How to Start Trading For Dummies

How to Start Trading

For Dummies

To most people currency trading is seen as complex, difficult and better to be left to the professionals. To others, it’s an intriguing and fascinating way to earn extra money while using well-developed predictive skills. Monitoring and researching foreign markets and investing in them offers an extra income that doesn’t require one to be hands-on and always working. In only an hour a day, you can do some research, and plan some trading moves.

Below you’ll find some great tips and information on how to develop your forex trading skills for dummies and work towards making a profit.

How does it work?

The first thing that beginner currency traders should know is that currency trading runs 24-hours, except weekends from Friday closing to Monday opening. This means a few things, at almost any time you can be trading, but this doesn’t mean you should be. Being able to trade 24/7 means there’s a chance you could get addicted to watching the market and it could intrude on everyday life. Don’t let this happen. Set boundaries and times you want to check your investments.

With the above said, there are different market peak times. So, if you’ve invested in USD, then you’ll see the biggest swings and changes in volume during the US’s main trading times. The same for Euro and Asian markets, the biggest swings will happen during normal trading hours in those countries.

Trades in currency are completed in ‘lots’ of various different sizes. A ‘micro lot’ is 1,000 units of your chosen currency, so if you’ve chosen USD, for example, your micro lot is equivalent to $1,000 in that currency. ‘Mini lots’ are 10,000 units of the currency, and a ‘standard lot’ is 100,000 units of the currency.

Simply, a trade works by purchasing an amount of currency with your base currency, waiting for the price to grow and then exchanging it for your base currency again, hopefully at a profit.

Strategies

Where can I trade?

If you want to take a look at where you can begin forex trading, or simply want a look at current pricing and how it all works, then you’re best to head to an experienced trading platform. You should always make sure that they’re licensed and regulatory compliant, which you can do by checking with their information sections, as well as checking with your local regulatory body. Learn to Trade is a great place to start.

Are you ready?

Forex trading isn’t all about numbers, it’s also about making sure you keep your head and make good decisions during tough times as well as knowing how to be patient and prepared for the task ahead. Listed below are a few attributes you should ask yourself if you have, and you can learn to live by to find your success!

Can you handle losing?

Can you handle losing?

If you want to take a look at where you can begin forex trading, or simply want a look at current pricing and how it all works, then you’re best to head to an experienced trading platform. You should always make sure that they’re licensed and regulatory compliant, which you can do by checking with their information sections, as well as checking with your local regulatory body. Learn to Trade is a great place to start.

How patient are you?

How patient are you?

As everyone’s been told their whole life, slow and steady wins the race, and in forex trading that can’t be truer. Jumping around the exchange and cashing out and buying and selling with no patience is bound to leave you with loss after loss. Learn to hold your ground and watch what a market does and make educated guesses on where it’s going, don’t just pull out the moment you see green, or red.

How well do you handle pressure?

How well do you handle pressure?

No one said forex trading was easy. Sure, it isn’t labour intensive, but the framework behind the whole workflow is complex and unpredictable and can present you with some high-pressure situations. You’ll need to learn how to handle high-stress situations without making mistakes. Always take time out to relax and watch the market, don’t stay attached to it waiting for a time to sell or buy 24/7 because you’ll just do something irrational & this is why working with professional helps because they can guide you in the right direction without wasting your time and money in trial and error!

Can you be responsible?

Can you be responsible?

Sure, you can be responsible, you’re an adult. But can you do your research and stay on track with your investments? Losing money isn’t exactly what you get into forex trading for, so you need to take the time to be a responsible trader and do your research. Part of forex trading is staying relentlessly in touch with news stories, international relations, government spending and general economic outlooks. When you first begin trading your habits should consist of research, market checks and making sure you leave plenty of time away from watching the exchange.

Are you ready for Get started?

Are you ready for Get started?

Forex trading takes time to get good at. No one starts off earning back 500% of their investments, and it takes a long time to build a great investment portfolio filled with great returns. If you want to be good at forex trading you need to study, learn from experience and most importantly rigorously analyse your mistakes and find ways to bypass them in the future. Most trader’s first mistakes are seeing forex trading as a ‘get rich quick’ venture, when it certainly isn’t. Build your skills, do your research and learn from mistakes and over time you’ll start to see some pretty big returns.

Pairs and Pips?

Pairs and Pips?

PIP: Point in Percentage
Pair: Two currencies with a value determined by their comparison

If you’ve done any research on forex trading before you might have noticed the terms pairs and pips being thrown around. These pairs and pips exist because forex trading is different to the stock exchange, where you are able to buy or sell a single share. In forex trading you must sell and buy a currency because you’re using one currency to do so in short, it’s a swap or a pair.

