To start a career in Forex, start by studying the foreign exchange market. Below, we review the three components of Forex basics (the foreign exchange market, the trader and the broker) and look at how the system works in general. If you think everything is simple, you are correct. This is because you don't need to have an economics degree or other special education to make money in the foreign exchange market. But a non-fundamental knowledge of specific elements and how they work remains a necessary skill.
Forex trading started in 1976 when the G7 decided to abandon the Golden pattern and dollar indexation. The American currency no longer determined the value of other currencies, and countries no longer had to back their money with gold.
From that moment on, the rate of value of any currency was determined by just two parameters: supply and demand in the world market. And that market itself is called Forex, which means foreign exchange.
Forex Basics: Banks
They act as providers of liquidity (or quotes). Banks provide currency storage, all transactions and conversion from one currency to another.
Forex Basics: Traders
These are active market participants. Forex traders are continually buying and selling currencies, and other market assets while profiting from the differences between buy/sell prices.
Forex Basics: Brokers
Since, by law, traders cannot participate personally and directly in trading on the market, an intermediary is required between him and the banks. This intermediary is therefore the brokers.
Since most of the world's money is controlled by banks, banks constitute their own financial system. When a certain currency becomes more in demand (it is bought more), the rate of that currency in banks increases (it becomes more expensive).
The trader (can be anyone) buys that currency and sells it when it is at its peak price, before the rate starts to fall. The trader's task is to predict the given price movement and buy and sell at the right time. This is where a winning strategy comes into Forex. And each trader must have their own strategy.
The trader cannot buy and sell currency on the Forex market, so he uses the services of an intermediary broker. Typically, a broker is licensed by a government entity responsible for governing the brokers' ethical business operations.
Brokers bring the trader's transactions to the interbank market and provide the trader with quotes, trading instruments and other opportunities. In return, brokers receive a commission from the trader's transactions. This is how Forex works.
Forex education: effective methods
Forex for beginners is a conceptual apparatus. Various special terms are used in the foreign exchange market, denoting market participants, price movements, specific events, and certain actions or conditions. For example, there is the concept of spread. In the foreign exchange market, it refers to the difference between the bid price and the ask price.
The point is that these two prices cannot be equal a priori because the seller and the buyer have different goals. Therefore, the difference between these prices at a single instant in time is called the spread. When starting Forex from scratch, it is essential to understand what a spread is because it makes up the broker's commission as payment for the services of each trader's trade.
There is a chance to reduce the size of the spread in the Forex market. We are talking about a clearing discount or spread, which every trader can get, regardless of their experience or trading results. And it's free! In this review, we will tell you about discounts, how they work, what the benefits of discounts are for all scheme participants, how to sign up and start getting a discount, and much more.
Bulls and Bears (bulls and bears)
There are also other essential terms such as bulls and bears. Of course, these are not representatives of the fauna. They are the nicknames given to Forex market participants who implement specific trading strategies.
Bulls are traders who actively buy a certain currency (or other assets) in anticipation of a rise. Thus, they make the quotations grow. Figuratively speaking, this is how a bull throws its opponent up with its horns.
Bears are traders who are waiting for a price drop, for example, by going short selling. By their actions, they reduce the quotation marks, again figuratively, like a bear pressing its opponent to the ground with its paws.
There are many such interesting points and metaphors in a trader's conceptual apparatus, but their studies do not take long. And most importantly, there is no need to pay for knowledge and training. There are many free Forex training programs on the Internet.
Forex lessons for beginners
Taking free Forex lessons for beginners is the best option if you have never encountered the foreign exchange market. These lessons are usually taught by the brokers themselves or by specialized online schools.
Let's repeat: you don't have to pay for them! Of course, there are paid courses, but there is no real need for them. Free lessons share all the important points, which is enough to start trading.
Why are free classes effective?
