- Never invest too much initially, start with smaller amounts
- Use stop loss effectively to limit your losses
- Never use high leverages initially. Stick to x5 to x25 range max. Never leverage 100 or 200 times until you become a pro
- Practice a lot on the practice trading account before putting your real money
- It is better to start trading on Silver or Gold rather than directly jumping into currency trading. The same platform allows you to trade silver/gold.
- Never take emotional decisions. If your pair is loosing, just exit by booking losses. If it’s going up, exit at the pre-decided price rather than waiting for more
Forex Tips as shared by experts
Forex glossary
Base currency: The primary currency that you are trading or interested in. e.g. in aEURUSD currency pair, Euro (EUR) is the base currency and USD is called the quote currency
Counter currency: Same as the quote currency or second currency in a pair
Buy price (Ask rate): The price at which a buyer can buy a pair
Forex: Foreign Exchange or FX
Leverage: Leverage the loan from your broker that allows you to trade 100 or 200 times of your capital. E.g. it is possible for you to buy 10000 USDEUR with even $100 by applying the right leverage size. This can potentially increase your gains multifold but has the risk of loosing as well.
Lot: Lot is the standard unit of trading. Typically the standard lots are 100,000 units, mini-lots are 10,000 units and micro-lots 1000 units.
Open position: Your current holdings or trades that are not closed yet.
Pip: Pip (or Point) is the smallest price change that can be made on a currency pair quote. For most currencies (except for JPY combinations), the pip is usually a basis point or 0.0001. Hence the price movements are always in units of 0.0001 and smaller values than that. It may be noted that most forex quotes are in four decimal places.
Sell price (Bid rate): The price at which a pair can be sold
Short Position: Going short means that you are opening sell order hoping that the prices of a currency pair will fall. Later you can close that position at lower prices thereby booking profit.
Spread: Difference between the current buy and sell prices.
Stop Loss: The automatic closure price specified just in case your pair moves the other direction than expected. The stop loss order makes sure that you are protected from further losses by automatically closing the open positions at that specified stop loss price.
Easy forex trading with eToro
If you Google for ‘forex trading’ you may find plenty of online forex trading platforms. I found that eToro was pretty good due to the following reasons:
- You can open an eToro forex trading account with as low as $50 initial deposit
- On top of your first time deposit (FTD) they will add a welcome bonus of 25%. i.e. if you start an account with $1000, they will add $250 and hence you are already starting on profit. The bonus has a cap of $1000 (There are companies who give even 100% bonus but beware of their hidden costs)
- No hidden costs or brokerage charges
- You get a personal account manager (PAM) assigned to you if you start an account with at least $500. This means that you will get regular phone calls on trading ideas based on global economic and forex news
- Leverage up to 400 times and it allows micro-lots (see Forex terminologies below)
- eToro provides an excellent web based trading tool as well as a fast desktop based trading tool
- You can add or withdraw funds via PayPal. This may be one of the major criteria for bloggers who already have their blog income in PayPal. Many other platforms don’t support PayPal transfer
- Excellent customer support – via phone, email as well as live chat
- The practice account to get used to forex trading is very good and uses realtime data
How to forex trade
In order to trade forex you need to open an account with one of those online forex tradingagencies. There are plenty of them to choose from and I found that eToro is a good platform for the reasons mentioned in the next section. Once you sign up, all that you have to do is to add money to your forex trading account and start trading. Money transfer to the account can be via PayPal, Credit card, bank – wire transfer and many other online money transfer options. Of course, after signing up one still has the option of continuing with the practice account without adding any real money to your account.
It is a matter of couple of minutes before you start trading but wait till you do your homework. All your money can disappear in no time if you are not careful. This is why practice trading accounts are useful. Most trading platforms allow a practice accountwhereby you can trade using virtual money but use real time features such as price quotes, charts etc.
Difference between Forex trading and Stock trading
Many of us are familiar with the stock markets and share trading. The currency trading is slightly different from stock trading because of the following reasons.