If you take a look at the price of the USD or any currency, you’ll notice that these are mostly priced down to the fourth decimal point (eg. 1USD = 0.7650AUD). Because of this, pips exist as the smallest end of the trade, typically 1/100th of just 1%. Think of a pip as just a super small percentage point.

Beginner forex traders will normally trade in ‘micro lot’ sizes, and this means that a pip is just a 10 cent per pip price move. This is good for beginner traders as it makes it easier to minimise losses and stay in control. For example a 100 pip move against your trade will only lose $10 and while you are learning you are risk managing at the same time! When lot sizes increase, so do the currency pips. If you decide to trade in a mini lot, which has 10,000 units, then your pips will be $1 and in a standard lot with 100,000 units you pips are $10 each.

This is important to know as some currencies will jump by 100 pips during a single session, and if you’re trading in standard lots, that can be either a $1,000 profit or loss. So, smaller lot sizes make profit and loss a little more manageable.

Learn to Predict Pricing

Learn to Predict Pricing

A skill that can only really be learned from experience with forex trading is predicting price swings accurately. Now, it’s impossible to fully predict where a price will go and how far, up or down, but from research and looking at past events, planned future events as well as timelines of pricing you should be able to develop an expected price point that the currency should experience.

To make the process easier for dummies, try to ask yourself why the fluctuation may have occurred and study reasons online and in the media related to current events. This will greatly assist you with smart investing and generally help you to make profitable decisions.

Typically there are two major aspects that price predictions rest on:

One.
Assessing all factors which have resulted in the price getting to where it currently is. things like market supply and demand, current political climate, investment attractiveness, major news releases and much more.

Two.
Assessing historical pricing and analysing patterns. Often currency values swing up and down throughout the year on an almost-set schedule that revolves around political events, or other seasonal changes.
Utilising charts is also key to learning how to accurately predict currency pricing. You can find these almost anywhere, even Google features interactive currency pricing charts on their search results.

If you’ve done plenty of research and understand fairly well all the points that need to be known to assist you in predicting pricing, you can use these to influence your buy and sell decisions. Align all of your forex trading activities on well-educated predictions and you could see great returns.

Retail Understand the Jargon

Understand the Jargon

No matter what industry you’re in, it will have it’s own terms that everyone working in the field will understand and be using, and you should know them too. We’ve listed a few terms below.

Cable, Pound or Sterling– all terms for the GBP / Great British Pound
Greenback, Buck– other terms for the US dollar
Swissie– another term for the Swiss franc or CHF
Aussie– the Australian dollar
Kiwi– the New Zealand dollar
Loonieor little dollar– Canadian dollar
Figure– an exchange term for a number that is perfectly rounded, like 1.4000
Yard– a term for a billion units

What Affects Pricing?

What Affects Pricing?

There are a number of factors that affect the price of currencies from government policies, conflict and international cooperation, so there isn’t one sure place to look to find out what a currency is going to be priced at in the coming weeks or months, but rather multiple places to look which all have different levels of influence.

The stock market can often have a large impact on forex pricing, and stock traders often look to currency values to determine what is going to happen on the stock market.

Of all of the influential factors affecting price though, supply and demand are the largest. This is mainly due to forex trading relying on supply and demand almost entirely. When the world begins to run low on dollars, the dollar value rises, and when too many buyers sell the dollar, the dollar value falls.

Understanding Leverage

Use Demo Accounts to get started only

Almost every broker website you find will have an option to activate your demo account. This will be your best friend, whether you’re a beginner or not. It’s the side of the site that will teach you how everything works, what certain activities will leave you with, and let you test out new strategies before implementing them in the real world. A demo account is all about building your confidence but if you use it too long it can tend to build bad habits and when these people make a shift to real accounts they take their bad habits with them.It is much better for you to build strong foundations from the beginning.

Once you’ve spent plenty of time practicing and getting to know your demo account, you can then feel ready to move on to your real account. Now, the demo account and the real account will typically be really similar, though, of course, your real account will use real currency, so, make sure to implement your risk management plans and other strategies correctly. And this is where Psychology of Trading and Mind Power plays an important part in your overall long term success.

Don’t Spend more than you can afford

Don’t Spend more than you can afford

Finally, by far the most important thing you’ll need to know as a new dummy trader is that you shouldn’t spend or invest more than you can afford to lose. Don’t think that just because you’ve found a surefire growth opportunity you should put everything you have on it, it might not work out as planned and leave you with nothing.

Even if you have been in the game for a while, it’s still not wise to invest more than you can lose, or to utilise 100% of your brokers leverage because no one wants to be stuck in debt, or have to deal with the consequences of losing almost everything you have to a bad investment.

A rule of thumb is to simply put aside only 5% to 10% of your pay cheque or savings to invest in forex trading and leave the rest for your everyday life. Soon that small percentage will grow larger and larger if you’re wise with your investments and make well-educated decisions when trading.