The ultimate forex trading starter kit
Everyone has heard about forex trading from a friend, relative, colleague, or even via various social media platforms. Can you really make money trading forex? Yes, you can make as much money as you want. However, you should read the forex trading starter kit before proceeding to risk your money. Do not be one of those who set unrealistic expectations and get frustrated when money does not start trickling into your account within minutes.
Forex trading is, without a doubt, difficult for every beginner. Usually, newcomers set such high expectations, and when they are unmet, they give up quickly. Like any other craft or skill, you need these tips and insight that I have compiled for you in this forex blog. I hereby give you a forex trading starter kit that is foolproof.
Most people have read various topics on forex, but they still ask, “how do I start forex trading as a beginner?” If that is your biggest worry, relax because I have your back. Follow the guide below to know how to start trading today.
- Have a basic understanding of what it is all about
The first step to mastering how to become a trader is to seek information, insight, and knowledge on how to sell and buy online. You also need to familiarize yourself with the terms that are commonly used in this field.
Luckily for you, there are numerous books and online resources from which you can get this information. Even so, this is not adequate. Be conscious enough to realize that trading is a journey and not a destination from where you can mint free money. For this reason, avoid people who start talking about how much money you are supposed to make from forex forums out there. You are not ready to quit your job to become a full-time trader, so why do you allow yourself to listen to lies? Instead, seek more insight into how to trade.
A good way of gaining this knowledge and skills is by contacting a genuine trader, especially one who has authored a book about it. Conduct thorough research and analysis as you learn from them. In this digital era, you can take numerous forex trading courses or any other course that is available online. You have to be thirsty for knowledge and skills for you to master forex trading.
Reading books and taking online classes have, over time, proved to be inadequate. If you are a determined person, now is the time to join a forex traders forum, where there are numerous like-minded people. The best thing about such groups is that they comprise of novices, amateurs, and pros. Everyone will assist you in their own way on this journey to becoming wealthy. They will listen to you and allow you to ask questions. It is always a great idea to get a mentor on such platforms. Remember, birds of a feather will always flock together, so mingle with greatness to become great.
A group that is genuine about nurturing beginners like you will allow you to watch live forex trading. Your mentor may ask you to sit and watch as the pros show their skills and prowess in a forex day trading room. You can also reach and even surpass their level if you remain focused and ready to learn.
Do you remember that I mentioned terminologies up there? Well, here are some of the crucial terms that are a must-know;
- Spot Forex
This is a term that refers to selling and buying real currency. For example, when you buy 1,000 USD and exchange it for euros, you wait for the value of the euro to increase before changing the money into American dollars again. In the end, you get more money compared to the value you spent on the original purchase.
- CFDs (Contract for Difference)
You can expect to come across this acronym many times as a trader. It represents how the prices of financial instruments move. With time, you will come to understand that instead of selling and buying substantial amounts of currency, you can observe the price movements without owning the assets. CFDs are also common in bonds, stocks, indices, and cryptocurrencies. They allow you to trade in price movements without the need to buy anything.
- Pip
This term refers to or 0.0001 of the quoted price or the base unit in the price of a specific currency pair, usually in non-JPY currency pairs. If, for instance, your price bid for the EUR / USD pair rises from 1.15556 to 1.15566, the difference is 1 pip.
- Spread
Spread refers to the difference between the cost of purchase and the sale price of a currency pair. Usually, this difference is low for the common currency pairs, so the spread is low. Pairs that do not trade very often have a much higher spread. In this field, you can only make a profit if the value of the currency spread is higher than the spread.
- Margin
This is the money that is retained in your trading account whenever you open a trade. Usually, the average forex trader does not have the required margin to trade an amount that can lead to a good profit. To deal with this limitation, many brokers offer their clients some leverage.
- Leverage
Leverage capital refers to the capital that a forex broker offers a trader to increase the volume of trade that the trader can make.
- Come up with a well-deliberated strategy
The second step after gaining basic knowledge is having a strategy. You cannot go to war without a plan on how to conquer your opponents. You will need a set of rules of engagement to guide you on when to buy and when to sell. You also need to know how you will manage all your trades. When developing a strategy, I can assure you that you will need to KISS. This is not a romantic set-up, so let not your mind wonder. It means Keep It Simple Stupid. In simple terms, create a simple strategy.
At this point, you are still fresh in the game, so you do not require all the technical analysis that you have read about. Confidence in your strategy will yield better results. As you create your plan, be sure that it will not be flawless. Hey! I also failed a few times before my strategy caused me profitable trades. You will, sometimes, have a losing streak, and that is okay. What is not okay is failing to learn something new from each of your losses. Adjust your strategy along the way, for it is not cast in stone. It is always a good idea for beginners to do many back-tests on demo accounts to create the discipline of following the strategies they make.
There are three easy strategies that you can use;
- The breakout strategy
In this technique, you use breaks as signals. It is not unusual for markets to be between support and resistance bands, a state called consolidation. A breakout happens when the market moves beyond the confines of the consolidation phase. It, therefore, has new lows or highs. Before any trend can be observed, there is always a breakout. As a result, breaks can signal the start of a new trend, but not all breaks lead to new trends. You can avoid making a loss using a stop loss.
