Now is the time as the world faces its biggest crisis since World War II. Start slowly, learn everything you need to know from this simple Beginner’s Guide to Forex Trading and reap the benefits. Trading forex online is for those individuals who aren’t satisfied with an ordinary life and aspire to the extraordinary.
In this in-depth guide you’ll learn:
- What is online trading?
- How to get started trading online
- Benefits of trading Forex online
- What is online Forex trading?
- Forex trading for Hedging or Speculation
- How we traded Forex before the digital era
- How the Forex trading market works
And lots more…
Let’s dive right in…
10 Best Forex Brokers in South Africa for 2022
Are you interested in boosting your income with online forex trading? Invest in your future learning how to trade forex and other financial markets from the comfort of your home. Thousands of South Africans have discovered how investing online through a reputable online trading platform can give them financial freedom.
What is online trading?
👉 Trading online gives you access to a professional digital trading platform that provides you with a link to global financial markets. Trading online is the simple process of buying and selling financial assets through a brokerage that operates off an Internet-based trading platform.
👉 In today’s world, with high-speed connectivity and high-tech computers, online trading has never been easier. It makes financial asset trading accessible to the average man in the street and brings the world of stocks, bonds, options, futures, mutual funds and global currencies into our homes. Trading is no longer the domain of professional traders. Anyone with a passion for financial markets can now trade online.
How to get started trading online
👉 It’s easy to get started trading online. The simple approach to online starts with deciding you want more financial freedom and finding a reputable online trading school that will partner with you on your trading journey and take your financial growth to new heights.
➡️️ Register a demo account with a safe and authorized online trading college that gives you free access to an online trading platform.
➡️️ Partner with a personal trading specialist who mentors you while you learn to trade forex.
➡️️ Learn to use the trading tools to gain an understanding of how online trading works; from researching and analyzing market trends to charting and tracking trading performance and managing risk.
➡️️ Read as much as you can on the financial markets and learn how to trade responsibly with care and caution; develop a disciplined mentality to trading and a trading strategy that suits your personality.
👉 When you have spent enough time learning to trade online with a demo account and feel confident in your abilities, open a real-time mini account and start trading with small amounts of your own money.
Benefits of trading Forex online
Take control of your investment portfolio
👉 Control over buy and sell orders is a primary benefit of successful online trading, and checking your investment status and monitoring market performance is a key component of the trading process.
👉 Online trading platforms provide real-time information on your investment status. You can view stock quotes, monitor your trading dashboard and take controlled risks on buy and sell orders.
Access your trading status and market movements in real-time
👉 There is a wealth of information online and keeping up-to-date on political, economic and financial news is possibly the best investment you can make when it comes to securing your financial freedom through online trading.
👉 The more you put into the learning process to grow your knowledge and trading skills, the more you’ll get out of online trading.
Take control of your investment portfolio
👉 Control is key and online trading puts your investment portfolio back into your hands. With advanced charting and reporting on the trading platforms, you can access your investment statements, confirm buy and sell orders and generate investment tax forms without relying on your broker.
👉 A reputable online trading platform is affiliated with the main banks in South Africa as well as global financial institutions. This means the online brokerage can offer a convenient service that links its digital clients to their bank for real-time financial management.
Reduce the cost of trading
👉 Online trading has definitely reduced the cost of trading for both brokerage firms and investors. Brokers have lowered their commission for trading that takes place online and it should cost you less to trade online than over the phone.
👉 Lower commission fees make the financial markets more accessible for your average trader. A wider audience of investors can afford to trade online. The fairly prohibitive high commission fees of the past put trading in the domain of high-end investors.
👉 From a brokerage point of view, the automated process of trading has reduced their fixed costs. In other words, there are fewer expensive brokers in the field than there were a few years ago and a reduced need for costly office space, salaries, pension funds, medical aid, etc.
👉 Statements, charting and reporting are mostly generated by electronic technology and that means less paper wastage and reduced costs. Documents that were once printed and mailed to investors can be downloaded and filed electronically. Information is stored on the ‘cloud’ so nothing should get lost if you’re investing through a reputable digital trading platform.