Because they are conducted like classes at school: at home or remotely in webinars. The second option is now more common and is generally preferred because future traders don't have to go anywhere — all interactions and instructions take place on the web. It is critical that you ask the teacher all your questions and get advice from a competent and experienced professional in such seminars.
Video tutorials for beginner traders
An alternative to studying at a school is Forex video tutorials for beginners. Technically, the essence is the same: within the framework of a training program developed by professional traders, you learn about trading.
The difference is that these classes are not taught online or in real time. They are recorded in advance, after they are posted on the YouTube or to a link where interested people can easily find them.
Again, there are paid video tutorials, but there is no point in paying for them as a novice trader. Perhaps in the future, when you make your first profit and want to adopt the personal experience of a certain professional who is not ready to share free information, it will be advisable to turn to the paid option. But in reality, the vast majority of traders have never taken paid courses.
Forex Books for Beginners
Forex books for beginners are another effective way to gain targeted knowledge. Unlike webinars and video tutorials, working with a book it is more focused on self-study, although it does not preclude the use of other sources of information. Everything is customized to the individual.
Some people gain knowledge better by reading a book. It is easier for another to watch a video recording, and another can learn more effectively through live communication with a teacher.
It is more important to understand that your training should never end. Basic knowledge will allow you to start trading, but even prepared traders, in most cases, are capable of losing their entire deposit.
The point is not always to blame poor preparation or personal qualities, but to realize that the Forex market is extremely volatile and it is impossible to predict everything.
However, with each new bet, the trader gets a unique experience. He learns to react to individual signals and make relevant decisions correctly.
For this reason, even traders who have been trading for 15 – 20 years are still continually experimenting with new strategies and reading Forex books by other professionals to learn how to protect their assets and make greater profits.
Forex trading basics: step by step instructions
It is technically easy to start trading Forex. It's more challenging to do it in a way that you enter with a minimum deposit (or even no deposit), don't overpay your broker and get a part of the spread back. Below we give a basic matrix according to which a novice trader will rarely make a mistake.
1 — Complete your training.
It is a very important first point. Before even choosing a broker and making your first deposit, you need to complete at least one or two trainings, read some books and maybe sign up for a webinar with an experienced trader. Without training, you simply cannot operate effectively.
Usage time: from 1 week. It depends on the availability of free time and willingness to study. Price: 0 cents.
2 — Select a broker
The broker provides trading tools, trading software, functionality for technical and fundamental analysis.
It also defines conditions such as available account types, minimum deposit, leverage ceiling, offers (or does not offer) investment opportunities.
As you can see, there are a considerable number of factors that a broker determines. Furthermore, it is essential not to come across a Forex scammer or a financial pyramid.
Usage time: You can spend a few days on a scrupulous comparison of the top brokers, or you can use our site's rankings and make a decision in a few minutes. Price: 0 cents.
3 - Open an account.
An account can be opened with a broker indicated by our website. All the forex brokers are verified and regulated.
Usage time: just a few minutes. Price: Depends on broker conditions, usually $1-$100, but there are also no deposit options.
4 — Start trading.
The main thing here is not to rush to make money on the Forex market. It's best to start with a demo account, then practice on a cent account and only then open a dollar account (default). We will tell more about account types below.
Usage time: 1 months. Price per person.
5 — Build momentum
After 1 – 2 months of regular trading, the trader already fully understands how attractive the foreign exchange market is to him and how he is willing to continue to spend his time, energy and money to become a professional Forex participant.
At this stage, it is important not to stagnate, but to move steadily towards bigger deposits, bigger bets and bigger leverages.
Usage time: unlimited. Price per person.
So today you can type in the search bar “Forex where to start” and after 2 – 3 months become an experienced trader and start earning steady money in the foreign exchange market. If that's your goal, start now.
Remember [George (aka György Schwartz)] Soros’ mantra: “The best time to invest is yesterday.”
How Much Money Can You Make With Forex?
