Many newby traders ask themselves this question- how to learn to trade?The vast majority of new traders entering the Forex market do not have any specialized education.
This is due to the fact that thanks to modern technologies, Forex trading has become available to almost everyone. (for this it is enough to have a computer connected to the Internet).
Is it possible to Independently Learn to Trade
Newbies start to make their first deals and lose quite naturally.
At this moment they understand that a trader is a serious profession and, like any other profession, it requires some training (after all, it would never occur to anyone, for example, to fly an airplane without prior training in piloting skills).
Having felt the need to learn on a rapidly decreasing deposit, a trader sees two options for learning the basics of trading. The first option involves paid training in one of the many dealing centers providing market access services.
The second option is to master the basics of trading on your own. Can I learn to trade on my own?
Yes, it is possible, moreover, in my opinion, this path is more optimal. Optimal, firstly, in terms of the amount of costs. Why give some uncle a pretty tidy sum for the fact that he will voice to you information that is already freely available on the Internet. After all, this amount can be invested in trading (not immediately, of course, but after training on a demo account ).
Believe me, paid training courses will not provide you with any unique information for the simple reason that they do not have any unique information. There are no secrets, allegedly known only to the so-called trading gurus, and which they are willing to share with the elite, naturally, for a substantial monetary reward.
I repeat, all the information you need is freely available, you just need to skillfully pick it up and use it wisely.
I recently heard the argument in favor of paid training in trading. One student, who has already deposited money and is undergoing training, argued with foam at the mouth that the main advantage of this type of training is the systematic presentation of the material and the ability to ask questions during the training, getting answers to them. But here’s what I think about it.
Trading is a profession that requires a person who wants to master it, a certain level of intellectual development.
So, pay attention to the question: why should a person who is unable to systematically organize independent training and find on the Internet the answers to the questions that arise in the learning process to start trading? (and I can hardly believe that paid training courses will turn such a person into a stable earning trader).
For important tips for those who decided to master trading on their own, read the article: How to start trading Forex from scratch.
Step by step action plan how to start traiding forx from scratch
How to start traiding Forex?
So, you’ve decided to try your hand at such an interesting and potentially profitable craft as trading. But you still do not know where to start your work, how to go from a beginner to an accomplished trader with a minimum of financial losses and a maximum of gained experience.
Then you have come to the right place, because why go on a rake when others have already done it before you, in particular your humble servant.And on the basis of my thorny path,
I want to give you not just a few tips on how to and how not to start trading on Forex
I want to provide you with a step-by-step action plan, following which, if you do not become a seasoned professional, then helplessly hang out in the ocean financial markets will definitely stop, having found your course to the island called “Financial Wellbeing”.
Well, or in the process of learning how to traiding Forex, you will simply realize that trading is not yours and give up further attempts to master it. By the way this will also be a valuable decision. After all, in this world there are many ways to make money, and of all of them you have to choose the one that suits you.
Before we start, I want to give one good piece of advice:
do not buy into the promises of paid Forex trading training courses. Believe me, there is nothing exclusive about them, there is nothing that is not freely available on the Internet. The only thing that such courses can give is an incentive to master them from start to finish, for the simple reason that you paid a lot of money for them.
And so, I repeat, all the necessary information on how to learn trading in the Forex market is presented in abundance on the Internet.
This site “Trader’s ABC” is no exception, by the way, new interesting articles are periodically published on it, and in order to be constantly aware of these updates, I recommend subscribing (for this, join us in social networks). So let’s get started:
Step one: Installing the trading terminal
Before you start building a house, you first need to acquire all the necessary tools. In trading, your main working tool will be a trading terminal . It is through the trading terminal that you will keep in touch with your broker and send him orders to buy and sell financial instruments.
Don’t worry, you don’t have to invest a dime of your money, because :
Firstly, a trading terminal for trading on the Forex market is provided by a broker free of charge!
Secondly, you will take your first steps as a trader on a virtual demo account .
In addition, if you plan to trade not only from your computer, but also use such gadgets as a smartphone or tablet, then take care of installing the appropriate mobile applications. In this case, it will not hurt you to first check with your broker about whether he has these applications available. The process of installing a trading terminal is described in detail here: Installing a trading terminal and opening a demo account on Forex .
Step two: Learning to work with the trading terminal interface
You need to learn how to work with the purchased tools, for what good is a hammer if you cannot hammer a nail with it. In step one of our action plan, you have installed the MetaTrader 4 trading terminal , which has a very convenient and intuitive interface.
First of all, you must master the basic functions of the trading terminal, such as: working with charts of financial instruments (switching between timeframes , chart types), opening and closing positions, placing pending orders , etc.
