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On This Page You Will Find:
- What is Forex Trading?
- What’s the Forex Market – Detailed Explanation
- Which are the Most Traded Currency Pairs?
- How to Use Forex Charts?
- How to Profit from Forex?
- What is a Forex Broker?
- How to Choose a Forex Broker?
- Which are the Most Used Forex Trading Platforms?
- Tips and Tricks for Tradig Forex
What is Forex Trading?
Forex is a decentralized global financial market that exists to let people from all over the world trade in global currencies. Also referred to as currency trading, foreign exchange or FX, it has become the most liquidating and largest platform of trading Forex with over $5 trillion of daily trading volume.
Even combining all stock markets cannot meet the extent of its trading volume. But, this fact doesn’t sound worthy to all people because of their limited exposure to the term; Forex trading.
So, this article is going to explain everything that could help an individual grab every possible opportunity to take advantage of the FX market.
It’s All About the Exchange
Forex is involved in almost every second step or decision one makes. Whether he/she is traveling overseas or buying/selling products, it always involves Forex transactions. For instance, the plan of traveling France requires travelers to convert pounds or other national currencies into Euros.
Wondering why? It’s because of the fact that France uses Euros as its currency and therefore, travelers have to carry those foreign currencies if they intend to make any transaction.
The criterion is: the two currencies have a certain currency exchange rate – determined on the basis of demand and supply formula – that is used to calculate the amount of Euros one would get against the pounds.
However, the rate doesn’t necessarily be the same. It always fluctuates with the surrounding factors like politics, economy, law and order situation, etc.
Forex Trading is facilitated by Forex Brokers which allow both non-professional and institutional investor to participate in the currency exchange market. If you are interested in Bitcoin Trading you can read this article.
Opportunities in Forex Trading
Like stocks, traders are free to invest in any currency of their choice. All they have to do is to estimate their value and the extent to which they can give returns.
The best part of trading on the FX market is that there are frequent ups or downs, which traders can notice and make their decisions accordingly. If the speculation says a currency will rise after some time, then now is the right time to buy it or vice versa.
For instance, if China begins to devalue its currency (Yuan) in order to bring in foreign business, then traders can think of selling their Yuan against another currency, let’s say US Dollar. So, as much as Yuan goes down, the higher will be the profits in US Dollars or vice versa. So, always be careful while trading on a foreign exchange.
Criteria to Buying and Selling Foreign Exchange
When a person is involved in the currencies market, it means that he/she will be having two major foreign exchanges to bet on others being traded. The most-traded currency pair in the world is EUR/USD in which, the first is referred to as the base while the second is called the counter.
So, when a trader sees a figure or quoted price on the platform, it means the worth of EUR in terms of USD. Remember that there will be two figures on the screen – one is buying and the second is the selling price – while their difference is called ‘the spread.’ So, upon clicking the buying or selling button, the trader is dealing in the first medium of exchange from the currency pair.
For instance, EUR/USD is having a buy price of 0.70644 while selling at 0.70640, the spread is 0.4 pips. Whenever Forex trading goes against or in favor and spread is covered, the trader will have higher chances to make a loss or profit accordingly.
Forex Market – Detailed Explanation of What It Is
This is the over-the-counter or decentralized global market to trade Forex across the world. It works on different foreign exchange rates and allows traders to buy, sell or exchange foreign currencies at determined or current prices.
With respect to trading volume, it is the largest financial market across the globe, with the credit market as second in the list.
Major parties involved are large international banks. Whereas, financial institutions work as Forex trading anchors between numerous types of sellers and buyers, irrespective of the time and weekends.
Since foreign exchanges are traded in the form of pairs, the financial market doesn’t offer absolute value; rather, it determines the relative value for one currency against the other. Let’s say, $1 USD is equivalent to ‘X’ JPY, EUR, CAD, etc.
How Does the Market Work?
Unlike stocks, commodities or digital currencies market, there is a direct deal/contract between the two parties in the Forex market.
This over-the-counter platform is operated by global networks of banks, present in four major Forex trading centers based in different time zones: Tokyo, New York, London, and Sydney. Their responsibility is to cater to Forex traders 24/7.