The speed of investment transactions has increased
👉 High-speed interconnectivity 24-hours a day and five-days a week means the financial markets in South Africa don’t sleep, although they do take the weekend off.
👉 The speed of investment transactions has increased substantially and buy and sell orders can be executed in rapid real-time. Now there’s no waiting for your broker to come back from a long lunch.
Cut out the middleman
👉 When you place a buy or sell order online, it’s placed in a database. The technology rapidly assesses the market exchanges for the best price where the stock you want is in your preferred currency.
👉 The market exchange matches the buyer with a seller. The order confirmation is sent simultaneously to the buyer’s broker and the seller’s broker. This all takes place digitally in a matter of seconds and the online transaction can be over in minutes. Now there’s no need to hang onto the phone or wait for a call back from your broker.
What is online Forex trading?
👉 Forex is the abbreviated term for the foreign exchange market. It is a global decentralized or over-the-counter market for the trade of foreign currencies. Foreign currency is money from a country that is not your own.
👉 Foreign currencies are always traded in pairs. Some currency pairs are more liquid than others which, in theory, makes them easier to trade. Liquidity is the relative measure of how easy it is to trade a commodity with another commodity. If a currency is liquid, it means it is easy to trade.
👉 Cash is an extremely liquid commodity. You can buy almost anything with cash and it is easy to move around. Gold, crude oil or something like a Treasury bill is not as liquid as cash. You can’t buy a car with a Treasury bill. It has to first be converted into cash.
👉 When a country or say a financial institution has a liquidity crisis, it means it has too much money in circulation that is not in a liquid form. This includes loans or debt that can’t be used to cover withdrawals when the country or business needs money.
👉 The major currency pairs are pegged against the US Dollar which is the strongest performing forex in the world in value. Popular currency pairs that are USD-related are EUR/USD (Euro to US Dollar), GBP/USD (Pound Sterling to US Dollar) and JPY/USD (Japanese Yen to US Dollar).
👉 When a currency is not pegged to the USD, it is known as a Cross Rate or Cross. Popular crosses include EUR/JPY (Euro to Japanese Yen), GBP/JPY (Pound Sterling to Japanese Yen) and EUR/GBP (Euro to Pound Sterling).
👉 A good forex trading strategy is stick to your country’s currency and pair it with a strong market performer such as the USD, Euro, Pound Sterling or Japanese Yen. The reason for this is you can track price movements in your own country more easily than you can in other countries.
👉 South Africans trading forex will find it easier to research and track economic events and potential economic threats in their own currently if they subscribe to financial news sites and stay on top of local price movements through social media.
👉 The most common trading pairs are all linked to the US Dollar (USD). It’s not considered a major currency pair if the USD is not one of the currencies in the pair.
👉 The Euro to the US Dollar is the most widely-used forex trading pair in the world. It includes the currencies of two of the world’s largest and strongest economies. Both currencies have high liquidity and are less volatile as a trading pair compared to other currency pairs.
👉 The Japanese Jen to the US Dollar is the second-most commonly traded forex pair. The two currencies have high liquidity, complemented by the fact that the Japanese Yen is regarded as a ‘safe haven’ currency during worldwide economic uncertainty.
👉 The JPY is regarded as the ‘Gateway currency to the East’ and political and economic events in China and South Korea can have a notable impact on the liquidity of the Yen.
👉 The British Pound to the US Dollar was one of the first currency pairs to be traded via telephone which is why it’s sometimes known as the ‘Cable pair’. The United Kingdom and United States are regarded as two of the largest and most stable western economies and they share strong trading relations.
👉 The Canadian Dollar to the US Dollar is a popular pair because of its strong trading alliance. Canada exports substantial amounts of crude oil, minerals and grains to the United States and international trade in these commodities make both currencies highly liquid.
👉 The Australian Dollar to the US Dollar is a strong currency pair, mainly because Australia is a large exporter of commodities such as agricultural products, iron ore, coal and natural gas. International trade of these vital commodities creates strong liquidity in AUD/USD.
Forex trading for Hedging or Speculation
👉 Forex trading for hedging is where a trader takes an offsetting position with the aim being to balance any gains and losses on an asset. An offsetting position is when a trader takes an equivalent but opposite position to reduce the net position to zero. It’s a common forex trading strategy where the aim is to limit or eliminate liabilities, particularly across equities and derivative contracts.