All this is necessary so that during the trading process you do not have to be distracted by unnecessary details. All actions for opening, closing positions and placing pending orders must be performed automatically.
Step Three: Learning the Basics of Technical Analysis
Technical analysis ,
in my opinion, is the foundation of a trader’s work. Although, of course, knowledge of this type of analysis is not a panacea, but without knowledge of the basics of technical analysis, you should not even try to start trading on Forex. To complete this step, you will need some time to study special literature, such as:
Jack Schwager “Technical Analysis. Full course “.
John Murphy “Technical Analysis of Futures Markets: Theory and Practice”
It is not worth studying all the well-known publications devoted to technical analysis, since they basically describe the same thing. It will be enough to read one good book (for example, one of the above). In addition, on this site you will find a whole section dedicated to indicators of technical analysis.
In a nutshell, technical market analysis is a series of conclusions based on the study of price movement in the past. One of his axioms is the statement that history tends to repeat itself. Thus, having found the same price behavior patterns (patterns) in the past on the price chart, a technical analyst concludes that in the future the price will most likely behave in the same way.
In addition, the concept of trends is an important component of the theoretical base of technical analysis. Another axiom of his is that price movement occurs in trends. Moreover, small-order trends are included in large ones, and those, in turn, are part of even larger trends. This axiom, in particular, is the basis of the system of three screens by Alexander Elder. He examines price charts on different time frames (time periods) in order to assess which larger trend is part of the price movement that is currently observed on the chart open for trading.
Support and resistance levels are another powerful tool for technical market analysis. On price charts, you can often observe that for a long time the price cannot rise above (or fall below) a certain border – a level. This phenomenon is usually associated with the accumulation of pending orders to open large total volumes of transactions. In other words, the price, driven by buyers (sellers), reaching such an accumulation, collides with an avalanche of orders from sellers (buyers), which push it back. And so on until the accumulation of orders dries up, and after that the so-called level breakdown occurs.
Step Four: Learning the Basics of Fundamental Analysis
Fundamental analysis is also quite an important discipline in the education of a trader. Although, in my opinion, the role of fundamental analysis when applied to the Forex market is not as important as, for example, when applied to trading on the stock exchange.
Therefore, on Forex, I limit myself to only the following points: I try not to trade when important fundamental news is released (since the rate jumps at this moment are unpredictable) and I follow the change in interest rates in the US and the European Union (since I trade mainly the EUR / USD currency pair ).
But again, this is just my opinion. There are many traders who successfully use fundamental analysis in the Forex market and their opinion is undoubtedly worth listening to. On the Internet, you can freely find many books on this topic, including:
V. Likhovidov “Fundamental analysis of world currency markets”
D. Soros “Alchemy of Finance”
A. Kiyanitsa “Fundamental Analysis of Financial Markets”
In terms of fundamental analysis of the foreign exchange market, for a forex trader, it is important to monitor such macroeconomic indicators at the level of individual countries as interest rates, unemployment rates, levels of industrial production, the rate of change in inflation, in a word, all those indicators that can affect the change the rate of the national currency of a particular state (included in the analyzed currency pair).
As an example, let’s consider a hypothetical situation with the USD / JPY currency pair. Suppose that the level of interest rates in the United States rises, while in Japan, on the contrary, falls.
This will lead to the fact that investing money will become more profitable in the United States (where the interest is higher). But investments in the Japanese economy, due to a decrease in interest rates, may significantly decrease. Well, as a consequence of all this, one can expect an increase in the dollar rate against the yen, and therefore an increase in the quotes of the USD / JPY pair.
An important role is also played by tracking all kinds of news that are not directly related to the economy, but such that ultimately can have a significant impact on it. For example, natural disasters and man-made disasters of a large scale can cause significant damage to the economy of a particular country and, as a result, affect the rate of its national currency.
All this news, as well as data on the main macroeconomic indicators, you can find in a special trader’s calendar. Such calendars can be found on the website of any self-respecting forex dealer, and information for them is usually drawn from such authoritative sources as Reuters, Bloomberg, TASS, etc.
Step Five: Understanding the Basics of Money Management
Trading is not only the art of buying or selling a certain financial instrument in time to stay profitable, but also the art of dealing with money. Many consider this aspect of the trade as a matter of course, however, it is actually the art of money management in trading (or a capital management from the English money management ) is the cornerstone of your success.
To understand the importance of such an aspect of trading as money management, let’s look at a simple example. Suppose you decide to play a coin toss (coin toss game) according to the following simple rules:
You bet and your opponent bets the same;
If heads, then you take away your opponent’s bet;
If it comes up tails, your opponent takes the bets for himself.