When it comes to the types of Forex market, they are divided into three categories:
- Spot Forex Market: It facilitates the exchange of a currency pair right after the trade is settled or in other words, on the spot – within a certain time period.
- Forward Forex Market: Where the contracts are settled to be carried out at a particular date. Traders will buy/sell the specified amount of foreign exchanges within the upcoming dates, based on the future.
- Future Forex Market: The parties have agreed to sell or buy currencies at a certain amount, date and price in the future. However, the contract is legally binding, unlike the financial market.
What are Base and Quote Currencies?
The base is the first currency in the Forex pair while the second one is called quote. While trading Forex, traders are involved in selling one medium of exchange to own another one, present in the pair. Its price is determined by calculating how much does one unit of the base costs for the quote.
There are three-letter codes in each currency pair, consisting of 2 letters showing the region and the last one representing the exchange itself. Let’s say, GBP/USD is a Forex pair, showing the Great British Pound being bought against the US Dollar.
If GBP/USD shows the quote of 1.35361, then it means that one pound is valued at 1.35361 dollars. If the base’s price increases, it would become more valuable than the quote, thereby increasing the pair’s price or vice versa.
In order to understand Forex pairs easily, below are a few important groups to look at:
- Major Pairs: Comprise of 80% of trading volume. GBP/USD, EUR/USD, USD/CAD, AUD/CAD, USD/CHF, and USD/JPY.
- Minor Pairs: Less traded and consist of major currencies except for the USD. Such pairs are the GBP/JPY, EUR/GBP, and EUR/CHF.
- Exotics: Major currency against an emerging or small one. USD/PLN, EUR/CZK, and GBP/MXN.
- Regional Pairs: Classified by regions. AUD/NZD, EUR/NOK (Norwegian Krona), and AUD/SGD (Singaporean Dollar).
Elements that Move the Forex Market
Since the Forex market is made up of numerous currencies from the world, it’s quite difficult to estimate or predict their currency exchange rates because of the number of factors involved in price movement.
Though, the involvement of a few forces is as important as for the foreign exchange market because they are responsible to influence price fluctuation.
- Central Banks: They are responsible to control supply and announce measures affecting the price/rates in the different currencies markets. For instance, quantitative easing injects money into the economy and brings out the price.
- News Reports: Positive news about a particular region encourages traders to make investments. If there is a disparity between supply and demand, then it will increase the value of foreign currencies or vice versa.
- Market Sentiment: Driven by the nature of news, market sentiments have a great impact on determining foreign exchange prices. When traders get an idea about the direction of a currency, they tend to create strategies accordingly.
- Economic Data: Price movement has a lot to do with economic data. Not only does it explain the performance of the economy but it also gives an idea of what the central bank plans to do.
- Credit Ratings: It helps investors to make their minds about where to invest.
Principles of Forex Trading
When it comes to understanding the criteria of trading Forex, investors have to look at various methods or ways on which it operates. Practically, most of the transactions take place between a Forex trader and broker but nowadays, investors are more inclined towards Forex price movements based on CFD trading and other derivatives.
CFD trading involves leveraged products that allow investors to use a fraction of trade’s value to open a position. They don’t have ownership, like non-leveraged products; instead, they focus on the Forex market performance.
The Most Traded Currency Pairs on the Forex Market
The foreign exchange market works on a simple rule, currencies are being traded in pairs i.e. upon trading one currency, traders can buy or sell another one. Each pair comprises of one base (appears first) and one quote currency (appears second).
The price for each currency pair represents the amount of quote that needs to be spent in order to acquire base units. In EUR/USD pair, EUR is the base while USD is the quote. If the latter is priced at 1.2000, it shows that the trader will get $1.20 against 1 EUR.
Types of Forex Pairs
Forex pairs are usually divided into three categories, that are:
- Major Currencies: Most traded pairs in the Forex market, including EUR/USD, USD/CHF, GBP/USD, and USD/JPY.
- Commodity Currencies: Their value is associated with commodities like iron ore, oil or coal. Include USD/CAD and AUD/USD.
- Cross Currencies: They do not have USD in the pair like EUR/GBP.