👉 Forex trading for speculation is where a trader attempts to make a profit from movement in the price of a commodity, foreign exchange or a security asset. The speculation comes with greater risk where a hedging strategy aims to reduce risk or volatility that comes with price movement.
Forex trading for hedging
👉 Companies operating in foreign countries incur risk when they buy and sell goods and services due to fluctuations in the different currencies. Forex markets allow these companies to hedge currency risk by fixing a rate at which the transaction will be completed.
👉 A trader adopts a forward or swap market trading strategy in advance to buy and sell currencies. This locks in the exchange rate and negates the risk of currency fluctuations.
Forex trading for speculation
👉 Forex trading for speculation is what your average trader knows best. Speculative trading is where a trader buys and sells a currency or currencies to make a profit. There is always a degree of uncertainty because there is no guarantee that the forex market will swing the way it’s expected to which is why it’s called speculation trading.
👉 Forex trading for speculation is successful if a trader finds the ideal marriage between his or her trading personality and a trading strategy. At some point a trader has to commit to a trade position and submit a buy or sell order. How a trader gets to this final act is determined by what risk he or she is willing to take and how much capital is at stake.
How we traded Forex before the digital era
👉 Before online trading opened up a world of opportunities for investors, you had to call a brokerage firm and place a trade order. A broker would advise you on the market price and confirm your order.
👉 If an investor issued a limit or stop-loss order, the broker confirmed the limit or cut-off price as well as how long the order would be open for and the account that would be used to purchase the shares. The broker charged a commission for making the trade and this would be confirmed before the order to purchase was confirmed.
👉 It was a straightforward process and worked that way for many years but it placed the buying and selling role in the hands of the broker who had a direct link with the trading markets and exchanges.
👉 You would then sit back and wait for your trade order to perform. You would get trade confirmation by email and a monthly or quarterly investment statement. To top up your trading account or check on your investment account, you went back to your broker and gave him or her the instruction.
👉 This all changed when the digital trading era took off. Investors wanted to take more control over their investments and rather partner with an investment broker and have some influence over the trading process.
👉 Online trading platforms now act as a central portal for investment trading and compete to offer multiple tools for both brokers and online traders. These platforms give you greater control to manage your buy and sell orders as well as place market, limit, stop-loss and stop-limit orders.
👉 The online trading platforms offer advanced indicators to track trends and monitoring tools with multi-function charting and reporting. This allows you to keep a 24/7 eye on your investments. Day and night, you have online access to your investment portfolio which means you have access to the global markets regardless of what time of day it is in South Africa.
How the Forex trading market works
👉 The forex market is the domain of financial institutions and operates on several levels. Large financial institutions use the services of smaller financial companies known as dealers or brokers. The majority of dealers are foreign exchange departments in banks and insurance companies.
👉 Dealers trade in large quantities of foreign exchange, often in the hundreds of millions. Forex allows a business in South Africa to import goods from China and pay in US Dollars. It also allows investors to speculate on foreign exchange price movements and place buy and sell orders to benefit from the movements.
👉 A typical forex transaction involves an individual, business or government or financial entity buying a quantity of one currency and paying for it with a quantity of another currency.
History of modern foreign exchange markets
👉 Modern foreign exchange markets were formed during the 1970s. For three decades until early 2000, governments placed strict restrictions on foreign exchange transactions under the Bretton Woods system of monetary management. This system set out rules and regulations for commercial and financial forex relations for the major industrial countries in the world.
👉 Countries eventually graduated to floating exchange rates and enjoyed greater freedom in foreign exchange transactions that were previously prohibited through fixed rates determined by the Bretton Woods system.
What makes the modern foreign exchange market unique
👉 What makes the global foreign exchange market unique is its geographical spread and huge trading volume. The forex market represents the largest asset class in the world and has the highest liquidity.
👉 In addition, the forex market operates 24 hours a day, 5 days a week (only closed on weekends). The forex market offers low margins of relative profit compared to other markets with fixed income regimes. It uses leverage to enhance profit and loss margins with respect to the size of accounts.
