Forex is a massive international currency exchange, which is used by banks and international corporations to exchange money and supply the world trade. However, there are ways to make a living off it — and you don’t have to invest thousands of dollars to do so.
However, trading on Forex is risky and can be dangerous. In order to succeed — follow this 3-step course!
Step 1 — Start A Forex Demo Account
You don’t need to invest any money to start learning Forex. Just sign up for a demo account with any Forex broker and you will get full access to all trading resources. You also get an official right to bug their support in chat, which is always a plus!
Demo accounts are the same as the real-money accounts, except for the fact that all the money on them is virtual. This means that you can safely trade without risking anything, but you also won’t make any money off your trading. A perfect option for the newcomer to the market.
Some brokers even offer contests for the demo account users, where everyone starts with the same amount of money and the goal is to make as much as possible. While the prizes are rarely something valuable and often are just 10-20 USD, it is still good practice.
Step 2 — Learn How to Read Charts
Charts, when it comes to Forex, aren’t written in an commonly acceptable way. Instead of bars and lines, the analysts use Japanese candles. Here’s how to read them:
- The colour of the candle represents the direction of its movement. Traditionally, the ascending candlesticks are coloured black, while the descending are white. However, some analysts prefer green and red respectively.
- The body of the candle represents the opening and the closing prices. To determine which is which, refer to the colour of the candlestick.
- The wicks (or shadows) represent the price movements that go beyond the candlestick’s body. For example, if the ascending candlestick closed at 1.32500, but the peak price was 1.33000, the latter will be represented by the wick.
You can also use the traditional bar and line charts, but they put you into a severe disadvantage. It generally pays off to learn how to read candlesticks and get some practice under your belt.
Step 3 — Develop Your Trading Strategy
Trading strategies are extremely important for beginner traders. There are quite a lot of them too, but not all of them are suitable for the newcomers. However, there are two that definitely work:
- Price Action. Designed by james16 on the ForexFactory forums back in 2005, Price Action depends on the known market patterns to predict the future events. By utilizing combinations of both candlestick and chart patterns, Price Action traders can forecast the state of a market on long timeframes.
- Scalping. Scalping is also known as algorithmic trading and depends on exploiting the market’s micropatterns. Scalpers often place a lot of orders and obtain minimal profit from each of them. The most user-friendly scalping strategy is “lazy river” and all newcomers should try it out first.
These are the basics. If you want to learn more about trading strategies, hit up the MQL5 and ForexFactory forums. While being not that welcoming and somewhat disjointed, they are a treasure trove of useful information.