Top Forex Pairs Across the World
Famous as the most-traded pair in the foreign exchange market, EUR/USD is proudly making up around 23.1% of regular trades for a year. This currency pair is particularly famous for having the world’s two strongest economies i.e. the US and the European single market.
Their high trading volume shows higher levels of liquidity that cause tight spreads during transactions. They allow traders to involve in large trades without being concerned about making a big impact on the Forex market.
While there are numerous factors determining their exchange rate, interest rates from the US Federal Reserve (Fed) and the European Central Bank (ECB) hold a lot of significance. The higher the interest rates, the more demanding will be the currency in the financial market.
With the name ‘Gopher,’ this pair stands at the second spot among the world’s top currency pairs, having around 17.8% of daily transactions. Like EUR/USD, this pair holds high liquidity because of the fact that JPY is mostly traded in Asia while USD is chosen by the entire world.
Like ECB and Fed, the Bank of Japan (BoJ) is responsible to set interest rates for Japanese Yen, thereby showing a change in JPY with respect to USD.
The pair comprising of the US dollar and the pound sterling is called ‘Cable’ with reference to the deep-sea cables responsible to ask quotes and deliver bids between New York and London. 9.3% of daily transactions are based on GBP/USD.
Just other currencies, the pair gets its strength and value from the American and British economies. Their quote prices depend upon the interest rates from the Fed and the Bank of England (BoE).
Also named as the ‘Aussie,’ the currency pair used to handle 5.2% of the daily Forex trades, where the value of AUD depends upon its export of mineral and metal like coal and iron ore.
Here, the thing to remember is that a slump in these commodities around the world may cause a reciprocal slump in AUD’s value. In other words, the declined value of AUD can make USD stronger and therefore, traders can spend fewer American dollars to own one Australian dollar.
Also named as ‘loonie,’ the pair comprises of the American and Canadian dollar. It has been recorded that around 4.3% of daily trades occur with this pair in which, the value of CAD is associated with oil because it is Canada’s major export.
Since USD is the currency used to oil, Canada has greater opportunities to collect more and more USD by selling its major export. So, in case of a rise in oil’s value, CAD will become stronger against the USD.
This currency pair shows the partnership between the American dollar and the Chinese Yuan that is responsible to handle 3.8% of daily trades. There has been a visible decline in the value of CHY with respect to USD because of the Chinese government who allowed depreciation of Yuan with the aim of making their exports cheaper.
With the Swiss Franc, this currency pair is known as ‘Swissie’. That shows the impact of the Swiss financial system of convincing investors to invest their capital for good.
CHF experiences greater interest from traders when the Forex market is volatile while their interest starts to decrease as soon as the market moves towards getting stability. With that being said, USD/CHF is responsible to work on 3.6% of Forex trades on a regular basis.
The pairing of GBP and EUR has been one of the difficult occasions to predict their price movement. Since they had a historical link with respect to the proximity of Europe to the UK and subsequent trade, it’s a bit tricky and time-consuming to anticipate their future move.
However, EUR/GBP still makes up 2% of daily trades. Also, it is necessary for traders to update themselves about recent announcements from BoE and ECB because they also have a significant impact on their exchange rates.
This pair consists of the American Dollar and Mexican Peso. The pair makes up 1.8% of regular Forex transactions. However, Mexican Peso has been showing incredible performance for a few years, and experts have speculated that it would soon become one of the most traded pairs in the world.
Here, the United States Mexico Canada Agreement (USMCA) is important to consider because it may affect the exchange rate of USD/MXN in the Forex market.
With USD as the base and SGD as the quote, this pair is the last in most traded Forex pairs. Since Singapore has been one of the top financial hubs in Asia, its dollar is important for investors. It has shown more volatility than the Japanese Yen.
What are Forex Charts & How to Read Them
Used for a graphical depiction of exchange rates in the currencies market. A Forex chart is responsible to explain how currency exchange rates have changed over time and what are their impacts.
It explains the past of the Forex market so that technical analysts can predict future price movements. There are many Forex brokers who offer free charting software just so clients can trade Forex with funded or open Forex trading accounts.
FX charts have turned out to be one of the necessary tools for traders who want to take advantage of technical analysis so that they can bring the best out of their investment.