👉 Figures released in April 2019 show that the global trade of forex averaged US$ 6.6 trillion per day. This is up by just over a trillion from April 2016. When measured by value, forex pairs were traded more than any other instrument in 2019 at US$ 3.2 trillion per day. The closest rival was spot trading at US$ trillion.
The $6.6 trillion break-down is as follows:
➡️️ $2 trillion in spot transactions
➡️️ $1 trillion in outright forwards
➡️️ $3.2 trillion in foreign exchange swaps
➡️️ $108 billion currency swaps
➡️️ $294 billion in options and other products
Difference between a fixed and floating exchange rate
👉 A fixed exchange rate is a type of exchange rate regime where a currency’s value is fixed or pegged by a monetary authority against the value of another currency. The other currency may be a basket of currencies or a commodity such as gold. It’s also called a pegged exchange rate.
👉 In other words, the government of a country does not allow the exchange rate to change according to supply and demand. The aim of a fixed exchange rate is to maintain the value of a country’s currency within a very narrow band.
👉 A floating exchange rate is where the currency price of a nation is set by the forex market based on supply and demand of its own currency relative to other global currencies. It’s in stark contrast to a fixed exchange rate where the government of a country entirely or predominantly determines what the foreign exchange rate will be.
👉 Most widely-traded currencies originate from nations that advocate the democratic use of a floating exchange rate system. This includes the United States, Canada, countries in the Eurozone, countries in Asia such as Japan, China, Singapore and South Korea, and northern hemisphere countries such as South Africa, Australia and New Zealand.
How forex trading pairs work
👉 As discussed, forex is traded in pairs where the value of one currency is pegged against the value of a primary currency (usually USD). The forex market does not set an absolute value for a currency. Instead, it determines its relative value by setting the market price of one currency by what it would cost to buy it with another currency.
An example of this in South Africa would be:
“How many US dollars can I get for 1 000 Rand?”
In 2020, the answer would be “about R57”.
Examples of the Top 5 forex pairs are: (as at March 2020)
1 Pound Sterling = 1.25 USD
You get about US$1 245 for £1 000.
1 Euro = US$ 1,12
You get about US$1 117 for €1 000.
1 Japanese Yen = US$ 0.0093
You get about US$ 9.27 for ¥1 000
1 Canadian Dollar = US$ 0.71
You get about US$ 719 for CA$1 000
1 Australian Dollar = US$ 0.62
You get about US$ 616 for AU1 000.
10 Most-traded Forex currencies by value
👉 Below is a list of the 10 most-traded global currencies by value. Each foreign currency has its particular strengths and weaknesses and features that help them stay on the Top 10 forex list.
👉 These 10 currencies are the most heavily traded in the world and have the greatest impact on the price movement of other lesser-traded currencies. For example the movement of the price of the South African Rand is heavily influenced by the strength of the US Dollar.
👉 Understanding factors that affect price movement is one of the most important aspects of becoming a successful forex trader in South Africa. The more you read about foreign markets and develop an aptitude for picking up clues on price movements, the better you will do as a forex trader.
1️⃣ US DOLLAR (USD)
👉 The US Dollar (USD) is the most heavily-traded foreign currency in the world. USD overshadows all currencies largely due to its governance stability and strength of its economy.
👉 USD is the most important reserve currency in the world. A reserve currency is a currency that is held by the government and/or financial institutions in large amounts as a portion of their foreign exchange funds. USD is used most often by governments and financial institutions around the world for foreign investments and international transactions.
👉 Most countries in the world use the USD as a benchmark currency. To stabilise a currency, a country will ‘peg its currency against the USD.
👉 Another reason the USD is such a strong foreign currency is because most precious metals and crude oil is quoted and traded in US Dollars.
2️⃣ EURO (EUR)
👉 The Euro (EUR) was introduced on 1 January 1999. Today, it is the second-highest value currency of the world.
👉 The Euro is the single currency of the European Monetary Union which has been adopted by 12 countries. The official Euro banknotes and coins were introduced as legal tender on 1 January 2002.