Next, let’s suppose that in a coin toss series, it lays down like this:
1st toss – tails;
2nd toss – tails;
3rd toss – tails;
4th toss – eagle;
5th toss – heads;
6th toss – heads;
7th toss – heads.
Now let’s consider the following options for the size of your bet (we assume that you have 1,000 USD in total):
Looking at the above-described series of coin drops, you can easily make sure that with a bet of 500 USD, you will be left with nothing and will fly out of the game after the second move. A bet of 330 USD will allow you to hold out one move longer. But by putting 200 USD on the line, you will not only hold out for the whole game, but also come out of it as a winner with a win of 200 USD.
Step Six: Build Your Trading System
Having reached this stage, you have already acquired all the necessary information and your knowledge should be enough to build your own trading system. You need a trading system in order to turn trading from a feverish twitching of exchange rate fluctuations into a calm respectable occupation that brings regular stable income.
The trading system requires unquestioning obedience from the trader, but thereby relieves him of most of the psychological burden. Here you can look at a simple example of building a trading system . For yourself, you must create your own trading system that takes into account all your inherent psychological characteristics (your inclination to risk, attitude to losses, the level of activity in trading, etc.).
For some reason, many novice traders believe that the task of a trading system is reduced to only one indication of the point of entry into a position. The choice of the moment to open a position is, of course, an important component of the successful trading process, which cannot be overestimated. But no less important is the question of exactly when to exit the trade – to close the position.
A trading system is a set of rules that unambiguously indicate to a trader when and under what conditions to open and close their positions.
An important advantage of system trading is the ability to automate it. When the entire trading process is broken down, as they say, in pieces and spelled out in the form of a certain set of rules, it is easy to translate it into a programming language that is understandable for a trading robot. It is possible to automate both the entire trading process as a whole, and its individual components.
Although the system requires a trader to strictly obey all the rules prescribed in it, these rules themselves are not immutable. The fact is that any, even the most advanced and optimized trading system, requires some improvement over time. Everything in this world flows, everything changes, and financial markets are no exception to this rule.
Yes, and do not forget that your trading system must be developed taking into account the rules of money management discussed above. Since trading without observing these rules is a direct way to drain your deposit.
Step Seven: Trade on a demo account until a stable result is obtained
Now you are armed with the tools, the necessary knowledge implemented in your trading system, and besides, you know how to properly manage your money. In short, you have everything to start practical trading on the Forex market.
The only thing you still lack is experience. But experience, as they say, is a profitable business, and so that he does not become the “son of difficult mistakes”, you will acquire it by trading virtual money on a demo account. By the way, a demo account is no different from a real account (with the exception of virtual money, of course) it has exactly the same price movement charts (in real time) and the same conditions for the execution of transactions.
This is the stage that you shouldn’t take time to complete. You should not just trade by following your trading system, but trade with a stable profit. If you don’t get a stable profit, go back to the previous steps: fill in the knowledge gaps, improve your trading system, hone your money management system. And so on until you receive a stable profit for several months. Do not chase after quantity; stability must be at the forefront of the sum. Remember that a stable 3% profit per month is much better than plus 50% one month and minus 47% the next.
Step eight: trading on a real account
If you’ve gotten to this step, then I congratulate you most of the way behind, but not all the problems are over. Trading on a real account, due to the fact that you have to risk not virtual, but real money leaves its negative imprint on the trader. It often happens that a trader showing excellent stable results on a demo account starts to drain when switching to a real account. This is where the trader’s fear, greed and hope come into play – emotions that need to be controlled.
However, if you did not spare the time to master the seventh step of our plan, namely, you devoted enough time to practical trading on a demo account, then you should have confidence in your abilities, supported by this successful experience.
Even when you switch from a demo account to a real account, such a concept as a comfort zone comes into force, and in this case it means the amounts that you operate when concluding transactions. It so happens that when trading two lots, a trader consistently makes a profit, and as soon as he switches to a volume of twenty lots, he begins to experience psychological discomfort that prevents him from looking at the market critically and ultimately leads to losses. Well what can I say: increase the volumes gradually and again the trading system will help you.
Step Nine: Cultivation Never stop developing.
A stop means a rollback and this is true for any field of activity, not just for trading. The market is constantly changing and those systems that work and bring stable profits today may turn out to be potentially unprofitable in a year.
Develop and test new strategies. Study the psychology of trading. Study yourself, your reaction to the changing market situation. Increase your resistance to stress and learn to control your emotions. Life is always movement, either backward movement (degradation), or forward movement (development).