With the help of technical analysis, Forex traders are able to understand technical indicators to make moves with respect to predicted price movements.
Forex Chart Timeframes
Forex charts are responsible to explain the amount of time-based on the chosen timeframe. Traders are free to make this choice. However, the default timeframe of FX charts is 1D for which, each point on the graph is used to represent data for a day.
So, if someone wants to change this timeframe to 60 minutes, each point would then represent Forex trading data of 60 minutes. Traders are free to employ any type of free charting tools to display the timeframes from 1 minute to 1 month.
Types of Forex Charts
Traditionally, there are three types of Forex charts that show currency exchange rates based on their varied nature.
1. Line Chart: These charts are capable of representing quick Forex market trends in terms of current/close prices. Just make sure to never use these charts for taking profit orders or placing a stop loss.
2. Bar Chart: This chart consists of bars that represent a low (bottom) and a high (top) point with a vertical line on either side. The right side shows the opening price while the left side represents the closing price occurring within a certain time period. Traders can use different colors of their choice to identify bars.
3. Candlestick Chart: Apart from some resemblance to the bar chart, candlestick chart differs in the way that it adds colors and dimensions to the above Forex chart by highlighting the bar area between the close and open as a 2-dimensional body.
Needless to say, FX charts help traders to get an idea about the financial market behavior so that they can plan their investment moves accordingly. However, to get a better understanding of currency movements, there are a few indicators or visual guides to know about.
a) Bollinger Bands
They are volatility bands that are positioned according to the ‘X’ standard deviations with respect to the moving average. These bands expand with increasing volatility and vice versa. They are helpful to highlight potential overbought and oversold places so that traders can get an idea.
Moving Average (Middle) = 20 simple moving average or 20 SMA
Upper Band = 20 SMA add twice the 20-period SD
Lower Band = 20 SMA less twice the 20-period SD
b) Relative Strength Index or RSI
RSI is referred to as a momentum oscillator that is used to measure the velocity and direction of the Forex price movement. It compares upward price movement for closing price with downward movement of closing price within a certain time. On average, one period consists of 14 periods.
RSI = 100-100/ (1+RS)
RS = Average gain by Average loss
Average Gain = [(Sum of gains for 14 periods/14) *13 + current gains] / 14
Average Loss: [(Sum of losses for 14 periods/14) *13 + current loss] / 14
c) Simple Moving Average Line
SMA is the common indicator on a Forex chart that are responsible to smoothen price fluctuations for a certain period. This way, traders can have a clear idea of the status of price movement.
How to Profit Trading Forex?
When it comes to identifying whether foreign currency trading would be a favorable step towards prosperity or not, a person has to consider the following aspects:
Extent of Understanding
There is no denial in saying that the foreign exchange market is full of risks and competition. However, the traders also have chances to earn the same profits if everything goes well.
But, before getting started, they have to find out their understanding of the foreign exchange market since the extent of their knowledge will dictate how they would perform among Forex market leaders.
Their understanding is the key to making investment decisions. When Forex traders are aware of market trends and prevailing conditions, they can make better decisions as compared to those who have limited knowledge.
To minimize risk, experts suggest not to exceed investment by 20% of the investment portfolio. This is called portfolio diversification and is used by many pro traders on different trading platforms.
Forex Money Management
There is a lot of risk involved in Forex money management. Traders try to take big risks in Forex trading because of higher returns within a short time period.
But, what turns out to be a concerning part is to make uninformed or wrong decisions in high-risk trades, which end up in huge losses. In short, random distribution brings the same amount of losses and wins.
Traders have to design a definite and effective strategy for trading Forex successfully. Just remember that no way is right or wrong for trading Forex; rather, traders have to determine one that is easy to execute. It does not necessarily mean that one trading strategy can work the same way for all currencies.
Forex traders have to maintain a high level of discipline and execute a reliable strategy so that they can rest assured about keeping their focus on a certain currency pair instead of performing emotional trading.
For a beginner, the rule of thumb is to start with a demo account and practice skills until he/she is sure about getting started professionally.
Keep Emotions Away from Trading
Although it may seem to be a simple thing, in reality it holds a lot of importance. Since emotions can destroy a Forex trading career, there is no reason to involve them in any way.