👉 The Euro is the second reserve currency in the world, after the dominant US Dollar. It is used worldwide as a trusted currency and due to its favourable liquidity, the Euro is one of the dominant currencies on the forex market.
👉 The strength of the Euro is influenced by the strength of its member countries. This makes some countries in Europe vulnerable to the economic weaknesses of some Euro member countries. Political events that impact countries in what is known as the Eurozone can result in fluctuations in Euro trading volumes.
👉 Like the US Dollar, the Euro is used as a benchmark currency. This is more relevant to countries in Europe and in Africa where there a strong European trade alliances. There are 22 countries worldwide that peg their currency against the Euro.
3️⃣ JAPANESE YEN (JPY)
👉 The Japanese Yen (JPY) is the most-traded currency across Asia. The Yen is the benchmark currency against which the country gauges its strength in manufacturing and its export industry.
👉 The overall health of the Pacific region is typically measured against the strength of the Yen. This includes the economies of countries such as Singapore, South Korea and Thailand. These country’s own currencies are traded at a far lower level than the Yen.
👉 The Yen is highly regarded for the important role it plays in carry trade. A carry trade strategy is largely dependent on the stability of asset prices and any opposing movement of an exchange rate can quickly eliminate the critical interest rate variance.
👉 International traders in the Pacific region can borrow the Yen at reduced interest rates. The Bank of Japan has kept its interest rate at 0% to counteract economic stagnation in the country which makes the Yen a desirable trade.
👉 Traders exchange the Yen for different currencies that pay higher interest rates. They benefit because they pay low interest on Yen borrowed and receive a high interest rate on money they trade.
👉 The carry trade is an essential mechanism to keep the Yen strong and it helps to keep the Japanese currency on the Top 10 list of the most-traded currencies in the world by value.
👉 The Yen has proven time and time again to be a ‘safe haven’ currency, largely because it remains active even in times of economic instability.
4️⃣ BRITISH POUND (GBP)
👉 The British Pound (GBP) is more commonly known as the Pound Sterling. It’s the fourth most-traded currency in the world, having dropped from second place after the introduction of the Euro and the rise of the Yen.
👉 The GBP remains a strong reserve currency. This is because the Pound is still strong compared to other major world currencies.
👉 Great Britain made the decision not to use the Euro when it was introduced in 1999 as its official currency. There were several reasons for this but the historic sentiment of the Pound Sterling was one of the main reasons the currency retained its local favour. Another reason was Britain wanted to retain control of its domestic interest rate.
👉 The GBP maintains a relatively high cost value which makes it a vital currency benchmark for other countries. Forex traders base the Pound Sterling value on the strength of the British economy and political governance rather than the strength of the Eurozone economy and political stability.
👉 With Great Britain exiting the Eurozone, the Pound Sterling is more relevant than ever as an important foreign currency.
5️⃣ AUSTRALIAN DOLLAR (AUD)
👉 The Australian Dollar (AUD) replaced the Australian Pound in 1966. The Australian Pound was the official currency while the country fell under Commonwealth rule.
👉 The strength of the AUD grew rapidly and it wasn’t long before Australia’s newly-created currency became one of the most traded financial commodities by value. The AUD is particularly popular in the Asia-Pacific region which has a strong trading alliance with Australia and draws on the strength of the Australian economy.
👉 The AUD is a strong carry trade currency because the Royal Bank of Australia ensures it trades at a higher interest rate than many other world currencies.
👉 The health of the AUD is strongly tied to commodities such as gold and silver. Therefore, Australia’s interest rate and inflation control is highly dependent on the strength of these two commodities. The AUD has always had a strong relationship with the spot price of gold and the two are often pegged against each other in trading strategies.
6️⃣ CANADIAN DOLLAR (CAD)
👉 The Canadian Dollar (CAD) holds its own as the sixth most-traded currency in the world on value. The CAD is intricately linked to commodity trading in its minerals, crude oil and precious stones. Canada is a massive importer of these three vital commodities.
👉 The CAD as well as the Canadian economy is highly dependent on the strength and stability of the economy of the United States. Investment traders in Canada often switch between the two dollar currencies depending on the US and Canadian dollar movement.
