financial Planning check this page Stock Market Tips
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