Of course, the first thought that visits every novice trader is how much can you earn with forex. A trader's earnings depend on many factors, including the Forex company (broker) through which he enters the interbank market.
In general, this is a highly volatile market, currency quotes are constantly changing, and sometimes these changes are difficult to predict. But this is a trader's job.
As for direct earnings, in addition to brokerage commissions, the trader's strategy (e.g. scalping or intraday), the number of transactions he carries out daily, the amount of his deposit and compliance with the rules of money management it's essential.
For example, according to common rules, the amount of a fee must not exceed 2 – 5% of the deposit size. A bigger bet is a direct violation of basic money management rules, but this is how Chinese trader Chen Likui managed to make 61,595% profit in 1 month!
But Rejoice is an exception. Not in terms of earnings (you can immediately name dozens of world-class traders with colossal returns), but in terms of approach.
In most cases, winners act within the basic rules of money management and within the framework of standard market laws — because it's impossible to beat the market. But it is possible to make money from its instability.
The best traders like Andy Krieger, with a deposit of several million dollars, with leverage of 1: 200 of ten transactions, can very well receive up to 3 – 4 million dollars.
But not the average trader, which you will become a few months after proper training. Small (more) deposits (in the range of $100 – 500), of course, will have less profit. So, with ten trades a day and with leverage not exceeding 1:100, you can earn up to $300.
But you need to take into account that only 15 – 20% of new traders become professionals. Why do most fail? Because people don't want to waste time learning, choosing a reliable broker and thinking scrupulously about their strategies. They want everything at once.
However, only those who understand that there is no easy money and are ready to learn Forex from the bottom up will inevitably achieve sustained growth and success.
The best Forex brokers for new traders
After completing the training, you are ready to start a Forex session, ready to apply your first strategy and then place your first bet.
But first, you need to select a broker that, according to its terms, will be the most convenient for you.
How to start from scratch in Forex without investment
After watching a number of Forex beginner videos, completing an intensive training course, and choosing a broker, a future trader often understands that they are ready to start trading, but not yet ready to risk their own money.
. The desire to try to make money or learn from the real market without investment seems fantastic. Right? Right!
Currently, almost all Forex brokers offer their users a number of unique opportunities that allow them to start trading without making a minimum deposit.
We have already mentioned these opportunities. There are three of them: a demo account, a cent account and a no deposit trading account. Now let's take a closer look at each of the options available to a new trader.
Forex demo account
These accounts are called demo accounts or just demo accounts. The essence of the demo account is in its name: it is created to demonstrate to the trader how everything works in Forex using their broker's trading platform.
So, you enter the market through a real trading terminal and open a completely real account. You receive accurate quotes and up-to-date trading instruments. For forecasts, you use real analytics, and analyze the existing interbank market.
The advantage of the demo account is that you are trading but not using real money. So your transactions never go to the interbank market: they simply spin around in a virtual sandbox on your broker's website.
Consequently, you do not withdraw any profit. Likewise, the broker also does not risk anything and does not take any commission from you.
Typically, a broker receives 10.000 virtual dollars (sometimes 50.000), and as soon as they run out, the demo account is closed. However, you can open a new one at any time.
Also, some brokers do not have a limit on these accounts, but limit the time (usually 30 days) before they expire.
It is ideal for learning Forex as it gives you a visual understanding of the foreign exchange market and allows you to practice your first trading strategies and get to know your broker's training terminal and trading conditions.
Pros of demo accounts
You don't need a deposit
You work with real trading instruments and accurate quotes
You can check all trading strategies
Cons of demo accounts
The lack of risk psychologically will not allow you to verify the objectivity of the individual
The advantages of a demo account are not particularly relevant after a few days of intensive trading
Thus, a demo account is more of a training session that includes practicing technical skills of interacting with the trading terminal, testing the basic strategy in “non-combat”. But its importance cannot be underestimated.