7️⃣ SWISS FRANC (CHF)
👉 The Swiss Franc (CHF) is the official currency of Switzerland. It has always been considered a safe or neutral currency due to Switzerland’s infamous impartial stance on world politics.
👉 Typically, when other major world currencies move in one direction, the CHF moves in the opposite direction. This makes it a haven currency and keeps it on the list of the Top 10 most-traded currencies in the world by value.
👉 The CHF is also held in high regard as a carry trade currency. This is due to the stability of Switzerland’s economy, the currency’s high liquidity and the Bank’s low interest rate policy.
👉 More importantly, the value of the Swiss Franc is not impacted significantly by economic highs and lows in the Eurozone or the major world economies such as the United States and United Kingdom.
👉 Rather, the primary driver of the strength of the Swiss Franc is the interest rate policy of the Swiss National Bank. The high demand for CHF is determined by how much trust investors place in the currency, how liquid it is and the stability of Switzerland’s economy.
8️⃣ CHINESE YUAN RENMINBI (CNY)
👉 The Yuan is the official currency of China. It is also known as Renminbi. The reason China has two names for its official currency is historical and goes back to 1949 when the Communist People’s Republic of China introduced the official name of its currency as Renminbi which means the “People’s currency”.
👉 Yuan is the Chinese world for ‘dollar or silver coin’ and Yuan is a unit of China’s currency (Renminbi).
9️⃣ SWEDISH KRONA (SEK)
👉 The Swedish Krona is also known as the Swedish Crown. The Krona is the official currency of Sweden and is also used by countries such as Norway and Denmark. One Kroner is divided into 100 ore.
👉 SEK is issued in banknotes and coins by the Swedish National Bank, otherwise known as the Sveriges Riksbank or Bank of Sweden.
🔟 MEXICAN PESO (MXN)
👉 Historically, the Mexican Peso (MXN) was based on the official currency of Spain which is a Silver dollar. The old Silver coin of Spain and Spanish America was equal to 8 reales. The name of Mexico’s official currency originates from the ‘eight real coins’ which were issued to Mexico by Spain.
👉 The MXN has become one of the most-traded world currencies. This can be accredited to Mexico’s high interest rates and low USD/MXN volatility which attracts “carry trade” speculators.
👉 Mexico’s central bank rate of 7.25% compares favorably to the US Fed’s target rate range of 1.5% – 1.75%.
TOP 20 MOST-TRADED WORLD CURRENCIES
➡️️ US Dollar (USD)
➡️️ Euro (EUR)
➡️️ Japanese Yen (JPY)
➡️️ British Pound (GBP)
➡️️ Australian Dollar (AUD)
➡️️ Canadian Dollar (CAD)
➡️️ Swiss Franc (CHF)
➡️️ Chinese Yuan (CNY)
➡️️ Swedish Krona (SEK)
➡️️ Mexican Peso (MXN)
➡️️ New Zealand Dollar (NZD)
➡️️ Singapore Dollar (SGD)
➡️️ Hong Kong Dollar (HKD)
➡️️ Norwegian Krona (NOK)
➡️️ South Korean Won (KRW)
➡️️ Turkish Lira (TRY)
➡️️ Indian Rupee (INR)
➡️️ Russian Ruble (RUB)
➡️️ Brazilian Real (BRL)
➡️️ South African Rand (ZAR)
A step-by-step guide to online Forex trading
👉 The forex market is more accessible than it has ever been in the digital era. All you need is a decent laptop and Internet connectivity and you can learn to trade forex online from the comfort of your home.
👉 An automated trading programme is the best way to start trading forex as a beginner. Thereafter; discipline, knowledge and an appropriate trading strategy will ensure you achieve the financial freedom you seek from trading forex on a part-time basis.
Step 1: Choose a reputable online brokerage
👉 Don’t underestimate how important this first step is to becoming a successful forex trader. Do your research and find a professional online trading platform that allows you to register for free and open a demo account.
👉 The online trading platform needs to have scope because there will come a time where you progress from simple forex trading to advanced trading.
👉 An online trading platform is essentially your broker. You need a ‘middleman’ who connects you to someone who is buying or selling the world’s financial markets. And because you will eventually deposit real money into an investment account, you need to ensure the trading platform is secure and trustworthy.
