Introduction to Forex Trading
Forex trading is whereby you put two currencies together, one being strong and the other being weak. Currencies are vital in the buying and selling of goods and services across local and international markets. Here is everything you need to know about forex and forex trading.
In forex trading, traders are always looking for good trading conditions and the best way to maximize profits. For that reason, here are some of the reasons why forex trading is important;
• Forex trading hours
Forex trading has flexible 24 trading hours, 5 days a week. That way, traders love taking advantage of active trading sessions or hours.
• Low transaction costs
There are low transaction costs in forex trading. The transaction cost depends on the spread which is measured in pips. Brokers also get commissions on flat rates or a percentage basis.
Forex traders allow traders to trade with leverage amounts in the market. They give the trader the ability to trade with more money than what they have. This means that one can trade $50 for every $1 in their account
• High liquidity
Forex trading is one of the most liquid markets all over the world. Transactions in forex are quick, easy, and have low transaction costs. However, this creates a great opportunity for traders.
• Variety of currency pairs
You are allowed to trade with different currency pairs that you want.
3 Ways to Trade Forex
There are three ways to trade forex that include spot market, future, and forward markets.
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• Spot market
The spot market is whereby forex traders buy and sell currencies depending on the trading price. Here there supply and demand are what determine the trading price. Supply and demand are determined by some of the factors like interest rates, current economic and political performances in different countries. The spot market is also referred to as the forex market. Electronic trading and forex brokers have boosted the trading volume in the spot market.
Traders make a final deal called the spot deal whereby one trader delivers an amount to the other trader and they get a specified amount at an agreed rate value. The trading period is within two days.
• Forward contract
In the forward contract, two parties agree to buy a currency at a future date and a pre-determined price in the over-the-counter markets.
• Future contract
In the future contract or market, contracts are bought and sold by two parties upon a standardized future date and price.
Forex Trading Strategies
A forex trading strategy is whereby a forex trader decides whether to buy or sell a currency at a given time. Traders can develop trading strategies on their own or the internet. When creating a forex trading strategy there are factors that you should consider.
1. Market- when we mean market we mean the currency pairs. You should be able to read the currency pairs.
2. Size- it is good that you have a large position to control risks taken during trading.
3. Entry points- the entry points determine when to join the trading market.
4. Exit points- you should develop rules that determine the exit points and when to leave the market.
5. Tactics- you should develop tips and tricks on buying and selling currencies.
Forex Trading Systems
Forex trading systems are ways of forex trading based on a series of analyses to determine the buying and selling of a currency pair and with a set of procedures to help decide on the entry and exit points. It is also a way to determine the risk management methods. The forex trading systems also involve strict trading rules. There are different forex trading systems that a trader can use.
Automated forex trading systems
The automated forex trading systems combine a trading platform and a computer programming code. The automated forex trading system is designed to start and close a long or short position in the market. They do not require human interference. However, they combine the trading strategy and the MM also known as the Money Management System that is implemented as a computer software code. Some of the Automated Forex Trading Systems include the EA Builders System Creator, Wall street Expert Advisor, Forex Diamond Expert Advisor, Forex Mega droid Expert Advisor, and the FAP Turbo 2 Expert Advisor.
Every trading system has a different price depending on the key features. They can be sued in a variety of trading markets like the stock, community, and cryptocurrency. There are tips that you should consider when using the Automates Forex Trading Systems;
It is crucial to do a first-time test on the system. You can test it on live markets conditions with a demo account.
You should identify how much money you can make from the Automated Forex Trading System. Also, identify if it is a true system to ascertain its credibility.
It is good to copy multiple traders rather than a single trader. This helps in utilizing the system services.
o Risk Management
You should set up a risk management system to help you preserve your trading capital so that you do not lose too much money.
To start an Automated Trading System;
1. The first thing you need to do is open an e-Toro account. Provide relevant personal information like name, date of birth, contact, and physical address.
2. They make deposits to the account. The minimum deposit amount is $200. You can deposit using a visa card, MasterCard, PayPal, or any bank transfer that takes within 3-7 working days.
3. Look for traders. You can search for traders to copy by clicking on the people button. Search for different traders depending on your needs and expectations.
4. From there you can start trading.
Manual Forex Trading Systems
The manual forex trading systems do not have expert advisors, unlike automated systems. For manual, you have the chance to predict the future movement in the forex trading market. In trading, some situations require thinking other than technology. For that reason, the manual forex trading system is the best. Some of the manual forex trading systems include;
G7 Forex Trading System
It takes a short time to make tremendous profits. Your proficiency in forex trading is what will determine your profits. It is also a good way to risk because of the rewarding profits. The G7 has simple rules and numerous trading opportunities. Traders get free monthly analyses and reports.