From the above illustration of what a breakout trading strategy is, I have indicated the sell signal,but note that, it should be only confirmed if there are some candlesticks closing below it. In this daily chart, if the price closes below the orange line, then its a confirmed sell trade.Again, you can add one more idea to your confirmation by failure to make a new HH. Consolidation is a point where by the big banks are loading up orders.
- The moving average cross strategy
This strategy is commonly known as SMA. Moving strategies refer to the lagging indicators that use historical price data. They not only generate forex signals, but they are also used to confirm trends. Usually, many people combine the breakout signals with SMAs to make better-informed decisions.
From the above chart, its well shown that when the price ais on the upper side of the 100 moving average many forex traders would confirm that as an uptread and when the price is below its a downtrend. I am just helping them who are searching ”how to trade the forex market using simple moving average or exponential moving averages?” I am not a fan of indicators. The moment you get used to get signals from indicators you will never learn how market works. I prefer price action to this moving average strategies, but its a good tookkit for the beginners who are yet to identify a trend by use of HHs/LLs sequence.
- Donchian channels
Richard Donchian invented these channels, whose parameters are easy to modify. In this technique, a trader uses a breakdown for a certain period to guide their decisions. The breakdown helps them to establish if the prevailing market price excessed the highest high in the selected period. It also helps in knowing if the same price surpasses the lowest low during the same period. The direction of the shorter-term moving average guides the direction that the trader chooses.
- Find a broker
Without a broker, you will not achieve much, and you can take my words to the bank. In simple terms, a broker facilates trading as they execute your trades when you place a buy or a sell.. They are instrumental to your success. There are numerous brokers who can assist you. However, you have to be very careful when choosing one. Look out for the following things before settling on one;
- Avoid brokers who offer you extreme leverage. If a person offers you a considerable percentage profit on your capital, run! This is a broker who understands the human desire to make money. They will get you excited by promising a higher profit margin. My friend, if you pick one like this, you will lose money as they celebrate their profits. Do not fall prey to their tactics.
- Be keen to note the amount of commission that they charge. Avoid those who charge extreme commission amounts.
- Be wary about the spread, that is, the variance between the buying price and the selling price. A good broker has a tight spread, meaning that the cost of trading will be less for you.
- Depending on your location, you need to ascertain that your preferred broker has met the regulations in your country.
- Observe the customer service and be sure that it is excellent. You need to relate well with your broker, and you have a right to get answers to any questions you have. Take note of their withdrawal and deposit speeds. A reliable broker is one who helps you to get your money out whenever you need to.
Now that you have spotted a good broker, how much do you need to start trading forex? You are not there yet, so hold your horses. Before you start trading, use a demo trading account for practice. You cannot afford to lose your hard-earned money yet. Remember that you are on a journey and that you are still a student, so be patient. This is not a get-rich-quick scheme! Trading using demo accounts can sometimes be boring, but you need to be serious about it before you making any decision of having a live account.
Do you want to make trading using your demo account more fun? If so, write down all your rules of engagement, when you will buy and sell, when you will make a profit and how you will manage your risk. This is the strategy I mentioned earlier on.
You need to treat this demo trading account as a real account. You have to know that, if you do not treat it with respect and discpline it deserves, it might develop bad trading habits which will be very hard to change.
Note that, mind is involved in trading, many traders who use this do not pay attention to the following,
- Starting capital,
- Leverage
- Risk management strategy
- Trading plan.
In case you trade demo for a long time without paying attention to the above, you will duplicate all those bad trading habits into your live trading which might cause losses and burn your trading account.
Take this from me, treat demo account as a real account, having a trading plan,write down all the reasons for entry and exit. The moment you train your mind to be discplined, it obeys your orders. Train it to follow those trading concepts for your success.
Look out for more articles of how mind intefere with your decision making when trading. I know it will be a game changer for many new traders like you.
- Always start with low leverage
How do I trade forex with $100? While this is undoubtedly an amount that you can risk, the leverage is more important. You are still a beginner, so do not go beyond a 5, 10, to 1 leverage. This will allow you to get a feel of both losing and winning a trade. It will teach you how to conduct your trade without taking very high risks that can ruin your financial life forever.
- Always have a written plan
You cannot succeed in a forex trading live stream or any other forex-related activity without having a plan. When you start dealing with real money, you will need a plan before you make life-changing losses. You must have a journal in which you record all your trades. Keep it organized.
Over time, you will learn that losing is part of the game in this field and that it is not always a bad thing. Each loss will teach you something new. Go through your journal and observe the trend in all your losses. You will know your weaknesses and think of a plan to mitigate them. From your wins, you will learn the tips and tricks that you need to capitalize on. Do not forget to write down the points you got from the forex live trading group and your mentor.
Getting started in forex trading requires self-belief, a reasonable thirst for wealth, and an ever-willing mind to learn. While it may seem very difficult at first, the above forex trading starter kit offers you ample insight on what to do before risking your money. These steps worked well for me, so they certainly will for you.
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“I Wish You Well In Your Journey & In Your Trading.”-