How to Learn Forex Trading?

Due to the rapid development of the global economy, people's demand for currency exchange is increasing, so the foreign exchange market has become the world's largest and most liquid asset market. People often conduct currency conversion transactions in the form of exchange rate pairs, such as EUR/USD, but the foreign exchange market is not only that, it has also developed many derivatives, offering forwards, futures, options, etc.

There are many functions of foreign exchange. Participants can not only exchange currencies, but also use foreign exchange to hedge international currency and interest rate risks, obtain large profits through diversify portfolios, and even speculate on some political events, etc.

Basics of Forex Trading

Trading in the foreign exchange market is conducted electronically over the counter (OTC). Due to the nature of online trading, this means that currency transactions can be conducted anytime, anywhere.

Forex trading used to be limited to large multinational corporations, hedge funds, and high-net-worth individuals due to the substantial capital required to participate in the market. Although most transactions on the market are still conducted by commercial and investment banks , but now more and more individual traders have the opportunity to enter the foreign exchange market, and they can exchange a single currency through some brokers.

Currency pairs

We often see some currency pairs when trading, so what is a currency pair and how to use it?

Currency pair refers to the price comparison combination when two currencies are exchanged, in which the first currency is used as the base currency, and the second currency becomes the quote currency.

It indicates how much of the quote currency is needed to purchase one unit of the base currency. For example, when you want to trade USD and EUR, the currency pair you see is USD/EUR=1.0965, when you choose to buy When you deposit 1 unit of US dollars, you are equivalent to selling 1.0965 euros

Market analysis methods

We can mainly conduct foreign exchange analysis through two methods, technical analysis and fundamental analysis.

Technical analysis is to judge the Trend, Momentum, Volume, and Volatility of exchange rate changes by studying icons and using various indicators, and predict the time nodes of possible buying and selling, so as to obtain benefits. Common technical analysis indicators include moving averages, Parabolic SAR, Bollinger Bands, Average True Range (ATR), Relative Strength Index (RSI), and Fibonacci retracements, Stochastics, and CCI.

Fundamental analysis, as the name suggests, is to analyze the basic factors that may affect the change of currency value. It mainly includes some political and economic factors, such as GPD data, employment indicators, central bank exchange rate policies, and political policies in some regions, etc. Generally speaking, these factors The impact on currency prices is relatively objective, but it is still necessary to accept this information in a timely manner in order to make better changes

Steps to Learn Forex Trading

We have learned the basics of foreign exchange trading, so how to trade forex simply and quickly? Below I will provide the 5 simplest steps to help you better avoid risks and obtain benefits.

1. Learn the basis of exchange trading

To better enter the forex market ,you’d better know the trading platform MT4 and MT5.Both of them offer Technical indicators, Charting tools, Timeframes, Trading orders, Demo trading and other functions, which are very convenient for beginners and veteran traders.

2.Set up a brokerage account

For individual traders, the most convenient way to enter the foreign exchange market is to find a reliable forex broker, so how to judge?

The first step is to research the broker you want to choose. You can search for its name directly on Google or social media sites, and then see how people evaluate it, and check its online ratings and ratings. The most important thing is Need to see if it is a regulated institution.

Second, you need to check his fees and commissions to ensure that it will not charge additional fees, such as Annual or Monthly Account Maintenance Fees, you can consult the customer service on their official website.

Third, make sure its trading platform suits your needs. For example, you can consult information such as Leverage and margin amounts,Spread and commission rate,Deposits and withdrawals,Trading hours.

Fourth, you need to make sure that it is safe enough to protect your personal information and property, and there will be no phenomenon that you cannot withdraw money.

3. Learning trading terminology and concepts

As beginners in foreign exchange trading, we may come across unfamiliar trading strategies and terminology. To help you navigate this complex field, we have compiled a list of commonly used forex trading terms and concepts.

In addition, you can also learn various Forex trading strategies and use them in your actual trading. The best way is to find some professional traders and learn their trading strategies

4. Understanding risk management

Any transaction has risks. When we do risk management, we need to pay attention to identifying, assessing, and managing potential risks associated with trading activities. When trading, we should pay attention to our account balance to determine our transaction size. The ratio of return on investment is used to determine the risk that can be tolerated. In addition, a variety of investment portfolios can be used to reduce risk.

5. Developing a trading plan

A well-designed trading plan can often help traders get more returns. The first step in making a good plan is to determine clear and feasible goals, financial goals, profit goals, etc. The second is to implement trading strategies, adjust strategies according to market changes, and make time records in order to obtain more experience. Third, set a stop loss, manage risks, and make the above plans, and your investment will get twice the result with half the effort.

Learning Technical Analysis

Technical Analysis is a commonly used analysis method for traders. As we have mentioned in the previous article.Technical analysis is a method of evaluating securities that involves analyzing statistics generated by market activity, such as past prices and volume. Technical analysts use charts and other tools to identify patterns and trends that may suggest what a security will do in the future.

Overview of technical indicators

Technical indicators are mainly divided into two categories: trend indicators and oscillators. Trend indicators are mainly used to identify trends, including moving averages, trend lines, and the Relative Strength Index (RSI). Oscillator indicators used to identify overbought or oversold conditions in a security, mainly include Stochastic Oscillator, the Commodity Channel Index (CCI), and the Moving Average Convergence Divergence (MACD).

Reading and interpreting charts and patterns

A forex chart is a graph that presents the relative price movement of a currency pair over different time frames. Through these icons, various future trends can be predicted.The most common types of forex charts are line, bar, and candlestick charts.

The daily chart of Line charts mainly shows the closing price at the time of viewing. It is often used to identify larger trends, but has no other functions.

The daily chart of bar charts can display the closing price, opening price, highest price, lowest price, etc., and each vertical bar represents a day's trading volume. The color of the bars on the chart can indicate whether buyers or sellers are in control of the market.When the closing price is above the opening price, the bar is green, which is known as a buyer bar. Conversely, when the closing price is below the opening price, the bar is red, which is known as a seller bar. By looking at the color of the bars, traders can quickly identify who is in control of the market.

Candlesticks charts composed of individual "candles" that show the opening, closing, high, and low prices for a specific time period. Traders use candlesticks to make trading decisions based on patterns that help forecast the short-term direction of the price.

Price candles are made up of three specific points - the open, close, and wicks. The open and close prices mark the beginning and end of a selected period and are used to create the body of the candle. Each candle represents the price movement over a chosen time frame, such as a day on a daily chart.

Practicing and Refining Skills

In the process of trading, practice is essential. The experience gained in this process will affect every step of your future trading. Here are some ways to help you improve your trading skills.

1.Record every transaction you make, and analyze the purpose and results of the transaction, so as to improve your ability to identify trading signals

2. Use the demo account to practice trading. In this process, you don't need to take any risks, and it will change like the real situation.

3. Learn and ask for advice from other experienced traders, they will give you the most direct advice.

4. Pay attention to risk management, control your own psychology, don't lose too much because of small losses, and don't pursue profits too much.

5. There are also some books to read and online courses that are good for learning. The point is to find the resources that suit your style and goals.