- In the stock market, there are too many (thousands) companies and their stocks that you need to track. But in the currency market, you mainly deal with those leading currencies in the world. Fourteen of these major currencies count for majority of the transactions. They include US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD) and Swiss Franc (CHD). The other currencies are traded as well but these are trader’s favorites and high volume currencies
- The stock market is active only for a certain number of hours per day and you transact in a particular stock market (e.g. NYSE) at a given time. But currency trading is done 24 hours a day in some market or other and you don’t need to worry about where you are trading. The trading system takes care of this part and simplifies things for you
- Because of the leveraging (margin trading), even a small amount such as $50 can get you exposure to buying 1000s of units of a particular pair
- Even a small change (such as 0.0001) in the price can result in a significant return on your investment due to leveraging
- Volume is so high that buy and disposal is easier
- Usually there is no account opening fee or even brokerage charges – the forex company’s commission is only the difference between the sell and buy price at any time (buy price will be always slightly more than the sell price at any time)
- There is no physical shares, documents or dematerialized form of the traded currencies maintained anywhere. The trading system just keeps your buy-sell status
- Due to the huge volume nature and global span, currency market cannot be manipulated by traders where as stocks, sometimes, can be manipulated by insiders and market makers
Make Money Online via Forex Trading (for Beginners)
Forex trading has always been a mystery for me until about couple of weeks ago when I started reading more about it. For most people forex trading is something that is meant for the corporates & banks and perceived as a very complicated thing to do. Now, after doing enough research, I realized that it is the one of the easiest make money online instrument to get started and make money instantly – of course with its associated risks. In this post, let me explain the basics of forex trading and how easy it is for anybody to get started with online forex trading pretty quickly.
Forex trading for beginners – Basics
Forex market or currency market (or simply FX) is the place where currency trading takes place. It primarily facilitates the exchange (buy / sell) of currencies from one to another and is the backbone of international trade and investment between countries – major banks being the main parties involved. For example, if a US company has to import something from Japan, it has to pay in Japanese Yen and and hence need to convert the US dollars into the acceptable currency. This happens on a continuous basis round the clock to help with global trades and hence make a mammoth US $7 trillion daily turnover which is bigger than any stock market turnover.
Forex trading by individuals is nothing but the act of involving in the above process with your small amount of money whereby you buy and sell currencies at the prevailing market price.
Basically, when you buy a particular currency (e.g. US Dollar), it is exchanged against another (e.g. Euro) and hence the entity that is traded is known as a pair. For example USDEUR is a pair whereby you are trading US Dollars against Euro and you buy (or sell) that pair at something like 1.5000 per pair.
Just like the stock market, you buy or sell – not shares but pairs.
Forex Trading Rules
Why Trade in Currencies?
There are 10 major reasons why the currency market is a great place to trade:
1. You can trade to any style - strategies can be built on five-minute charts, hourly charts ,daily charts or even weekly charts.
2. There is a massive amount of information - charts, real-time news, top level research - all available for free.
3. All key information is public and disseminated instantly.
4. You can collect interest on trades on a daily or even hourly basis.
5. Lot sizes can be customized, meaning that you can trade with as little as $500 dollars at nearly the same execution costs as accounts that trade $500 million.
6. Customizable leverage allows you to be as conservative or as aggressive as you like (cash on cash or 100:1 margin).
7. No commission means that every win or loss is cleanly accounted for in the P&L.
8. You can trade 24 hours a day with ample liquidity ($20 million up)
9. There is no discrimination between going short or long (no uptick rule).
10. You can't lose more capital than you put in (automatic margin call)
Fair Warning
This tutorial is designed to help you develop a logical, intelligent approach to currency trading base on 10 key rules. The systems and ideas presented here stem from years of observation of price action in this market and provide high probability approaches to trading both trend and countertrendsetups, but they are by no means a surefire guarantee of success. No trade setup is ever 100% accurate. That is why we show you failures as well as successes - so that you may learn and understand the profit possibilities, as well as the potential pitfalls of each idea that we present.
The 10 Rules1. Never Let a Winner Turn Into a Loser
2. Logic Wins, Impulse Kills
3. Never Risk More Than 2% per Trade
4. Trigger Fundamentally, Enter and Exit Technically
5. Always Pair Strong With Weak
6. Being Right but Being Early Simply Means That You Are Wrong
7. Know the Difference Between Scaling In and Adding to a Loser
8. What is Mathematically Optimal Is Psychologically Impossible
9. Risk Can Be Predetermined, but Reward Is Unpredictable
10. No Excuses, Ever
Trading is an art rather than a science. Therefore, no rule in trading is ever absolute (except the one about always using stops!) Nevertheless, these 10 rules work well across a variety of market environments, and will help to keep you grounded - and out of harm's way. (If you have questions about currency trading you might want to check out, Common Questions About Currency Trading.)