Step 2: Learn as much as you can with a demo account before trading with real money
👉 If forex trading was easy, everyone would be doing it. Even the most experienced forex traders have horror tales to tell of deals gone wrong and money lost.
👉 Fortunately, with professional online trading courses, you can take your time learning everything there is to know about forex trading, putting your new-found knowledge to the test with a demo account and learning from the best under expert guidance from trading specialists who are affiliated to the trading school.
👉 Don’t be in a rush to start trading with real money. Professional traders have spent years honing their trading strategy as well as their trading intuition. It takes time to develop the best trading strategy for your trading personality so expect to make many mistakes before you get it right. At least make those mistakes with ‘fake’ money before you put you start trading forex with your own money.
Step 3: Choose the best forex pairs to trade
👉 Choosing the best forex pairs to trade comes down to simple logistics. If you have a full-time job and are learning to trade forex online in your spare time, you need to look at trading pairs that are active in the hours you have available to trade.
👉 Liquidity is an essential component of forex trading. This is your ability to place buy and sell orders in real-time. It’s no use having a good position at a time when the market is inactive. Even though forex trading takes place 24-hours a day, it does have its peak volume hours.
👉 Choose a forex pair to trade that experiences high trading volume when you are free to learn to trade. This may be early in the morning or late in the evening.
Step 4: Set up an automated trading system
👉 If you are learning to trade forex with a reputable online trading college, you will have access to an automated trading program. Trading programs today offer the full range of functions that make it easy to monitor price movements in real-time, place buy and sell orders, set stop orders and create charts for instant access to vital information.
👉 In the beginning, you’ll take advantage of software that automates the trading process for you and makes trading decisions on your behalf. This is the ‘plug and play’ option which is ideal while you’re learning how to trade forex online.
👉 However, there will come a time when you have the knowledge, discipline, and experience to move beyond a demo account and trade with a mini-account and use real money in real-time. Don’t be in a rush to get to this point in your trading journey. Take full advantage of the automated trading software that is available because it serves the function of making disciplined and unemotional trades.
👉 Automated trading is what you need as a beginner forex trader to learn responsible trading and develop your own trading strategy.
Step 5: Develop a disciplined mentality to forex trading
👉 Self-discipline and a cool head are two essential attributes that separate successful forex traders from fly-by-nights. With speculative forex trading, there is always an inherent risk and no crystal ball in the world can foretell a downturn or upturn in the market.
👉 Successful traders cash in profits when they can and don’t risk gains for wider spreads and bigger profits. Keeping a cool head when the market gets rocky goes hand-in-hand with using the right tools to minimise risk, such as trailing stop and stop market orders.
👉 Start slowly by registering with a reputable online trading platform and use a demo account to gain trading knowledge, intuition and experience.
👉 Next step, start trading small amounts by opening a mini trading account. The latter requires a smaller-than-standard cash deposit and this should be within your budget. In other words, small enough that you can afford to lose it. Minimum cash deposits for a mini forex account range from US$ 2 000 to US$ 10 000.
👉 When you are ‘good and ready’, advance to trading in real time with real money. Before you do, make sure you have a trading mentor who will partner with you on your trading journey.
How to make your first Forex trade
Ready to start trading forex online? Or rather, learning to trade online? Make your first trade following these 5 easy steps using your demo account.
Step 1: Open the trading platform
👉 A forex trading platform is an advanced software interface provided by forex brokers to their clients which allows them direct access to the forex market. The online trading platform provides a host of functions including tools for research, analysis, charting and order processing.
Step 2: Open a trading chart
👉 Choose a currency pair and open a forex chart. Knowing how to read a chart is difficult to start off with but this is what you’ll learn through a reputable forex trading course. Charts can be simple or very complicated, depending on what display settings and time frames you set.
👉 Time frames can be anything from 1 second to 10 years. Price movement is displayed as a line, a bar or what they call a candlestick. Candlestick charts are the most common. They are used to indicate the price on a forex pair and provide a nearly instant outlook on the forex market.
👉 Line charts are a useful tool to simplify the display of price movement and show you the closing price for each trade period. Bar charts are similar to candlestick charts but have the advantage of showing you where the price opened, the high and low points throughout the trade period, and where the price closed.
