How to Become a Forex Trader – The Simple Three Step Guide

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Dear Traders,you are reading my forex trading experiences. Forex trading is a very profitable and very risky business opportunity. If you are a beginner, calm down,have a cup of coffee, and convince yourself that you need to study hard to win in forex trading.

The regulations are industry- imposed for the sake and protection of each participating bank. Since the market is made by each of the participating banks providing offers and bids for a particular currency, the market pricing mechanism is derived from supply and demand.

Due to the huge flows within the system, it is almost impossible for any one rogue trader to influence the price of a currency.

This is a positive move for retail traders who will gain a benefit by seeing more competitive pricing and centralized liquidity. Banks of course do not have this issue and can, therefore, remain decentralized. Traders with direct access to the forex banks are also less exposed than those retail traders who deal with relatively small and unregulated forex brokers , which can and sometimes do re-quote prices and even trade against their own customers.

It seems that the discussion of regulation has arisen because of the need to protect the unsophisticated retail trader who has been led to believe that forex trading is a surefire profit -making scheme. As with any financial investment, it pays to remember the caveat emptor rule — "buyer beware! The forex markets are the largest in terms of volume traded in the world and therefore offer the most liquidity, thus making it easy to enter and exit a position in any of the major currencies within a fraction of a second.

Leverage in the range of Of course, a trader must understand the use of leverage and the risks that leverage can impose on an account. Leverage has to be used judiciously and cautiously if it is to provide any benefits. A lack of understanding or wisdom in this regard can easily wipe out a trader's account. For more on leverage, check out " Forex Leverage: Another advantage of the forex markets is the fact that they trade 24 hours around the clock, starting each day in Australia and ending in New York.

Trading currencies is a "macroeconomic" endeavor. A currency trader needs to have a big-picture understanding of the economies of the various countries and their inter-connectedness in order to grasp the fundamentals that drive currency values. For some, it is easier to focus on economic activity to make trading decisions than to understand the nuances and often closed environments that exist in the stock and futures markets where microeconomic activities need to be understood.

However, an understanding of a company's management skills, financial strengths, market opportunities and industry-specific knowledge are not necessary in forex trading. One of the underlying tenets of technical analysis is that historical price action predicts future price action.

Step 1, understand how currencies are traded First, you have to understand how currencies are traded. There are three critical terms to learn: Each pair signifies two different currencies. A pip is the smallest increment of a pair. All forex markets of any liquidity have a spread of some sort, and oftentimes a broker will widen them slightly to make a profit.

This is equivalent to a stock broker charging per-trade. So in order to be profitable, you will need to recoup the spread. Step 2, practice The second key to Forex trading is practice, practice, practice. Set one up, and mess around-watch your money evaporate.

If you stay disciplined you WILL earn money. You can earn a lot of money investing in currency markets. But what happens if the price starts to go down? What do you do then? Well this is why putting in stop losses is so important. So say you purchased at 1. If the price reached this 1. Always always always use stop losses. As with many trades, as soon as you are stopped out, the price turns around and hits the targets we set….

So setting stop losses at the right points is incredibly important. The points at which you set them though will depend on the following: Generally you want to ensure a risk to reward of at least 1: Risk vs reward is just your stop losses in proportion to your take profits. If I had a stop loss at 50 pips and a take profit at pips that would be a 1: Generally speaking the better the risk to reward the better the trade will look. Ensure X is greater than 1 in every case.

Moving stop losses Another very important concept. When a trade begins to move up to a certain position the position of course depends on your strategy you will want to move your stop losses with it. So, if the market does turn around before you have hit your profit targets then you will not make a loss on the trade.

Moving and re-setting stop losses, when and why to do this is a very difficult strategy and will generally only come with time or education. Below gives you an idea of how risk vs reward works on a pulback entry. Never move stop losses down!!! When we enter trades we will know our stop losses and take profits before we get in. Take Profits Targets So now we know why we set stop losses to ensure we exit a market at the correct point , but what happens when the price goes the way we want it to go?

When do we exit the market at a profit? You Are Allowed to Move take profits but only higher more profit never lower. Generally, when you get into a trade you will have an idea of where the price will go.

Usually this is based on your technical analysis and the previous structure of a price chart. When you are looking to take profits remember you can have multiple targets.

In the below example if we shorted the market sell from the red arrow points and looked to have 2 take profit or targets we would put them in the highlighted range. The key when it comes to targets is to establish them as well as stop losses before you even enter a trade.

For example, if I am looking to get into a trade when price action reaches point X, I want to know my stop losses and my take profits before I even consider opening that position. In the above example I used structure for these positions and we actually took this trade we managed to hit both take profit 1 and 2 for a healthy profit. The difference between your opening position and your stop losses is the maximum amount you are willing to risk.

This figure should change slightly for each new trade. Your Risk vs reward is then: Risk vs reward Forex trading in general is a huge game of risk vs reward.

Now if you constantly had a 1: Because over time all trades would even out. Continuing with our coin flip example.. What if you could suddenly earn 2 units of profit whilst only risking 1 unit?

This example outlines 2 things: Bankroll management is incredibly important — Because even with a huge edge of 2: You make a lot more money with a larger risk vs reward ratio everything else equal. So this is generally what I personally look for and what I teach people to look for too. This means that we have a high reward and a low risk! Because when they do correctly predict the market movement they might have a Or at least a 1: But if you flipped a coin 5, times. This can be seen in almost everything in life not just investments.

If you have a 1. But what happens when you lose the next 10 in a row? If you are disciplined and understand bankroll management and reversion to the mean, you will still be making a profit! Keeping the discipline is incredibly important when up and down swings happen, which to successful traders is simply called variance.

How much capital do you need to get started? You understand the markets, you understand technical analysis and fundamentals, you have a good back-tested strategy, you are disciplined, you understand why the markets move and you have correct bankroll management and mindset — Then the answer is simple, as much as you possibly can. Most people poor people generally never take big enough risks.

Educate yourself, learn, test, fail, back-test, succeed. That might take months. Deposit your starting amount. Work as hard as you possibly can, overtime or in business. It will be the single greatest decision of your life and will in time give you true financial freedom.

Pay the price today so you can pay any price tomorrow. With low capital you can look at technical analysis in a different way and make more money. If anyone is interested in one on one coaching you can fill out an application form here.

I also recommend you never put more into an account than you can afford to lose. If you do then you are asking for trouble, but you also remove the compound effect.


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Step 2, practice

Watch video · Learn How To Trade Forex and Become Financially Free. Our Free 12, Word Guide Will Teach You Exactly How To Earn 5% Per Month & Become Financially Free In The Process. We Teach People From Absolute Beginners Into Full Time Profitable Currency Traders. Join The Movement Today By Reading This FREE Guide. Forex is one of the most volatile type of investment markets and one of the most exhilarating experiences in the world. Forex, in it’s nebulous form, is simply trading currencies-buying and selling, betting for and against the various currencies of nations.

About your Demo Account. A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk. What Is Forex Trading? Are you interested in trading currencies instead of shares? Take a look at this guide where I’ll cover what you need to know about forex trading.

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