Remember that this type of trading is neither a game nor a piece of cake that everyone can do effortlessly. It is actually a combination of disciple and analysis that needs an attentive mind and quick response.
Keep Updated with Current Market Trends
In order to be profitable in trading Forex, one of the key rules is to get every piece of knowledge that could affect the Forex trading decision. Whether it is new releases, market trend analysis or news about investment platforms, every single information is important!
What’s a Forex Broker?
Also referred to as a currency trading broker or retail Forex broker, a Forex broker is involved in modern commercial and financial trading. The role is to work as an intermediary between buyers and sellers of the assets to earn commission on every successful trade.
Some concepts declare a broker as the salesman of financial assets who plays an integral role in dealing with derivatives, commodities, equities, and foreign currencies.
The importance of a Forex broker is not limited to just making deals on Forex platforms; rather, there are many other types of brokers with respect to their services and duties.
It is a type of Forex where dealers work for individual investors. Also called retail aggregators, these firms used to carry out transactions with the help of a retail Forex broker.
Since its establishment in the 1990s, these brokers used to help traders set up accounts with limited assets and educate them about how to carry out transactions online through a trusted platform.
Normally, the trade is carried out with the spot currency market where there are a few who used to focus on derivative products like options and futures.
Dealers and Brokers
Dealers are responsible to handle most of the retail Forex brokerages so that Forex traders are able to enjoy maximum liquidity. Upon providing their services, brokers charge a certain amount as fee via a bid-ask spread.
This spread is usually higher for retail customers as compared to what has been prevailing in the interdealer market.
There is no doubt in saying that retail Forex traders need help from brokers to access the foreign exchange market. Though, they have to choose one of the two Forex trading modalities that brokers specialize in:
- Dealing desk trading where brokers are the dealers and play an opposite role of traders. They are allowed to pay large spreads while brokers can fill orders on a discretionary basis.
- No dealing desk trading where traders have access to the interdealer market against a certain amount of fee. The Forex market conditions are affected by variable spreads.
How to Choose the Right Forex Broker for You?
Yes, starting with the security, traders are required to be particular about who they are providing all information. Since it has their personal, payment as well as other important details, it is necessary to check their credibility and reliability.
The best source is to consult with any of the regulatory agencies across the world, including the Commodity Future Trading Commission (CFTC) and National Futures Association (NFA) in the U.S., Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) in the U.K., Australian Securities and Investment Commission (ASIC) in Australia, Investment Information Regulatory organization of Canada (IIROC) in Canada, Bundesanstalt Fur Finanzdienstleintungsaufsicht (BaFIN) in Germany, Swiss Federal Banking Commission (SFBC) in Switzerland and Autorite des Marches Financiers (AMF) in France.
There is no way to avoid currency trading costs. Traders have to pay for every single trade they are involved in. Whether it is in the form of a commission or spread, the key is to search for the cheapest and affordable rates.
However, traders have to find out if they need tight spreads based on the availability of options.
Deposits and Withdrawal
Reliable and trusted FX brokers always simplify money deposit and withdrawal for traders. They don’t find any reason to create hurdles or make things difficult.
Since all Forex trading activities are carried out on a currency trading platform, a good Forex broker will suggest an option that is stable and user-friendly. So, it’s better to always have a look at the trading platform before allowing the broker to carry out any transaction.
A good Forex broker always tries to get the best price for orders so that traders can rest assured about getting all the benefits they want. Under normal foreign exchange market situations i.e. liquidity or surprise events, a broker cannot resist making a trade.
As a matter of fact, brokers are not perfect and so do their services. Traders should always approach someone who is easily available at the time of need. There is no point in joining a Forex broker who is hard to reach when it is the time to ask for some guidance or assistance.
The Best Forex Brokers
You can’t hope to have a satisfying currency investment experience if you don’t use the best brokers around. Our team has managed to identify them and we want to introduce you to the two top choices you can make for a currency trading partner.
The broker offers an advanced web-based investment platform that has been tailor-made to meet the needs of online investors. You can choose from a huge list of assets to trade. They include but are not limited to financial instruments and derivatives.
