Welcome to the ultimate Forex trading for beginners guide!
If you are new to Forex trading or you want to learn more about Forex markets this article is exactly for you. Here you’ll learn answers to the most asked question among all the beginners - how to start Forex trading and to make first money on Forex? Well, let’s begin!
What is Forex?
So, first and foremost, what is the Forex market and how does it work?
The word Forex refers to the term Foreign Exchange which basically means that you trade one currency for another to get in profit by speculating on changes in the exchange rate of currencies.
Multiple participants trade Forex. For example, there are Central banks, regular banks, corporations, and retail traders. These are only a few groups of traders among many others who trade the Forex market.
Different groups trade Forex due to different reasons. But as for the retail Forex traders, the main idea is to sell or buy one currency for another at a particular price to gain profit. The profit is gained due to price fluctuation and timely purchase/sale of currency, as a result of which the difference between prices accumulates profit.
Before getting deeper into the specificity of Forex trading, let's first learn a basic terminology frequently used in Forex trading.
It is important to be aware of the main terminology on Forex to understand the subject better. Also, it is helpful when learning how to start Forex trading because it is easier to study when understanding the basics. So, here are the main terms that are in common use among all traders around the world.
|a monetary unit that is a part of a currency pair. It can be the currency of any country. Typically, the most traded currencies on Forex are the euro, the US dollar, and the Japanese yen;
|a trading instrument that traders work with. It consists of the base currency, which comes first, and the quoted currency, which comes second. When performing transactions with currency pairs, you sell or buy the base currency for the quoted one. The most popular currency pair is the euro to the US dollar (EURUSD);
|a cost at which a purchase is made on Forex. In any currency pair, the base currency is displayed first, then the quoted one. Ask determines how much the first currency is worth I the equivalent of the quoted one;
|opposite to ask. A bid is a price at which a sale is made in Forex;
|Long position (buy)
|a market action that refers to purchase a currency pair. Usually, the trader expects that its market value will rise;
|Short position (sell)
|opposite to the long position. A market action which refers to sell the currency pair. Usually, the trader expects that its market value will fall;
|a difference between Ask and Bid price (the selling price and the purchase price);
|an abbreviation of two English words "percentage" and "point". Therefore? A "pip" can be defined as a percentage point, which is the minimum price variation on the Forex (1/100). This tool helps to quickly fix the slightest changes in quotes. Pip also performs the function of clarifying the rate, starting from the fifth decimal place;
|a unit for measuring the volume of transactions. A standard lot is 100 000 of the base currency. In other words, by buying one lot of currency pair, you are acquiring one hundred thousand units of the base currency;
|a degree to which a broker increases available traders’ funds on the account. Expressed as the ratio between own funds to borrowed funds. For example, a leverage of 1:100 means that you can work with an amount of 150 times your real deposit;
|the amount that the trader provides to the broker as collateral when using leverage;
|an open position or trade of the trader in the market;
|a computer program that provides the trader with access to real quotes in the Forex market. All transactions in Forex are made using trading terminals of various types;
|an organization that provides intermediary services between retail clients and large financial institutions in trading on the Forex. The broker receives a commission for their services, the amount of which is clearly indicated and fixed in legal form. Without their assistance, an individual trader is not able to work on Forex.
|a difference between the rates of the pair forming currencies. It is taken only if the position is carried over the next day. If you transfer an open position from Friday to Monday, this fee is charged three times.
|a computer program with some trading algorithm installed in it that is created to automate some or all the Forex trading processes for a trader. Forex robot usually is installed into the trading terminal and is used 24/7.
|the price of one currency in terms of another currency. The principle of direct and reverse quotes is implemented in the Forex market by using a difference in the rates of different national units, creating "currency pairs".
|a trade order that allows you to take profit from the trade when a certain level of price is reached. Such an order helps to reduce the risks for the trader. If a trader places a take-profit order for a particular trade, then after the price reaches the set level, the deal will be closed automatically. A take profit can be set at any time during the trade is opened.
|an order that allows you to fix the financial result when the trade reaches a certain price level at loss. Stop loss, similarly to take profit, can be set before or after the opening of a position. A Stop-loss order allows the trader to avoid additional losses by automatically closing the position.
|a specific direction of price movement in Forex. The behavior of trends usually is analyzed during technical analysis. There are a few types of trends: downtrend – also called "bearish", uptrend – also called bullish, and sideways – the absent or flat one. As a rule, during a downtrend, it is recommended to open sell positions, and during the uptrend to open sell positions. It Is better not to perform any operations when the trend is flat.
|Specific tools are usually used to predict price changes in the Forex market. These are calculations that take into account the volume of a particular currency in the market and its price. By focusing on Forex indicators, traders can make decisions about entering or exiting the market.
