A simple web search query “how to trade in Forex” will yield dozens of on-site and online classes for beginners and traders of various experiences. With professional guidance and structured teaching programs, it’s much easier to get down to business. However, it doesn’t mean that beginners can’t teach themselves everything.
It doesn’t take a genius to get ready to Forex trading. The principles of trading aren’t that difficult and can be figured out without special classes. Discipline and ability to control your emotions are enough. However, someone who decides to skip Forex education will find it time-consuming to master trading, and they will have to learn it the hard way (although there are cent accounts for learning the hard way).
The simpler, the surer
There are numerous Forex trading strategies that work and bring profit. Early on it’s recommended to adhere to the rule “the simpler, the better”, since any trader should fully understand all actions they perform. If one to plunge into complex strategies and techniques head on, it’s highly likely they will just blindly follow the textbook instructions. Turning off one’s brain is the worst thing a market speculator can do.
What’s the bane of novice traders? The inability to leave one’s emotions behind when it comes to making trading decisions. It’s the emotions, not mistakes in chart analysis, lead to lost deposits.
No matter what broker is chosen for trading and the variety of instruments it offers, traders should start with the basics and accept the following rules:
- Trading only currency pairs with strong price change trends and only one indicator to make predictions;
- No matter what the stop loss is, the target level should be twice the number of pips in this value. In other words, take profit should be the double of stop loss;
- Trading only popular currency pairs, no exotic instruments;
- No matter the initial deposit, the risk mustn’t exceed 1%.
With these four rules in mind, you can move on to forming a trading strategy. Narrow down your signals, when and how to enter the market, where to put your stop loss. This will become the outline of your trading system.
It’s important to remember that if a successful professional Forex trading millionaire shares their trading strategy with a chosen few, only one in dozen will be able to repeat the success. This happens because the strategy’s author understands the reason behind each action and can be flexible, adjust to changing conditions. Thoughtlessly repeating the actions, on the other hand, means that you’ll miss a cue to change the tactics. Or, vice versa, give in to emotions and stray from the plan when it’s absolutely necessary to follow it.
Having defined these rules, the next step is to form and test your own trading strategy and system. You’ll need to open a Micro account and make a deposit. It’s a cent account with the minimum deposit of $10, it’s designed to allow traders to gain experience and test their skills before entering the big market. To start with a Micro account, download MetaTrader 4 or MetaTrader 5, or trade directly in your browser with WebTrader.
Both applications and web platform are equipped with many indicators. Newcomers often fall into the trap of indicators, since their values may appear contradictory. It’s better to ignore them at first and focus on only one when trading pairs with strong price change trends. When practicing, you can rely on the other indicators and gradually learn when to use them and in what conditions.
Until you attain this level of proficiency, it’s recommended to look into Price Action: lots of free info on this technique is available on the web. It’s a special candlestick model (or a combination of several ones) used in strictly specific market conditions. This can be a separate candlestick (pin bar), as well as combinations (bearish engulfing, inside bar). Price Action traders also use indicators, most often moving averages and oscillators, but they are not the base of the strategy.
After you’ve mastered Price Action, it’s time to look at indicators. Not all at once, though. The most important ones: support and resistance levels, moving averages, commodity channel index (CCI), average true range. Each of them has a specific purpose and is used with specific goals in mind.
For instance, support and resistance levels indicate the points of entry and exit of the most market players. Moving averages make clearer the trend behind the price changes. Commodity channel index helps detect strong trends, and overbought/oversold levels. The average true range determines whether you should waste your time on a particular currency pair.
Having put Price Action and all basic indicators to practice, you can develop your own strategy further, and then the whole system. A strategy answers why and what, while a system is more specific: how, when, and where. Answering all these questions based on your own experience and indicators, you create your own trading strategy and system. All the aspects, of course, should be written down and saved. When you describe everything, it’s time to switch to a Standard or an MT5 account with a $100 minimum deposit.
This is the perfect amount because of the low risk, while allowing you to start trading with real funds at the same time.