Knowledge – Trading Forex for beginners summarized
There are dozens of steps that people have to take in order to truly call themselves a Forex trader. Most of these steps are taken when people are trading Forex for beginners’ status or are trying to exit it with some knowledge already under their belt.
To summarize the whole beginner’s phase of starting to trade Forex we need to look at exactly 10 major steps that a beginner has to take.
- Learning the basics (currency pairs)
- Learn the software (MT4, MT5)
- Learn with demo accounts
- Find a reliable service provider
- Use the service provider’s resources such as tools and guides
- Try out the support services of the provider
- Learn about strategies and try them all out
- Create a plan for reading news and doing independent analysis
- Keep weekly track of the progress
- Start placing real trades
All of these may look overwhelming, but beginners usually take it step-by-step so that the learning material is always easy to handle.
Forex trading for beginners is extremely hard, it requires hours of time every single day in order to stay updated on the news, new strategies and all the material that is needed. All in all, it’s not something people can do in a week. It could take months, and sometimes even years.
Even the most experienced traders tend to learn something new on the market.
Ways to learn Forex trading basics for beginners
Everybody has their own method of learning Forex trading, which is why it’s very hard to find a universal guide.
In most cases, traders find success stories from all over the world and try to include some of the used strategies in their own methods. However, this could prove very risky, simply because most success stories are about people risking quite a lot and getting lucky in the market.
It may take more time but ways to learn about Forex trading for beginners are usually recommended to be as risk-free as possible. But they do sometimes boil down to 3 strategies.
- Learning through online guides
- Copying successful traders
- Learning while trading and making mistakes
All three of these have their advantages and disadvantages, but let’s focus on some tried and tested strategies.
Learning for free
It might sound surprising, but learning Forex trading for free is a definite possibility. The methods that beginners use in this case usually have something to do with demo accounts and no deposit bonuses. But what are these things?
A demo account is pretty much a real account where you can place trades, exchange currencies and even have some kind of payout. However, trading on demo accounts is not done with real funds. The company that owns the demo account gives traders virtual currencies to trade with and learn as they go. It’s something like a sandbox for beginners.
A no deposit bonus is a classic answer on how to trade with Forex for beginners in most cases. Newcomers to the markets tend to find a company that has this service and goes for it immediately. Sure it may be trading for free, but there are reasons why it’s not very effective.
You see, when a trader has nothing to lose, they are in a completely different mood. They are more open to risk and don’t do too much research. Because of this, they don’t really learn too much from this strategy and end up wasting time and energy.
Common mistakes that beginners make
No matter which strategy you as a trader choose, chances are that you will make at least some mistakes on the journey. It’s nothing to be ashamed of and nothing to fear as well. It happens almost all the time, and people with decades of Forex trading experience tend to make mistakes as well.
However, this doesn’t mean that Forex trading strategies for beginners cannot be planned with the most common mistakes in mind. Here are some mistakes that are usually made by beginners.
No prior research
Forex may be a market that is mostly influenced by supply and demand, but it also changes according to what’s going on in the world. Let’s take Brexit as an example. When the UK first announced that they were leaving the European Union, a lot of traders believed that it would hurt the economy, so they started selling a lot of GBP. This increased supply and decreased demand. Because of this, the exchange rate was changed, and those that didn’t consider Brexit as an influencer didn’t really see a successful week. A daily dose of new information is essential when trading risky trades.
Not following a trend
A trend could be almost anything. It usually starts when a large part of the market starts agreeing on something. Let’s bring the Brexit example back. Imagine there was a trader that refused to believe that the UK economy would go down. He or she could have been absolutely correct, but would still not be successful on the market. A very important thing people consider when they try to learn to trade Forex for beginners is that no matter how wrong a trend is, it always influences supply and demand as long as enough people follow it. When traders don’t follow it, they usually end up having a terrible trading experience.
Trading unknown currencies
This mistake is usually made when a specific currency pair has a good history. For example, those that traded this pair managed to achieve huge payouts in the past. This encourages new traders to try it themselves, only to find out that the “good past” had its reasons, and those reasons are now gone. Trading currencies that a trader knows nothing about is usually considered a bad idea.
No weekly/monthly goals
Goals may not be essential for being successful in the market, but they are very useful when traders are trying to stay motivated. For example, achieving the goal for the past week, no matter how small it was is always very pleasant. While not reaching it gives a unique opportunity to see what the mistakes were. When people try to learn Forex trading for beginners, it’s not uncommon to see them set small daily goals to keep track of their progress.
Leverage is undoubtedly a very useful tool when trading Forex, but it’s also very dangerous. The simplest way to explain leverage is to call it a loan from your broker. Basically what happens is that the broker increases the amount you can trade by 10, 100 or even 1000 and then takes a percentage from your payout if it’s successful. If it’s not, then there’s a chance that a trader’s whole account will be wiped out in just 1 trade. It’s usually recommended for beginners to stay away from leverage during the first 6-12 months of their trading.