24Option has been operational in the financial markets for years now, has numerous clients from around the globe and is one of the most reputable brokers you could choose to join.
On the 24Option platform, you’ll gain access to financial pairs, commodities, stocks, and indices. This provides you with unlimited opportunities to invest and trade instantly.
The broker uses the MetaTrader4 platform to ensure user-friendliness, top-line safety and security, and a smooth experience available across multiple devices, including on-the-go.
To access the financial markets from one place, this is the go-to platform. Licensed and regulated to mediate financial operations, it is a great place to start your investment career.
To get access to all the stellar features offered by 24Option, simply open an account by providing basic details. You can open a demo account as well, in order to test the waters.
Among the advantages of trading through 24Option are:
- Smooth continuous connection to the markets;
- Huge number of assets to choose from;
- Safe and secure, as well as regulated, investment environment;
- Multiple methods for deposits and withdrawals;
- Constant customer support;
- Demo account, great for complete beginners
- A huge library of free educational resources.
FXVC quickly gained traction and became the preferred broker for many online investors. It is a licensed and regulated platform that offers you the opportunity to trade with more than 300 assets.
A great advantage of this broker is the availability of different tiers of trading accounts. You can choose between five accounts, starting at €500 initial deposit. This is a clear sign that the platform is suitable for both big and small traders at various levels of experience.
As a registered client, you’ll gain access to comprehensive and extremely useful tools for analysis that can help both beginners and professional investors make better decisions when trading online.
You also have at your disposal a rich library, a glossary and index information that will help you gain the knowledge required to have an edge on the market.
With FXVC, you can expect:
- Fair treatment;
- Quick processing of requests and queries;
- Dedicated customer support available through multiple channels;
- Safety and security through regulation;
- Strict control to ensure your funds’ safety;
- Additional educational resources;
- Live training webinars;
- Advanced investing tools and solutions;
- A huge list of financial instruments to trade, including cryptocurrencies.
Which Are the Different Forex Trading Platforms?
There are three different trading platforms investors differentiate between. These are:
Without a doubt, the most popular investment platform known to currency traders. All brokers offer one of MetaTrader’s iterations. As a user of the platform, you’ll become a part of a global community of investors.
That means you’ll have all the resources and information necessary to figure out all the elements of the currency trading software without coming across serious difficulties.
MetaTrader is extremely popular because it allows you to use a copy-trading feature which is extremely helpful for beginners. It is also available on various platforms, including as a desktop solution for Windows and an app that runs on both iOS and Android.
We’ve discussed in more detail the MetaTrader software below.
This software option is newer but is quickly gaining popularity when we compare it to the leader in Forex solutions – MetaTrader. It is available both for web and desktop use, thanks to the web version being built on HTML5.
This implies that using the software suite is safe and secure. It also allows copy trading and a limited version of automated investment through bots. In general, the cTrader platform provides a user-friendly, clean and easy-to-navigate experience for currency traders and investors.
If you have a significant amount of experience in currency investments, then you’ve probably heard of the TradeStation platform. It is best suited for experienced investors in the currency market.
Like its competitors, it is also available in a web-based and desktop versions you can easily use and navigate. But only as long as you have a solid experience in the currency investment field. We wouldn’t recommend it for total beginners.
MT4 – Forex Trading Platform
MetaTrader 4 or MT4 is one of the largest and leading providers of Forex trading technologies. Its services are extended to but are not limited to analytical analysis. It prides on having all features needed to make trading a breeze.
MT4 is known for its incredible strategies and their seamless implementation. It doesn’t matter how difficult they are, the platform is efficient enough to get things done properly.
MT4 has been one of the preferable platforms to trade Forex financial instruments. With its advanced functionality, it can work for all types of traders i.e. from beginners to professionals.
MetaTrader4 is packed with tools of trading signals, algorithmic and mobile trading, trading robots, technical analysis and many more. Traders just have to figure out how to bring the best out of its services.