Step 3: Add indicators to the chart
👉 With your chart open and chart style displayed, it’s time to add some indicators. Technical indicators are used most often for forex trading and the most common is MACD.
👉 MACD is short for Moving Average Convergence Divergence. This extremely helpful tool helps identify moving averages that pick up a new trend. Identifying trends is a priority for forex trading because that is how money is made (and lost).
Step 4: Place a trade order
👉 Time to place a buy or sell order. You’ve used your indicators to identify a trend and you’ve decided if you want to ‘go long’ or ‘go short’ on a trade. If you go long on a currency, the worst thing that can happen is you’ll sit by and watch the currency’s value fall. Your loss is limited if you can ride out the price movement volatility.
👉 If you go short on a currency, you might be in a bit of trouble if you speculated the price would fall when in fact, it strengthens and rises.
To manage the risk, you will learn to use the right tools to limit orders on short orders or stop orders.
➡️️ A limit order is an electronic instruction to close out your short position when the currency falls to a pre-determined value. This locks in any profit you might have made and eliminates future risk.
➡️️ A stop-loss order is an electronic instruction to close out your position if the currency rises to a certain value in order to protect you from greater loss.
👉 To redeem any profits earned on a forex trade order, you will learn to set take-profit levels. It’s an optional step but highly recommended for beginners.
👉 When you set the take-profit level, you ensure that the trade exits in profit and is triggered as soon at the forex pair makes a price shift that is unexpected. It’s recommended you make use of this tool before you set a trade order because once the trade is taking place, the pressure can interfere with your decision-making.
Step 6: Confirm your forex trade order
👉 When all is in place and you’re sure you’ve put in place orders to manage the risks and profits, it’s time to submit your order. Once submitted, you’ll receive a reference ticket with a number that confirms your order.
👉 This is necessary to ensure your broker hasn’t made any mistakes in the execution of your order. If he or she has made a mistake, you need your confirmation ticket reference number to have the order corrected and/or for your account to be credited.
Step 7: Wait patiently for the trade to play out
👉 The waiting period can be the hardest part and requires a cool head. If you’ve used the right tools to manage your risk, you should be okay. There’s no point worrying about the price movement of your currency pair and if you’re in the learning phase and using a demo account, what you take out of the trade is nothing more than valuable experience and knowledge.
Step 8: Trade completed
👉 Once your trade order has been executed and the trade is complete, you will know whether you have made a profit or loss. Remember, not all forex trades will be profitable. As long as you have acquired the knowledge and discipline to manage your risk, you will eventually start making money.
👉 Don’t rush the learning process. Trading forex online is not a game that everyone can play. Partner with a reputable online trading college to learn from the best and be mentored through good and bad trading periods. Time is on your side so take all the time you need to be a successful online forex trader.
👉 Times were fairly tough before we entered the traumatic Covid-19 crisis but post-pandemic panic, times may well be tougher. Now, more than ever, is the time to look beyond a normal 9-to-5 job to earn what you need for maintain your lifestyle and finance your dreams.
👉 Technology has made it easier than ever to enter the foreign exchange market and try your hand at trading forex online. There are a host of excellent online forex trading colleges and easy-to-access automated trading platforms that will entice you to get in on the forex trading action.
👉 If it was that easy, everybody would be trading forex online and making money. It’s not. It’s fraught with risks and many seasoned, professional traders bear the scars of trade orders gone wrong.
👉 Through a reputable trading college, you’ll learn from the best and make gains and losses that are not real. Forex trading is something that you’ll do part-time but the excitement and thrill of successful speculation will become a full-time mental occupation.
👉 If trading forex online excites you, remember these simple instructions.
➡️️ Do your homework and partner with a reputable online trading brokerage.
➡️️ Learn to trade carefully and cautiously through a professional trading college that provides free access to a demo account and trading mentors that’ll guide you through your trading journey.
➡️️ Use the tools available to research and analyse the foreign exchange market, manage your risk and control the amount of leverage you take on orders.
➡️️ Develop a disciplined mentality to trading and an appropriate trading strategy for your personality.