I wish you only go forward.
P . S .: If you liked this article, then the best gratitude for me would be that you can put this plan into practice and become a successful trader. But you can also share what you read on social networks (you will see the buttons of social networks below)
The overwhelming majority of private traders work in the Forex market through the intermediary of dealers (or dealing centers (DC)), and not through brokers. What this can be fraught with and where the pitfalls of trading through a dealer are hidden, we will now discuss with you.
Fundamental differences between a dealer and a broker
We’ll start by finding out the main differences between the work of a forex dealers and a broker. So, in order:
The dealer trades in the foreign exchange market, and he must do this entirely at his own expense (and on his own behalf). The broker does not engage in trading as such, he only concludes transactions on behalf of the client, thus acting as a kind of intermediate link between the trader and the interbank FOREX market. The broker concludes all transactions on behalf of and at the expense of his client.
The dealer can set his own quotes, thus offering traders to act as counterparties for their deals (if the trader is satisfied with the terms of the deal, he concludes it). The broker does not generate its own quotes, but only broadcasts to its clients the prices of current orders in the market (the so-called Depth of Market).
Brokers earn through the commission they charge their clients for concluding deals on their behalf. At the same time, the broker is not interested in the result of the transaction, it does not matter to him whether the transaction brought profit or loss, he will still receive his commission (although indirectly, the broker is still interested in the client staying in the game and concluding more and more new transactions, because what the more transactions there will be, the more commissions there will be).
The dealer, in fact, acts as a counterparty to his client in the transaction. Accordingly, the client’s profit can turn into a loss for the dealer, and vice versa, the client’s loss, the dealer can put in his pocket. And although all 100% of Forex dealers declare the fact that their earnings are entirely formed due to the spread (the exchange rate difference between the purchase price and the sale price of the same financial instrument).Personally, I hardly believe that none of them succumb to the temptation to tear off a bigger piece for themselves (we will talk about how this can be done, and in a relatively legal way, just below).
Here are, perhaps, three fundamental differences between these two potential intermediaries between a trader and the foreign exchange market. Based on the knowledge gained, we smoothly move on to the next section of this article.
How Forex dealers profit from their clients
In no case do I want to denigrate all dealers providing access to the Forex market without exception. I will only tell you about how any Forex dealer can leave his client “without pants” in relatively legal ways, and draw your own conclusions from this.
The dealing center undoubtedly possesses a greater amount of information than the trader who is his client, which means that he is actually playing against him. The conditions of this game are obviously unequal, the DC has full information about all concluded deals of its clients, and besides that, the dealer has the right to put up his quotes. The combination of these two factors already gives the dealer the opportunity to quite legally “tweak” the deposits of his clients.
You are probably already starting to understand how this is done. And this is done quite simply.
Let’s say a dealer looks at the positions of his clients and sees a significant overweight in sell positions open for the EUR/CHF pair. All sell positions will be closed sooner or later, and closing a sell is nothing more than a buy. That is, clients will start buying EUR/CHF, closing their sales, and the dealer just needs to move the quotes (or just the Ask price) up a little to close the position for traders at an unfavorable rate. Well, the dealer calmly puts the difference in the rate into his pocket, because, after all, this is his earnings.
The above method is the most harmless of what a Forex dealer can do with respect to the deposits of their clients. Greed often leads dealers to the point that they almost openly begin to manipulate quotes, knocking down Stop Loss orders. Just as they can see all the positions of traders, they perfectly see the places where their stop-losses accumulate. In this case, quotes manipulation is performed as follows:
Sharp price movement towards the accumulation of these orders; Orders are naturally closed and naturally at a loss for traders (after all, Stop Loss is an order limiting the trader’s loss on an open position, and therefore it is placed in the loss zone);
Sharp price movement towards the accumulation of these orders; Orders are naturally closed and naturally at a loss for traders (after all, Stop Loss is an order limiting the trader’s loss on an open position, and therefore it is placed in the loss zone);
In the same way, they can bring especially “fat” positions of their clients to the Margin Call.
In order for none of the traders to take advantage of such a price jump and make money on it, the dealer simply simulates the system overload, or in response to all attempts to open or close a position at the time of this manipulation, the terminal responds to the trader with requotes.
A requote is when you try to open or close a position, and the price at that moment moves too fast and the trading terminal constantly asks you if you agree to do this at a new price. As a result, you simply miss a strong price movement without making any money from it.
Well, then the price goes, as if nothing had happened. And only the hairpin drawn on the price chart reminds of the previous events. Yes, and that, soon the dealer simply paints over, thus covering up all the traces of his crime.
