Forex trading is like any other business that you can try for yourself in order to make fast money online. This business is not only lucrative but a very rewarding one provided that you have the right education, correct tools, and strict discipline to effectively manage this kind of business.
But unlike other businesses, Forex trading is very risky if you don’t know what you are doing. You could lose money and all of your invested capital will be lost in an instant if you don’t fully understand the concept.
In this article, I want to give you a definition of the essentials information that you need to know in order to start your forex trading business.
Successful Day Trading Video
One of my successful day trading captured in the video. Watch this first before you continue reading the rest of the article details below.
Table Of Contents
What Is Forex Trading
Forex trading is basically exchanging one currency over the other currency. You may not notice this but if say you are in the United States and you want to travel to Japan for a short vacation, you may want to exchange your US Dollar to Japanese Yen for easy local transactions, right? If so then you are conducting Forex Trading.
Or maybe you are from Canada and your company sent you to the United States for work. You need to send money to your families back in Canada so you would probably want to exchange your US Dollar to Canadian Dollar, right? If that is the case, then you are conducting Forex Trading.
Another classic example would be if a car manufacturer located in the United States wants to buy some parts that are only available in Germany, then that car company in the US needs to send US Dollars to Germany and the bank may or may not convert it from USD to EURO (depending on the terms) in order to complete the transactions.
So as you can see, forex trading is everywhere. whether you are a tourist from another country, a worker from overseas or a company transacting business to other parts of the world, exchanging currencies is essential in everyday activities.
In the example above, Forex trading takes place out of necessity. A tourist needed to exchange money in order to buy local stuff while on vacation. An overseas worker needs to exchange money to send local currencies to his or her families back home. Companies all over the world need to exchange money for their day to day business transactions to thrive.
So in essence, Forex trading happens because of necessity. So how does one make money from forex trading? The simple answer is through “Speculation”.
When you conduct forex trading as a speculator, you are basically hoping for the price fluctuation of one currency over the over currency to hopefully profit from the difference.
So for example, if you happen to know that 1 EURO is currently at 1.6 US Dollar and you believe that 1 EURO might cost 1.8 US Dollar in the next days to come, then you can BUY EURO at 1.6 today and when it indeed goes up to 1.8 Dollars, you will have profited 0.2 points difference. (Buying from 1.6 then goes up to 1.8 = 0.2).
Conversely, if you happen to know that 1 EURO is at 1.8 US Dollar and you believe that 1 EURO might cost 1.6 US Dollar in the next days to come, then you can SELL EURO at 1.8 today and when it indeed goes down to 1.6 Dollars, you will profit 0.2 points difference. (Selling from 1.8 down to 1.6 = 0.2).
Buying and selling spot prices and profit for the difference can only happen in the Financial Exchanges or more commonly known as the Forex Market around the world. And you can only buy or sell from the Forex Market through a Forex Broker.
You cannot just go directly to any of the Forex Market and conduct your trading. The market will not entertain you. The market will only accept your transactions (buying or selling) through a forex broker.
Forex Trading Broker
A forex trading broker is needed in order to transact business to the forex market. There are tons of online forex brokers out there. Just google “Forex Broker” and you will see many results.
There are forex brokers who are new to the field and there are seasoned forex brokers to choose from. Some offer perks and bonuses while others don’t. in general, all reputable and trusted brokers do not offer some sort of bonuses and freebies because it is not allowed by regulations.
A broker that is new to the business will easily vanish. When that happens, you will lose all the money you have in that brokerage firm. So when choosing a forex broker as your partner in forex trading, choose a reputable and regulated one. One that has been in the business for a very long time and has stood the test of time.
Another key thing to consider when choosing a forex broker is its reputation. I know that reputation can be easily faked these days, especially in Social Media. And one can easily drop a bad review just to discredit the broker in question. But most of the time, that is not the case.
The best way to choose a broker is through a “word of mouth”. Do not rely on advertisements you see online because all brokers want clients. They need traders to trade with them in order to make money from commissions and spread. So these brokers will do all sorts of gimmicks just to get you on board.
Find a trusted friend that you know who has direct personal experience with a forex broker and that he or she does not have issues with support and most importantly in withdrawals.
