Many of you I see coming into forex market without having any depth knowledge or some of you even don’t know what is forex and how this markets works. If you’re in forex to make money without any knowledge then I tell you quit now because you gonna loose money soon.
These days, most of new Forex trader comes without Forex Market knowledge. They don’t know what is Technical Analysis, Fundamental Analysis, how to choose broker and which forex broker is best, what is lot size, how to trade in foreign exchange currency pairs and how to make a plan and strategy to make the highest profit from pairs of forex.
I am here to help those beginner in forex trading who don’t know anything but eager to learn and start trading in forex market after having a depth knowledge. In this article, I’m gonna share about top 10 things what you need to know.
Before moving into main point, I would like to explain what is forex and how does it works so you will be helpful if anybody ask you about Forex and that is:
What is Forex?
Forex is the short meaning which has divided in two parts. One is For and another is Ex. For means Foreign and Ex means Exchange, altogether it is called Foreign Exchange.
Forex trading is simply the trading held between foreign currency; which one trade for another. As example: you’re selling your own domestic currency to purchase another foreign currency if you’re going to travel somewhere and you need another currency for spending there. This is one form of Forex trading.
What are the major currency pairs in Forex?
The major currency pairs in Forex trading is:
EUR/USD (Euro / American Dollar).
GBP/USD (British Pound / American Dollar).
USD/CHF (American Dollar / Swiss Franc).
USD/JPY (Swiss F. / Japaneese Yen).
AUD/USD (Australian Dollar / American Dollar).
NZD/USD (New Zealand Dollar / American Dollar).
USD/CAD (American Dollar / Canadian Dollar).
Among these 7 currency pairs top 4 of them usually has bulk of transactions with the most liquidity.
Who trades in Forex?
Forex traded by:
- Central Banks
- Retail Traders
Top 10 Things You Need to Know in Forex Trading
Now let’s come to the point about which top 10 things you need to know before begin trading in forex market.
1. Technical Analysis
When you prepare to learn Forex from any institute in your forex trading book, the first chapter about the first term you need to know about basic technical analysis which most of the beginner and experience forex traders focus on.
There are lot of things to learn but in Basic Technical Analysis (TA) you need to know most important things which is:
1. How to evaluate the volume for trade.
2. How to trade the market momentum.
3. How to read price action. (It can be indicators you use, candlesticks and other).
4. How to properly define where is S & R (Support and Resistance). (It can be trend lines or horizontal resistance lines).
5. How to define the Moving Average in Forex trading.
These things you need to learn before begin trading in Forex market because It helps you to make good amount of profits choosing the best indicators of your own.
2. The Fundamental Analysis
The second thing you need to learn is the Fundamental Analysis of Forex trading market. This is what the most pro forex trader focused more on. If you don’t focus more on what the pros do to trade longer using Fundamental Analysis tactics then you can’t make any profit. Learning this you can trade for long-term and if wants to do scalp trading and wants to trade on long-term based fundamental forex analysis report you can do. But if you’re doing short-term timeframe trading and thinking when market is going up or down like that then short-term trading is not for you.
There are lot to learn but the most important things are:
– Central Banks.
– Interest Rates.
– Random-Political events.
3. Risk Management
If you want to be a successful forex trader then most importantly you have to learn the risk management aspect. In basics you need to know –
How do you determine
– your go down.
– your risk per trade.
– you calculate your lot size
When it comes to calculating lot size you should determine your value per pip. Also you need to understand how would market risk and counter part risk effect your trading. So have your risk management in place.
4. Trading Psychology
All you need to learn as a forex trader is trading psychology. The best way to opponent is true practice because there are so many emotion need to handle – fear of missing, fear of loosing and fear of winning too much money. The best way to success in forex trading is more practice. Because more practice makes sense and it take you towards profit.
Learning more about trading psychology will teach you:
– How do you handle desperate time when you really need money.
– How do you know those days when you’re depressed but there is a trade.
– Even though those days when you’re super excited and there is a tray.
– How do you handle string of loosing streaks and get back in next day.
– How do you handle those days when you don’t want to do anything still there is a trade.
5. Sentiment Analysis
Next thing is to learn, where Sentiment Analysis need to put in simply is how the markets feeling right now, how the traders feeling right now, how the investors feeling right now, are they feeling bullish optimistic or they feeling pessimistic bearish, how do you evaluate that some of the ways you can do it is by using Volatility Index (VIX).
Usually you learn how to evaluate COT reports (the basic of forex trading) and you need to learn how to determine the market psychology. In other words, you also need to know a little bit about behavioral finance and there’s a whole entire topic itself.
If you’re talking about successful hedge fund managers; they will say that successful traders and investors have a contrarian flavor to their decision-making process.
6. Forex Broker
The next thing, you should learn about how do you choose and pick the right broker. There are many different types of broker but you need to understand that is – how market makers operates, how STP markets operates, how an ECN broker operates.
In addition, go through a proper checklist and test one by one so you can decide to work with any particular forex broker you want. Avoid those broker who loves your money, play game with your mind in silence and don’t listen to you properly.
7. Portfolio Allocation
The next things need to learn how do you properly allocate your portfolio in such a way that you have a diversified and balanced portfolio. You need to learn how to diversify properly, you also need to know how a different markets affect the movement of the forex market, how does the stock price movement, how does the oil price movement affect to the consider your trading. In other words, you need to learn how to do intermarket analysis.
8. Trading Platform
The very next thing, you need to learn how to use your trading platform. Personally I’ve used Meta Trader 4 earlier and now using Meta Trader 5 but you also can use Bloomberg.
As a beginner in forex trading market if you don’t have any financial background I recommend you to use MT4 (Meta Trader 4) terminal.
As a beginner to use this forex trading platform you need to learn how to execute the orders as follows:
– You need to learn how to buy sell pairs.
– how to buy stop and sell stop.
– short term, long-term,.
– how to use indicators etc.
Bloomberg is a very powerful forex trading terminal you can use when you’re all set because it is highly recommended by experienced and financial professional forex traders.
If you’re trading with news from your trading platform, because you are in the finance industry there will be dragon, there are a lot of financial professional use.
9. Basic Terms
The next thing is – you need to learn about basic finance trading terms which every traders and investors need to follow whether you’re a beginner or professional.
The next thing is about to learn your trading business aspects. You also need to understand that –
– how do you sustain your first trading business in long-term rather than pursuing this like a freaking get rich quick scheme so in order to run this like a real business you need to learn properly craft your trading plan and you need to know how to properly we cut down onto your trading journal you need to determine how much money should you invest back into your business to make a lot of money from the forex markets.
Also need to know how much portion of your profits should you withdraw and compound so does the many other things you need to learn. And it has done by most successful forex trader to become successful in this field.
Finally, I would say you need to learn every single aspect properly to implement on your trading to become a successful trader and make profit like other professional does. If you have any question or wants to join a broker recommend by us then we would like to invite you become our affiliate to XM Forex Broker.
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Leave your feedback in the comment below. Our guide about investing in forex trading is only educational. We are not responsible for any loss occur while you trade. Its’s your own responsibility and you should learn first and take risk to make profit in forex industry. Thanks for read.