The best of all, instant execution, trading from a Forex chart, stop order, pending and market order, trading history and a tick chart at their traders’ disposal, meaning that they are free to use in whatever manner they want. Other than that, the following features make MT4 a better place to trade Forex compared to the rest:
- Analytics: Proving to be the worthy and strongest part of MetaTrader4, analytical functions are responsible to offer interactive charts and online quotes with 9 periods so that traders can analysis quotes and respond to the price changes accordingly. Its 30 built-in technical indicators and 23 analytical objects can simplify Forex trading while built-in Market and free Code Base gives access to additional indicators affecting the analytical options. This way, traders can keep an eye on market movements and create their plans accordingly.
- Copy Trading and Trading Signals: This feature is particularly favorable for traders who do not have much time to analyze data and perform trades. They can allow MetaTrader4 to trade Forex from other traders. Just choose a provider, subscribe to trading signals and allow the terminal to copy their trades.
- MetaTrader Market: It is the perfect place to interact with Expert Advisors or technical indicators. Traders are free to purchase any trading robot or indicator that can help them to execute strategies efficiently. The best of all, this purchase is secured, transparent and simple. So, just look at its 2,100 technical indicators and 1,700+ trading robots for better trading experience.
- Algorithmic Trading: With this feature, traders can employ an Expert Advisor to carry out automated trading. MetaTrader4 uses a Forex trading robot to control analytics and provide a full-fledged environment for creation, examination, and optimization of automated/algorithmic trading programs. The platform also offers a strategy tester, MetaEditor, MQL4 language and free trading robot library for better trading experience.
- Mobile Trading: Since tablets and smartphones have become the essence of trading Forex, MT4 has designed a compatible app that can support Android OS and iOS to let traders enjoy full trading market orders.
- Financial News and Alerts: By keeping themselves updated with the latest news, traders can create or alter their trading strategies based on price movements. Alerts enable them to receive timely notifications, information about foreign exchange market conditions and finances.
MT5 – Forex Trading Platform
As a multi-asset platform, MetaTrader5 enables users to trade Forex, stocks, and futures. It is equipped with superior tools to carry out comprehensive price analysis along with bringing the best out of algorithmic trading and copy trading.
Flexible Trading Platform: MT5 prides itself on offering incredible trading services with a system of trades and accounting of orders. It supports two order accounting systems: the hedging option system and the traditional netting system. Also, there are four order execution modes to work for different Forex trading objectives, namely Exchange execution, Instant, Market and Request. MT5 supports all trade orders, consisting of stop, pending and Forex market orders.
Technical Analysis: It works on the all-in-one concept and facilitates traders with incredible analytical tools. Its 21 timeframes work for comprehensive detailed analysis while analytical tools and technical indicators work for graphic objects and detailed analysis of quote dynamics. Traders can create their own indicators with the help of MQL5 programming language.
Fundamental Analysis: MT5 offers resources for fundamental analysis to forecast price movements for financial instruments. Its aim is to ensure constant monitoring of different industrial and open-source economic indicators. The best of all, traders are able to know the latest international news through this platform. Its economic calendar contains major macroeconomic indicators according to various countries so that traders can use financial instruments to the fullest.
Copy Trading and Trading Signals: Saving the need of manual Forex trading, MetaTrader5 encourages users to subscribe to the trading signals for automated reproduction of trades in the account. All they have to do is to choose free and paid signals either for demo or live accounts with respect to the profitability and preferred risk level.
Mobile Trading: MT5 offers the full-fledged Forex trading facility on the mobile version. Apart from being compatible with desktop, users can also carry out trades through their Android or iOS phones with the help of extensive analytical capabilities.
Virtual Hosting or VPS: MetaTrader5 or MT5 has the ability to work without a computer. It doesn’t matter if it is working or not. Its virtual platform enables users to run Forex VPS (a remote server) to execute trades at any time they want.
Types of Forex Trading Accounts
There are three major foreign currency trading accounts everyone should know before signing up to any of them:
1. Standard Trading Account: Being the most common and frequently used account, it allows users to trade in standard currency lots worthy of $100,000. Remember that to deal with this account, there is no need to invest $100,000 as capital. Instead, its rules of leverage and margin allow traders to trade Forex with only $1,000 for the entire lot. Traders are able to enjoy added benefits from a Forex broker who offers better services and perks to individual investors dealing with this account. However, they ask for at least $2,000 or even $5,000 as minimum capital to start trading. So, only an experienced and well-funded trader can step forward to deal with it.