As you need to deposit money into your brokerage account, it is vital that you conduct your due diligence so that your money is protected and that you will not have any issues withdrawing your money later on.
Simulated Forex Trading
Simulated forex trading or demo trading as commonly referred to is the process of conducting actual trading with the current market condition but using only demo money.
When you signup with a forex broker, You have the option to either open a live account or a demo account inside your brokers direct portal. Once your demo account is created, you can download the trading software or trading platform from inside your brokers direct portal. Once installed, you can start demo trading.
When trading using a demo account, it is wise to choose a demo money that is close to the money you are willing to risk in live trading. If you only have $100 USD to start with when you actually start live trading, its not a good idea to choose $1,000,000 as your demo money for your demo trading.
Forex Trading Software
Forex trading software in the form of Expert Advisor, Indicators, scripts among others has been created to help traders in their forex trading activities. To be honest, there is no software out in the market that is 100% sure that you will make consistent money; there is none. But there are many trading software available online for you to buy but all these trading software for sale are garbage and crap.
People who sell this trading software have only one intention and that is for them to make money. When you buy their products, they make money. It’s that simple! So stay away.
Make no mistake, there is legitimate trading software out there but it is not for sale. If you don’t believe me, just ask this to yourself… if you have the ability to create a trading software that makes money day and night even if are sleeping, would you sell it? of course not! Why sell it when you can make money all by yourself day in and day out! right?
So don’t be naive. don’t get fooled by all the hype you see in Social Media. All screenshots can be easily faked just for the sake of advertising. Use common sense. And you’re better off trading by learning how to trade manually using some proven forex trading strategies that work all the time.
Forex Trading Strategies
Forex trading strategies have been developed over the years and basically, it is a set of rules and guidelines that experienced traders have developed to aid them in their day trading activities.
Of the many Forex trading strategies out there, my favorite is Support and Resistance trading and I love to trade this strategy.
Support is a price level where buyers usually open up a new BUY position or that sellers closed their opened positions to secure some profits.
Resistance is a price level where sellers typically will enter the market to open a new SELL position and/or those old buyers usually closed their opened positions to secure some profits.
Instead of duplicating myself in this article, I will just point you to my other article so you can learn more trading strategies by reading this post.
Forex Trading Platforms
Forex trading platforms are software developed exclusively for trading. Most forex brokers offer trading platforms that you can use for your trading and its free. These days, Forex trading platforms are available in both Windows, Web, and mobile so if you can freely trade whenever and wherever you like.
If you’re at home and has a windows computer, you can install a desktop version of the trading platform. If you’re out somewhere and you have data internet on your mobile phone, you can download and install a Forex trading app from your broker. If are on a public cafe and no trading platform is installed in the computer you are in and your phone is not with you, you can use a web browser and just log in to the web-based version of your broker trading platform.
Forex Trading Signals
Forex trading signals have been developed to help traders find trading opportunities in the market. There are many signal providers online and I cannot recommend one. Just google it and choose from the results.
One thing to remember when choosing a signal provider is that make sure, the signal is profitable. Many providers offer signals just for them to make money.
Remember that in trading, there is no 100% guarantee that you will always make money. There is money to be made in trading but it involves hard work and discipline.
Forex Trading Hours
Forex trading hours start on Monday and ends on Friday. It is a 24-hours a day and 5-days a week operation; non-stop. And depending on where you are located, The first forex market to open is in Asia. It starts in Wellington NewZealand, followed by the Sydney in Australia and then in Tokyo Japan.
When these markets are open, you are in the Asian Session. After the Asian session. Frankfurt in Germany starts to open next and then the London market. When the London market is open, you are in the European Session or simply called the London Session. Next to open in New York in the United States.
When New York is open, you are in the US Session or simply called New York Session. In truth, many markets in North America, Europe, and Asia open but these are the major markets that you need to pay attention to as volatility is very high when these markets are open especially if the London market is still open while the New York market started to open.
When these two major markets overlap each other meaning they are both open, almost 70-80% of the transaction takes place and so forex day trading is more fun and profitable during these forex trading hours.