How does a trading on Forex works
Trading on the Forex market sometimes might seem like a mysterious and pretty hard process that is associated with a lot of experience, knowledge, and risk, which is partly true but, at the same time, we at ForexStore believe that the Forex market Is opened for everyone to enter, and it is not as hard as it seems.
So, we’ve prepared a detailed step-by-step manual on how to get from knowing nothing about the Market to making money using automated Forex trading software.
Choose the broker
The first thing you need to do to start trading on Forex is to choose a broker that trades at the Forex market and supports MetaTrader 4 or 5 platforms (also known as MT4 and MT5).
This is one of the most important moments of your trading because the quality and the fairness of the broker are crucial and you should not neglect the importance of the wise choice of the Forex broker.
In this article, we have described in detail the process and the main factors when choosing a Forex robot. Read it to learn how to choose a Forex broker, what to pay special attention to, and how to not get deceived by scam brokers.
If you don’t want to dwell on this matter right now, below you can find a list of brokers that are most popular among our clients and support everything that is needed for the stable work of Forex robots.
The next thing to do is register at the broker you have chosen and create a trading account in your personal area. Your account at a broker is like your bank account – in order to trade you need to have money on it. You can deposit funds in any convenient way for you.
Set up your trading terminal
Trading on Forex is made easy to access for everyone due to the worldwide influence and development of computer technologies. To start your Forex trading you need just a computer and an internet connection.
The computer programs used for entering the market and handling the whole trading process are called trading terminals. There are only a few trading terminals that are used commonly – MetaTrader 4 or MetaTrader 5.
To start trading with the MetaTrader 4 or 5 download MT4 from the broker's website and install it on your PC. The first time you run MT4 you need to enter your account number and password, that you got during the broker account registration process. Also, you can do this by clicking "File" and selecting the "Login to Trade Account" menu item. After this, you are ready to trade.
There is a more detailed explanation of how to start trading with the MetaTrader 4 platform in this article if you're totally new to Forex trading, so make sure to read it before the actual trading terminal installation.
Choose your Forex robot
When you are done with all the preps like choosing a broker, setting up the MT4, and creating the trading account, it is time to chose the best Forex robot for you (or a couple of them) on our website.
But when selecting the Forex robot you should remember, that there are a lot of factors you need to take into accounts such as system profitability, duration of its trading on the account, trading style, stability of the results, drawdown, and more.
To make it easier for you we have written an article where we explained all the factors that should be considered in order to choose the best Forex robot for you. If you are not sure about your knowledge on the subject or doubt the choice that you’ve made, we recommend you to use advisors that have the highest rating on our website (more information on how the rating is formed here). They are represented as a list in the article above or on the Rating page.
Forex Expert Advisors with this icon are protected by the ForexStore platform. This means that you will receive a license automatically right after the purchase, and it will be displayed in your personal area with an opportunity to specify the account's number online. Also, in this case, we control the observance of the money-back guarantees that were promised by the sellers of the products.
When you have chosen and bought the best Forex robot, you can download it from our website (you can do it in your personal area ONLY if it has this icon ), also there you can enter the account number that you've received from the broker. In case if the advisor doesn't have that icon, the conditions of delivering the license to you after the purchase may differ depending on the seller's rules.
Install the Forex Robot in MT4 or MT5
The last step to start trading on Forex is to install the Forex robot in a trading terminal and set it up for proper work.
After downloading the trading robot to your computer, you need to install it. In order to do this, run the MT4 application, click on the "File" menu and select "Open Data Folder" from the drop-down list. It will bring you to the root folder of MT4. Then open the MQL4 folder and copy the file of the Expert Advisor (it has the *ex4 extension) from the downloaded archive of the purchased robot to the "Experts" folder. Also copy the *dll file to the "Libraries" folder. All you need to do now is to restart MT4 to finish the installation.
The process of installing the Forex robot to the MetaTrader 5 is quite the same as with a few exceptions. Run MetaTrader 5 application, click on the "File" menu, and select "Open Data Folder" from the drop-down list. It will bring you to the root folder of MT5. Then open the MQL5 folder and copy the file of the Expert Advisor (it has the *ex5 extension) from the downloaded archive of the purchased robot to the "Experts" folder. Also copy the *dll file to the "Libraries" folder. All you need to do now is to restart MT5 to finish the installation.
Now you need to set it up. Since all the EAs (expert advisors) and settings could be different, we won't talk about it here and now. But advisors at ForexStore with the badge are really easy to configure – it won't take you more than 2 minutes to have it done. You will simply need to turn it on and enter the risk parameter. You will get detailed instructions on how to install an advisor (it comes with your Forex EA).
