If you have developed an interest in trading forex, one of the best ways to ensure you do not dive in blindly is taking the time to learn about trading forex. The idea of making money from it seems easier than it is. Once you get into the details, forex trading comes off at challenging and complicated.
Starting with demo accounts
The first step in learning about forex trading is opening a forex trading demo account. This is a type of account that gives you the liberty to try your hands on forex trading without risking your own money. Even though not real money is used, demo accounts operate under real forex market conditions. Most forex broker platforms online offer forex trading demo accounts to new clients.
Sharpening your skills through demo accounts ensures you8bgain experience in different areas. It also gives you the opportunity to discover whether forex is the niche to invest in. if you are not good at it, the demo account offers you a platform to become better.
Forex trading Demo accounts are therefore very important to anyone starting out in forex trading.
Reading forex quotes
While learning how to trade forex, you need to learn how to read forex quotes. Forex quotes consist of two currencies which are quote currency and the base currency. The most common base currencies include AUD (Australian Dollar), EUR (Euros), USD (US dollars) and GBP (British pounds). On the other hand, the quote currency can be any currency or one of the base currencies.
For instance in EUR/USD 1.3600 combo, the euro is the base currency while the dollar is the quote currency. This quote shows that the euro is equivalent to 1.36 us dollars.
Regardless of the base currency, it always equals 1. In the quote above, the amount 1.3600 is the quote currency amount that is needed to equal 1 unit of the euro which is the base currency.
Reading forex charts
The next thing you need to learn is how to read forex charts. While some traders may use complicated charts, reading forex is not as hard as it is assumed to be. Forex charts come with technical indicators that make it easier for you to understand the market.
Forex charts are available in different display modes. The Japanese candlestick mode is the easiest to understand. This display method is believed to show almost instant sentiment reads of the forex market.
Another method to display prices is by using the line charts method. This is a simplified way of displaying forex market prices with indicators for the closing prices in each period. Bar charts are also commonly used to display forex prices and work similarly to the candlestick chart method. With a bar chart, however, one is able to track where prices opened, highs and lows and also where the process closed.
Placing forex trades
The process of placing a trade is generally simple. However, it takes most people a bit of time before they decide whether or not they want to trade. This is especially if one is trading in a live account and not a forex trading demo account. With the right strategy, placing a trade can be an easier choice to make.
Keep your records
As you trade, you need to ensure that you always keep records. As much as the broker platform will save your trading history, it is always a good idea to keep an offline record of your trades. Also, keep a trading journal where you document the reasons that drive you making trades. This is a good way of analyzing your trading psychology after every trade. You will find that it helps you to make better decisions in the future.
Forex Trading systems
One of the toughest task faced by forex traders is finding trading systems that work. Most traders fall into the trap of continuously searching for a trading system that won’t fail. There is no such thing as a perfect system even though it is possible to find several systems that work for your trades.