2. Mini Trading Account: It enables traders to start with mini lots that are equal to $10,000 or 1/10th of what is required for standard accounts. Brokers dealing in standard accounts also enable traders to have mini accounts so that they can encourage new clients to start with full trading. The best part of this account is the low risk that is favorable for inexperienced traders to begin their career without bringing everything at stake. They just have to invest $250 to $500 with leverage of around 400:1. The downside of this account is that it doesn’t pay off much to let traders think of Forex trading i.e. for $10,000 lot, they can produce $1 pip as compared to $10 as received in a standard account.
3. Managed Trading Account: Even after making an investment, this type of Forex account doesn’t give trading rights to the person. Like stockbrokers, there are account managers for each who are responsible to handle all account activities. Owners are only intended to set objectives and managers have to execute them. Practically, there are two types of managed trading accounts based on their scope of work:
- i. Pooled Funds: Capitals from many investors are collected at one place and profits are shared accordingly. They are based on risk tolerance, meaning that traders who want to earn higher returns, should invest their money in higher-risk ratio pooled accounts or vice versa.
- ii. Individual Account: A Forex broker is intended to handle accounts individually, thereby making separate decisions of investments.
Forex Glossary – Terms You Should Know
To be able to trade currency and all other assets, you have to be aware of the main terms you’ll regularly come across in the market. Have a look at the list below and get yourself ready.
- Spread: Difference between the selling and buying prices for a currency pair. Like the financial market, investors come across two major prices right after they open a position. One allows them to trade at buying price for a long position while to open a short position, they have to trade at selling price, which is a bit lower than that offered by the foreign exchange market.
- Lot: Like digital currencies, foreign currencies are also traded in lots or batches in order to standardize trades, consisting of 100,000 base units.
- Leverage: When investors gain exposure without paying the full price of the trade; rather, they pay a small deposit called Forex.
- Margin: Initial deposit by investors against opening and maintaining a leveraged position. Just be sure to keep an eye over margin because its requirements change from one Forex broker to the other and the size of the trade.
- Pip: Used to measure price movement in a currency pair. It is counted based on the digit movement in the 4th decimal of the pair. For instance, if pip for GBP/USD was $1.35361 and becomes $1.36371, then it moves by one pip.
- Gaps: When the market shows sharp up or down movement against little or no trade, it creates a gap in the price pattern.
Beginner Tips & Tricks for Trading Forex
We would like to offer you some basic tips and tricks that will help you navigate the currency market with more confidence. Don’t miss out on the chance to get an edge over the market.
Understand the Market: Collecting relevant knowledge about the financial market, Forex market, and the likes, is crucial. Before taking any step, investors have to invest time and understand how the foreign currency market works and how to deal in each currency pair. It’s important to know the risk before investing capital on either platform.
Create a Plan and Follow It: Whether the person is a beginner or professional, the presence of a good trading plan is always crucial. It must be created after identifying profit goals, methodology, risk tolerance level, and execution criteria. Every trade should be based on this plan.
Practice, Practice, and Practice: One of the key rules is to master trading skills before actually making an investment in foreign currencies. For this, beginners can start by signing up to demo accounts and give a test drive to whatever they have learned so far.
Forecast Market Conditions: Being a fundamental trader, the person should follow a practical approach and trade according to the latest news, market happenings, market order, and political and financial data. Technical traders can utilize technical tools to derive benefits from the Forex market movements. However, a smart trader can combine both tactics to make trades as accurate as possible.
Know the Limit: Setting up limits is another key factor in mastering Forex trading skills. Beginners should identify the risk involved in each trade, set their leverage ratio and do not risk something more than what they can’t afford to lose.
Don’t be Emotional: In order to be a successful trader, one of the key rules is never to involve emotions while trading foreign currencies. There is no reason to run after a trade that doesn’t fit the trading plan. Never focus on revenge trading nor invest everything on a losing trade just to get everything back in one go.
Don’t be in a Hurry: Another key tactic to a successful trading experience is patience and consistency with trading. It is important to maintain a positive attitude in order to grab opportunities at the right time. Investors should educate themselves before each trade so that everything goes well and within the desired discipline.