If you did follow the instructions above – congratulations Forex robot is already working and will gain profit without your participation and attention.
Note: for the stable and consistent results of the Expert Advisors it is necessary that the computer on which it is installed can work without interruption for 5 working days straight. In some cases, it is more convenient to rent a VPS (Virtual Private Server) or a dedicated server, where you need to do the same installation. This will allow Advisor to work 24 hours a day.
All the best Forex robots on ForexStore are supported with the User Manual – a PDF file that describes in detail the process of installing and setting up of the expert advisor so you don’t need to worry about it.
What software is needed to start trading?
Automated Forex trading is a process that requires the use of different trading software. There are different types of software you might need for your trading but the main two of them are trading terminals and Forex robots.
The trading terminal is the main software that allows traders to participate in Forex trading. It is a computer program (usually installed on a PC or VPS) that is used for every trading process you might only imagine.
There are many different trading platforms on the market but the main two of them are MetaTrader 4 and Meta Trader 5. They are free to use programs that are available on the official website of MetaQuotes. Also, almost every broker offers their clients a free trading terminal pre-setup for the most comfortable trading with the exact broker.
The second but not less important program you need for your automated trading is the Forex robot (or Expert Advisor). This is a fully automated computer program that has an access to your trading account and executes trades automatically according to the algorithms and logic programmed in it.
Forex robots are tools that give traders the possibility to make a profit without actually doing manual trading. There are a lot of advantages of using automated trading systems which make them very popular nowadays.
To know more about the software such as trading terminals, Forex robots and many more that are used for Forex trading read the article where we break down Forex trading software in detail.
Losses on Forex: How to manage it?
Forex trading is a risky business. Every Forex trader faces losses and that’s quite normal. It is a part of the trading routine that you cannot avoid. Therefore, it is unreasonable to focus on the ways to totally avoid losses because it is unrealistic to do so but it is much wiser to make an effort to reduce losses and cover them with profitable trades.
Do not avoid losses, control them. There are a few of the main ways to do that which you can use for your Forex trading regardless of whether you trade manually or using trading robots.
Start with the demo account
The main advice that every experience Forex trade would give to newbies is – start trading with the demo account. It is the best way to not lose all your fund from the very beginning.
A demo account on Forex is a kind of training account or simulator of a real Forex trading. Trading on a demo account is carried out with virtual money. It is an opportunity to learn how to make a real profit from Forex, at the same having no risk and no need to be afraid to make mistakes.
There are a few main purposes of demo accounts that will be useful for the newbie trader:
1. Safely learn how to trade on Forex
A demo account is kind of a training playground where you can safely try out everything that you learn about Forex trading without actually risking your money. The perfect way to start your beginners Forex trading journey.
2. Get used to the trading terminal
Trading terminal is not that complicated a computer program but there is still some stuff to learn. A demo account is a perfect way to get comfortable in using the trading terminal with no risk of destroying your trading account.
3. Test your Forex robot before real trading
Every Forex robot, even the most reliable one, needs to be tested before giving it real money. It is not because robots are scams but because every robot is made by a human who can make mistakes. That is why we at ForexStore recommend all our customers to start their trading experience with our Forex robots from the demo account for at least a couple of months.
Learn money management basics
Money management is one of the most powerful trading practices which ensure profit for successful traders. Money management is the set of rules for managing capital. This refers to several principles and systems for the distribution of funds. The goal is to minimize the risks of losing the entire trader's capital.
Many people think that this is a trading strategy, but in fact, money management does not help to make money directly, it helps not to lose them. Read the Money Management on Forex article to learn more about the main principles of money management on Forex and how it affects trading results.
Study educational content
Forex trading for beginners is a quite complicated thing to understand and that's why we focus so much on education. It doesn't matter if you choose to trade manually or to use automated trading systems, you still need to understand the basics of Forex to win on the market.
The good news is that the information is available for everyone nowadays and there are a lot of places where you can learn how to trade on Forex both manually and automatically.
There are tons of information about Forex trading on the internet so it is important to learn from the best. Most of the quality brokers support their clients with educational content, so don’t neglect using those possibilities. Also, there are a lot of authoritative websites such as BabyPips that give out tons of educational materials for free.
Learn your way to successful Forex trading and don't underestimate the power of proper education!
There is a lot more that you might want to know about Forex to start trading but there is still enough information in this article for your first steps. We hope that this Forex trading for beginners guide will help you to start your Forex journey in the right direction.
The ForexStore is here to support and help you to make your automated Forex trading the best reliable experience you could only get.