Forex account no deposit
As the name suggests, you don't need a deposit to enter the Forex market using this method. Unlike a demo account, this practice is not as widespread among brokers.
Still, more experienced traders are increasingly finding this opportunity to open the first full account without depositing their personal funds.
What will you trade if you don't make a deposit? Answer: from the money broker! The broker just gives the money to you sometimes as a gift and sometimes as a loan or with commitments.
Therefore, you need to read the broker's agreement on non-deposit accounts carefully. Of course, these amounts aren't colossal, usually around $10. But this kind of help is more than enough to start placing bets and earning your first bucks while gaining unique hands-on experience along the way with real “free” funds.
The no deposit Forex bonus is the only limitation on the money the broker will give you at the time of registration. That is, you cannot withdraw $10 (and often you cannot withdraw any profits made from it), and they will remain in your account indefinitely (or until you lose them).
Pros of No Deposit Forex
You don't need personal funds to start trading
You don't risk your money.
Using the broker's bonus deposit, you earn real money, which you can withdraw later
Forex no deposit cons
If you miss the bonus deposit, the broker will not give you another
Technically, a no deposit Forex account has no real downsides and you can start earning professionally in the foreign exchange market without any investment. It still makes sense to deposit a certain amount to increase fees and hence your income.
Cent Forex Accounts
Unlike no deposit and demo Forex accounts, you must make an investment when using a cents account, albeit in small monetary amounts such as $1 – 10.
The idea behind a cent account is that you trade the real market with real money, but you bet not in dollars but in cents.
Likewise, all your profit is reduced by 100 times. But all risks are reduced in the same proportion.
A penny account allows you to experience the Forex market and realize what it means to risk real money, not virtual money, or the money provided by a broker. It's a psychological thing. Trading differs when using your “own” “real” money, however small the amount.
Traders using cent accounts report that they quickly develop a “need for greed”! But this is a business trait that must be earned and controlled for long-term growth and success. Better to learn this lesson using $10 against $10.000.
Cent accounts allow you to work more consciously on real strategies, and this is the last step on the way to opening a real “dollar” account.
Usually, new traders open a demo account first, and after a few days or weeks they open a penny account.
Some brokers allow you to use the initial bonus on a penny account, but this is rare. A trader often deposits something like $1 into a penny account and trains for a week or two. After that, they migrate to a dollar account (default).
Benefits of a penny account
Real market trading with real funds
Unique hands-on experience
Minimal risk (several tens of cents for the most unsuccessful bets)
Disadvantages of a Penny Account
quickly becomes boring
A cents account is ideal for studying Forex on your own. But it gets boring in the blink of an eye because the trader doesn’t see significant profits or experiences the “challenge” of risking considerable amounts of money.
Typically, a cents account is traded for no more than one to two weeks with active trading.
New traders do not always use all these opportunities. Some beginners, after a demo account, immediately open a dollar account.
Some beginners who first work with a penny account believe that if there is no minimal risk, they will not be able to fully appreciate the philosophy of the market.
It's all up to the individual, but the result is the same: the trader eventually opens a standard dollar account and begins his path to professional trading and steady earnings.
One question still remains: which option do you prefer: auto trading or investment?
Auto trading or investing in Forex
Forex courses for beginners and training on demo and cent accounts provide an essential foundation and experience for new traders.
But it doesn't answer the question: is it more profitable to trade on your own (i.e. do it yourself, taking all risks and mistakes), or is it better to minimize risk when choosing investments and let experts manage your trades? To make the right choice, let's start with the concept of auto trading.
Independent Forex trading entails independent analysis of the market, predicting price movements for the selected currency pair, opening and closing orders, and setting take-profit and stop-loss points.
That is, your profit depends 100% on you. Nobody helps you and you can't transfer the responsibility to someone else. Likewise, you don't need to share income or profits with anyone (excluding the broker commission).
Pros of auto trading
You don't depend on anyone
You don't share the profits with anyone
No restrictions (only your broker's conditions)
You are getting more experienced over time, and as a result, revenue increases.