10 Minutes Forex Wealth Builder
Its qualities make it one of the best Forex Trading Manual Systems. It has 2 trading setups that are the swing trade and breakout trade. Its setup is easy and has an easy way to learn. Also, large movements in the daily charts make great profits. With the 10 minutes forex wealth builder, trading takes a short time.
Little Pigs Trading System
The little pigs trading system uses the simple moving averages across three-time frames to help in establishing a specific trend. When the system was tested it already had a 28.65% profit. That makes it easy to trust whenever you want to trade. This system requires expert traders rather than newbies.
Moving Average Strategy
Moving averages calculate the average cost of several periods in a given time. They usually help traders see the overall movement of an asset. They are also used to check on support and resistance. Most traders believe that the current price will still be in the future and will make more profits. There are two types of moving averages. They are the simple moving averages also known as the SMA and the exponentially moving Averages also known as the EMA.
Simple moving averages- they help in calculating the average of different prices like the closing price by the number of periods at a given time.
The simple moving average formula is;
SMA= [A1+ A2+ A3+…..+An/n]
An= the current price of an asset at time n
n= number of periods
Exponential Moving Average- this puts weight and advantage on the current data points. It is also called the exponentially weighted moving average.
The EMA formula is;
First, calculate the SMA for the period. It is the sum of all closing costs for the period and divide by the number of periods.
Calculate the multiplier of the exponential weighted moving average
Multiplier= [2/(selected time period+ 1)]
For instance, if the time is 10,
Multiplier will be= [2/(10+1)]= 0.1818
Calculate the current EMA
[Closing price-EMA]*[Multiplier+ EMA]
The difference between the exponential moving averages and the simple moving averages is the sensitivity to price changes. The EMA is more sensitive than the SMA. The SMA is more responsive to the current price changes.
There are different moving average strategies. They include;
Moving Average Crossover
This is a popular trading strategy because it takes place when a fast-moving average crosses over a slow-moving average.
Other Moving average strategies include;
Using Moving Averages to ride a trend
Using moving averages during pullbacks
Using moving average to stop a loss or trading
Using moving average when taking profits
Best Ways to Trade Gold
Trading Gold gives traders more great trading opportunities and profits. It also means buying and selling many times, in short, spun like hours or minutes. Gold needs to be traded with something that has the same value as gold or its price. The most reason for trading Gold is because its price fluctuates with much force and volatility than using the currency pairs. There are different Gold trading strategies like trading Gold with fundamental analysis, with U.S inflation, with economic crisis or instability, U.S dollar index, and with Negative Real estate interest rate among others.
How to Read a Forex Chart
To read a forex chart you need to;
1. Open any chart in your trading platform like the Metatrader4
2. You can select a chart depending on its type like a line chart and bar chart among others.
3. Understand the price and chart levels as they are in the chart.
4. You should also identify the chart frame.
Best Rich Forex Traders
With the best top rich forex traders, we learn that forex trading is not a scam. Forex trading is legal but only for those that have the right licenses. It just takes you to risk and get more great profits. Here are some of the best rich forex traders you can learn from.
o Warren Buffett
He is one of the richest traders who started trading at the age of 11 years. Warren is the son of one of the US congressmen. If you ask him about forex trading he will tell you that is a business activity just like the other. All you need is to use the right resources to make good profits from forex. He is now the CEO of Berkshire Hathaway Inc. he is worth $88.6 billion.
o Michael Bloomberg
He started his career in a security brokerage company known as the Salomon brothers. He, therefore, started his company in 1981 known as Bloomberg. He is worth$60 billion.
o George Soros
He is from Hungary and was born in 1952. He started trading while still in school. He gained relevant experience in currency rate markets. He has since then earned billions on money.
o Joe Lewis
He is based in the United Kingdom and started trading at 15 years old. The trading business gave home $1.8 billion. Today he is worth billions. And for that reason, he is one of the top rich forex traders.
o Paul Tudor Jones
Paul turned down his offer to go to Harvard business school and choose to be a commodity trader. Trading gave him almost $100m. Today he is the founder of Tudor Investment Corporation and was on the NYSE for quite some time.
There is a lot to learn from forex trading. It can help you earn more money just from your comfort zone. You need to identify the best trading sessions or hours every day and you get quick money. The more proficient you are the better you will make more profit. With the relevant information above, we hope that you learn something about forex trading.