For the sake of fairness, it should be noted that not all requotes and not all interruptions in the operation of the trading terminal indicate that the dealer is stealing funds from his clients. The technique can always fail, and besides that, there are such periods of the highest price volatility, when one simply cannot do without requotes.
Why not just opt ??for brokers? It would seem that this is an ideal option to trade through an intermediary who is not only not interested in draining your deposit, but on the contrary, it is beneficial for him that you constantly remain in the game (that is, so that you at least do not drain, but as a maximum – earn).
Yes, the option is really ideal for a trader, but there is one big BUT here. The fact is that entering FOREX through a broker requires a trader to make a minimum deposit of several hundred thousand dollars. This is due to the minimum lot size in the interbank foreign exchange market.
Not every trader can afford to trade on Forex through a broker, so many people spit on everything and open accounts in numerous dealerships (choosing the most famous of them). Perhaps there is nothing wrong with this (I myself have several small accounts opened in DC), and not every dealer will deceive his clients. In any case, I would like to hope so.
What is the alternative to Forex dealers
Do not think that for a trader who does not have a deposit of several hundred thousand US dollars, there is no other alternative but to trade with a Forex broker.
There is an alternative, and it is called the exchange. Only there the currency market is represented by futures contracts, but do not be alarmed, the essence of trading remains the same, up to the fact that the futures chart for a currency pair is almost identical to the chart of the currency pair itself. And you can make money in the same way as on the growth of the value of a currency futures, and on its fall (by opening a long or short position, respectively).
Perhaps the only difference is that the futures contract has a limited duration, but this nuance is important only for long-term traders. And even then, the extension of a futures is a simple purchase (sale) of a new contract after the expiration of the old one, nothing complicated.
Most Forex traders keep their positions open for no more than a few days, or even trade within one day, so they don’t even have to bother with such an occupation as extending a futures contract.
Of course, one cannot enter this market with a hundred dollars, but hundreds of thousands of dollars are not required here either. You can start trading with a deposit of about one hundred thousand (however, everything here is individual and directly depends on your money management strategy).
I hope this article will help you make the right choice. Good luck in trading, more profits and fewer moose, dear friends!
Before answering the question posed in the title of the article, let’s briefly go over the theory.
What is the Forex market and what is the stock exchange?
The Forex market (from the ANL. FOREX – Foreign Exchange ) is an international market where the exchange of state currencies is carried out one for another. The main players in this market are the so-called. market makers, to which it is customary to include large banks (including central banks of countries), multinational companies, investment funds, etc. Interbank FOREX should not be confused with the similarity used by ordinary private traders.
The stock exchange is an organized trading platform for concluding transactions with such financial instruments as: stocks, bonds, shares of exchange-traded investment funds, etc. In addition, it presents such derivative financial instruments (derivatives) as futures (including foreign exchange) and options.
Exchange vs FOREX: Main differences On the exchange, trading is carried out through a broker, and on Forex, through a dealer. The broker earns exclusively on commissions and is simply an intermediary, and the dealer acts as a counterparty for all transactions concluded by his clients, and therefore, theoretically, his earnings are the losses of clients (although officially the dealer earns from the spread).
The work of stock brokers is strictly controlled, while the activities of Forex dealers, although officially and within the framework of the law, are not yet regulated effectively enough. This, to a greater extent, is the reason that a huge number of Forex dealers abuse their position and profit from clients.
Read more about this here:Caution! Forex dealers In order to start more or less fully trading on the exchange, an initial capital of the order of several hundred thousand rubles is required.
A smaller amount simply will not allow you to create a relatively diversified investment portfolio, and therefore there can be no talk of any serious trading with it. Forex dealers, in this regard, offer much more loyal conditions. Firstly, due to their huge leverage, you can start trading with a couple of hundred dollars. And secondly, many of them provide their clients with the opportunity to trade on so-called micro-accounts. On a micro-account, a deposit of even $ 10 allows you to conduct full-fledged trading simultaneously with a large number of currency pairs (thereby ensuring proper diversification).
So, what do we have in the end.
If you just want to try yourself as a trader and do not want to invest a lot of capital in trading, then you can well start with the Forex market (just register with reliable dealers certified by the Central Bank of the your residense country). And if your goal is serious work, you intend to invest substantial capital in trading and want to be absolutely sure of the reliability of your intermediary (broker), then you have a direct path to the stock exchange. In any case, no matter what you decide, you should understand that trading is far from a game, but serious work to achieve success in which, you need to make quite certain efforts. And taking this fortress with a swoop is unlikely to succeed.New to Forex?Click here to learn how to succeed!