Forex beginners

  • Aug 23 2021
  • by
  • Analyst AZA
Forex beginners

Forex beginners

First I would like to thank you for taking the time to read this article. Ok let's get into it, Forex is an abbreviation of foreign exchange.

Foreign exchange is a market where currencies are bought and sold, it can be when taking a holiday to another country where they use a different currency. You will have to buy the foreign currency using your domestic currency. In trading currency, however, we buy or sell a currency in anticipation of

Making a profit from the price variation. when buying/selling a currency. We get brokers who are providing traders with liquidity, liquidity being the ability to enter and exit the market. the Forex market is an over-the-counter market meaning it can be operated electronically without a dealing desk, a trader is provided with a bid and an ask. A bid is a price the broker is offering for buyers and the ask is offered to sellers. The difference between the ask and bid is the spread, which is one of the ways brokers make their commission. 

Trading Forex is an art or a skill that needs to be done learned and practiced for you to even consider using real money to trade, I would advise beginners to look for a mentor to accelerate their learning process because my personal experience has shown me that street smart is better than book smart in Forex. In a nutshell in Forex trading, you need a strategy that suits your personality and has the discipline to execute it accordingly, of course, the strategy won't work all the time in this change-driven market. But a strategy will help you to stay disciplined and allow you to improve it further as you learn its flaws. Psychologically you have to be strong and never let the emotions get the better of you.

Backtesting and forward testing a strategy is highly recommended to be done on a demo account, but it does not necessarily guarantee you success in a live account, as emotions will be at play. So trading is not only about having a strategy but also having the right mindset.

Funds you are willing to lose and input is equal to output the hard-working you give to the market will be compensated by an equal reward. It is also advisable to keep a trading journal because you need to keep note of the mistakes you made in previous trades, so they cannot be repeated. In Forex we have a pyramid of market participants, at the top, we have interbank, Central banks, and large institutions, at the middle we have commercial banks and at the bottom, we have retail traders.

Retail traders only contribute to a small percentage of market movements, so it's ideal to have a sentiment on how the big players are planning on conducting their operations. When you are a trader it's a must to know the interest rates since they are a dough of the pie. And there is a lot of noise in the markets, you find blogs, forums, brokers input, social media, etc. so try to keep the noise low as less is more. When I started trading I consumed a lot of information, and at the later stage, I unlearned a lot of things, as I said earlier it's very much better for you, to consult with a person who has experienced the market, to cut the learning process. There is a correlation between the Forex market, the equity market, the bond market, and others. Learning this correlation will give a trader confidence and an edge to stay profitable. Trading Forex is not about making money all the time but losing less when you lose. Now it's an exciting and interesting time to trade the markets because since the covid-19 epidemic started there has been volatility and great opportunities to profit from the market. Technological advancements have made it easier for an average citizen to take part in global markets which is ideal. When choosing a broker, try choosing a broker that compliments your trading style. Eg: if you are a scalper it's advisable to use a broker with low spreads since you will be entering and exiting trades now and then. If you are trading for longer periods it would be ideal to use a broker that charges less on swaps. There is technical and fundamental analysis. 

Technical analysts try to forecast future market movements using the past behavior of the market, whereas fundamental analysts will be concerned about the news that will impact the market. Both technical and fundamental analysis is important. The best trades are the ones where fundamentals and technicals were considered. in the Forex market, we have major currencies like us dollar, Great Britain pound, etc., which are freely floating, meaning their prices are determined by the market participants and you also find exotic currencies which are mostly from emerging markets like, South Africa, India, Brazil, etc.

Exotic currencies can be manipulated by their Central Banks to maintain their desired market pricing or can be pegged to a major currency. Eg: if the Indian rupee is pegged to the euro at a certain price band if the band is exceeded the central bank of India will sell their currency to get it back into the band ranges and vice versa if the Indian rupee goes below the page range, they will buy rupee. Trade balances are mostly influenced by the price of the currency relative to other countries, a strong currency makes the exports expensive which can result in a trade balance deficit and a weaker currency makes exports cheap, so it's very important to track data that is trade-related as it can be a useful indicator of the strength of a currency. in trading Forex, there is information that can shock the markets and course volatility which can open doors for a trader to capitalize, or can lead to large losses if your risk management is poor, this news is likely provided by your broker and should be noted in the trading journal.

Trading Forex is not about making money all the time but losing less when you lose.


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