Cons of auto trading
In the early stages, in the absence of experience, the risk of losing the deposit is High
In contrast, investments are an alternative to independent trading. Technically, investments can also be called long-term trading (a type of Forex strategy), when orders remain open for many weeks and even months.
But now let's consider traditional Forex investment methods that don't require independent market analysis, done by you on an ongoing basis:
With this investment option, a group of traders transfers part of their funds to a more experienced trader called an investment manager. PAMM account.
The account manager makes trades on your behalf and, in addition to your funds, uses the funds invested by other traders. If the trade wins, everyone receives a percentage based on the amount deposited, and the manager receives a small commission from each trade.
The “safety concept” (i.e. loss protection) here is that the account manager is also investing his own funds, so he is more likely to exercise greater prudence and caution.
In general, everything is the same as for PAMM accounts. That is, the more the professional market participant trades for you. The difference is that when investing in PAMM, the funds transferred to the manager are reserved by the system, but remain digitally in your account.
In the case of LAMM, funds are not reserved and the manager's bet is simply doubled to your trading terminal. But the result is the same: in case of victory, everyone gets a nice profit, and the manager gets a percentage.
Copy trades (auto trade or copy)
In this case, you carefully select a so-called signal provider — an experienced trader who makes his trades and allows others to copy them.
depending on broker conditions, full or partial copying is possible. If the copied bet wins, the signal provider again receives a small commission from your winnings.
All three investment options are popular and widely represented on the Forex market. New options are constantly emerging (like RAMM) and all offer great passive revenue potential.
Independent trading also has its advantages: you gain personal experience and your income depends only on you. Or you can use all or some of the above methods at once if the broker's conditions don't prohibit it.
Which to choose? How to invest? These can be million dollar questions. Literally! Some of the traders find it more convenient to trade independently; while others prefer to invest, saving time, headaches and worries.
And some successfully combine these methods, supplementing profit with independent trading, investing in—and learning from—the experience of others. There is no ideal option, and each trader decides for himself how it is most convenient for him to win.
How to become a successful Forex trader?
It is entirely possible to become a successful trader. But you need to understand of course that you must be seriously committed to the task of trading.
It's a full-time job that takes a lot of time and effort. Start by taking some Forex courses for beginners, read lots of books and watch video tutorials on the web.
Be sure to read the reviews about them to avoid wasting your time. The next step is to open a demo account with a carefully selected broker, and then we recommend doing a little work on a penny account before opening a standard account — ideally with a broker bonus because there is an excellent chance that you merge your first deposit.
Then set your time and desire level to achieve steady growth and profit. If you don't rush into battle right away without the minimum experience required, you won't be afraid to close deals. But always think positively and strive to win. Success will not be far off.
Forex Basics FAQ
Which has the better educational value: trading courses, video tutorials, or Forex books?
Typically, new traders combine all sources of information or choose the most convenient way for them to achieve their trading goals. One method or combination of efforts is not better than another. It is more important for a practitioner to become an experienced trader.
How to start trading on Forex? Is there a universal algorithm?
First, you study at an online school, watch webinars, read books and articles. Then choose your broker and open a demo account. After that, it makes sense to open a cents account and, after gaining basic experience in the cents account, switch to a real (ie standard) dollar account.
What are demo, cents and no deposit accounts?
On a demo account you trade virtual money, at one cent you trade real money but calculated in cents up to a limit of about $10. Therefore, risk and profit are minimal. A no deposit Forex account does not require you to make a deposit using your money because the deposit is provided by the broker (usually no more than $10).
Which is more suitable for me: self trading or investing?
Many professional traders combine these two methods. In reality, it all depends on your personal preference. Some traders prefer to earn money independently, while others find it more convenient to invest in PAMM accounts and receive stable passive income, allowing more experienced money managers to conduct trading.
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