How To Start Forex Trading
Chapter 1 : What Are Forex Brokers?
Now as we covered the basics of Forex, you’re probably planning to trade, but first you need to Create an account with a broker!
What are brokers?
Brokers, also known as market makers, are a financial intermediary that matches a buyer with a seller and arranges the transaction between the two for a commission paid by the initiator or by both parties.Forex brokers make their money from the difference between the buy and the selling price (the spread) and can therefore offer commission-free trading.
Types of Forex Trading Styles
Each trader is unique. What I mean by this is that no two traders are the same. Some may be relaxed, “type A” personality traders while others may be more aggressive, “type B” personality traders. Some may like taking small wins all the time, while others don’t mind losing a bit in order to make huge profits in the long run.
The point is that whilst most traders share the same goals, they achieve these goals using a variety of different trading styles.Trading styles can be molded to fit a trader’s time restrictions, profit goals, and personal strengths.
There are four main styles of trading:
- Day trading
- Swing trading
- Position trading
Automated vs Manual Forex Trading
Robots vs Humans.
Unless you have been living under the rock, you have probably heard about the constant Forex trader’s debate on what style of trading is better.Well, different traders would give you different opinions. Some prefer manual, while others would die for automated.
So which one is really better?
The truth be told, both approaches have their advantages (and disadvantages), and both sides have good arguments to support their stance.Let’s dig a bit deeper and explore some advantages of both automated and manual trading.
Chapter 2 : Forex Robots or Automated Forex Trading
What are Forex robots?
Forex robots (also known as an Expert Advisor, or EA) are a piece of software that trades automatically based on a set of preset conditions.Let me put that into context for you. If we were to create a basic technical trading strategy using the RSI indicator.
Say, we enter a trade every time RSI oversold or overbought on a particular chart. Everytime RSI hits a particular number we want to buy or sell and set an accompanying take profit and stop loss level.
Instead of sitting watching the charts for hours on end, the software (or I mean robot) can do it for you.All you need is some basic MQL5 coding knowledge to get started.It’s that easy.
These robots/EA’s are also what’s known as black box system. We don’t know how they’re built or why they work. All we can do is attach it to our charts and cross our fingers.
But they do have some advantages…
What are the advantages of Forex robots?
- They are exact, perfectly disciplined, and don’t make mistakes (if programmed correctly, of course).
- They stick to the trading plan you set up. Robots aren’t got no time to rebel.
- Forex robots will ALWAYS execute your trades correctly. A robot won’t take a buy when it should be taking a sell, it won’t enter the wrong lot size.
- Forex robots can take in more data than human traders.
That means, if your strategy applies to a whole bunch of different currency pairs, you can probably only monitor a few at a time. With an automated system, you just plug it into however many charts you want it to monitor and boom, it won’t miss a signal. Another point for the robot…
- Forex robots don’t get tired and can be plugging away at the markets 24 hours a day. That is 3, 4 maybe 10 times as much as a manual trader trades the market.
Humans or Manual Forex Trading
What is manual trading?
Manual trading is when trades are entered by a human without using computerised algorithms or programs.
What are the advantages of manual trading?
- The main advantage of humans compared to robots is that we have a brain.
- Robots can only execute trades based on the scenarios that were programmed into them, whilst humans can take into account everything that is going on and process it altogether.
- Humans can take into account fundamentals that are occurring unexpectedly (like Trump being busy on Twitter slamming poor Jinping again).
- Manual Forex trading gives you the real feel and thrill of the Forex market.
- Supply and demand are influenced by human variables which most computers cannot analyse or predict.
- Humans can see that the market is moving extremely slow or unreasonably erratic and pull out their trades.
- Humans can decide when they have enough profit and when they think the momentum will continue in their favour.
- Humans can use qualitative factors to judge the current market scenarios.
- And most importantly, experience, knowledge and intuition will ALWAYS outperform computation logic.
Robots vs Humans. Which one is better?
There is a place for automation in your trading. But in all honesty, it only works with manual oversight.You MUST understand the reason the market is moving and couple this knowledge with a technical overview.There are NO shortcuts to successful trading.
You need to put in the effort if you expect to succeed. If you have the passion and dedication will eventually succeed and set you up for financial independence.
Chapter 3 : Demo vs Live Trading Accounts
So now that you know all there is to know about pips, spread, margin, leverage and brokers; all that’s left is to do is log in, pop those charts open and start trading!
Demo vs Live Accounts
What’s a Demo Account?
A demo account is a trading account that provides a realistic trading environment, with real-life prices, indicators and all the available tools that a live account has, but without risking your hard-earned money.
When you open a demo account with a Forex broker, you’ll receive virtual money which can be used to demo-trade, practice your trading skills, get familiar with the broker’s trading platform and get a first-time experience of the dynamic world of financial markets.
Demo accounts are a great way to get your feet wet in trading and because it is fake money, you can’t withdraw a penny if you have a winning streak, but equally, you can’t lose your money either.
Learning is always helpful, but experience is invaluable
We recommend you to place at least 50-75 demo trades on your demo account before you start trading your real $$$ money.
You should DEMO TRADE until you develop a solid, profitable system before you even thinkabout trading with your real money.
What is a Live Account?
Trading with your live account is different from the trading demo in a number of different ways. The main factor that makes a significant difference between the live account and the demo account is trading psychology.
95% of Forex traders say that emotion is the main factor that cannot be recreated when comparing the two platforms. This is due to the fact that your money is NOT on a stake while using the demo accounts, and you can think clearly and rationally. But cool-headed trades made on a demo account, have little significance when placed into real markets.
As soon as you start using live accounts, everything changes. Regardless, of how strict your demo trading is, it is impossible to prepare yourself for the emotion attached to having real money on the line.
But sadly, there is no secret to success in Forex trading other than patience and consistency. It is all about building a stable base and focusing and improving your trading processes.
We again repeat that You should DEMO TRADE until you develop a solid, profitable system before you even think about trading with your real money.
We also suggest that though you may be a clever and a patient forex trader but try to consistently trade profitable on a demo account before starting trading with real money in Live account.
If you can’t wait until you’re profitable on a demo account, then there’s very little (zero) chance you will be profitable when real money and emotions are on the line.And if you’re really that impatient, then at least try to demo trade for like 3 weeks.