NotTheNoobs

Forex => What is Forex - a beginners guide => Topic started by: Caesar on September 16, 2019, 04:54:25 PM

Title: Beginners Guide To Forex
Post by: Caesar on September 16, 2019, 04:54:25 PM
Hi newbies, here is our beginners guide to forex trading.  We will be posting this in bite-size chunks, updated regularly,  so you can print it off  and save it for reference later. I would like to thank one of our members, who wishes to remain anonymous,  for his contributions to this guide



What is Forex?

Forex, or Foreign Exchange is a  decentralized global market where all the world's currencies trade. A forex market exists wherever the trade of two foreign currencies are taking place. It is open 24 hours a day, five days a week. This forex market exists to ease investment and trade. The primary trading centers are London, Paris, New York, Tokyo, Zurich, Frankfurt, Sydney, and Singapore.

The forex market forms the essential infrastructure for international trade and global investing, since countries, businesses, and even individuals need to exchange their own currency in order to buy  products and services that are sold in different currencies. It is crucial for supporting a country's imports and exports, which also grants it access to resources and creates additional demand for goods and services.

The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 12, 2019, 02:47:14 PM
Popular terms used in forex

Base currency: This is the first currency that appears when quoting a currency pair. Looking at EUR/USD, the Euro is the base currency. See the chart below for an example,  under "How to Read a Brokers Quote"

Variable/quote currency: This is the second currency in the quoted currency pair and is the US Dollar in the EUR/USD example.

Bid: The bid price is the highest price that a buyer (bidder) is prepared to pay. When you are looking to sell a forex pair this is the price you will see, usually to the left of the quote and is often in red.

Ask: This is the opposite of the bid and represents the lowest price a seller is willing to accept. When you are looking to buy a currency pair, this is the price you will see and is usually to the right and in blue.

Spread: This is the difference between the bid and the ask price which represents the actual spread in the underlying forex market plus the additional spread added by the broker.

Pips/points: A pip or point refers to a one digit move in the 4th decimal place. This is often how traders refer to movements in a currency pair, i.e. GBP/USD rallied 100 points today.

Leverage: Leverage allows traders to trade positions while only putting up a fraction of the full value of the trade. This allows traders to control larger positions with a small amount of capital. Leverage amplifies gains AND losses.

Margin: This is the amount of money needed to open a leveraged position and is the difference between the full value of your position and the funds being lent to you by the broker.

Margin call:When the total capital deposited, plus or minus any profits or losses, dips below a specified level (margin requirement).

Liquidity: A currency pair is considered to be liquid if it can easily be bought and sold due to there being many participants trading the currency pair.
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 15, 2019, 03:19:17 PM
How Much Money Do I Need?

A frequently asked question, with a myriad of different answers. The reasons for this include;
Where do you live?
Different countries have different income levels, and consequently people are likely to have different savings levels. What I will say is, regardless of where in the world you live, or what your income is, NEVER trade with money that you cannot afford to lose, and certainly not with borrowed money or credit cards.
What are your expectations?
If you expect to live solely off your profits from Forex you will need substantially more money in your account than if you are just looking for some extra cash, or just trying something new. As it’s highly likely that you will lose a large chunk, if not all, of your first trading account then it’s probably prudent not to overstretch yourself.
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 18, 2019, 04:55:22 PM
What age to start trading?

In most countries there are minimum age requirements for working, holding bank (not savings) accounts, having credit cards, etc, so it is not straightforward opening a forex account.

However, it is possible for an underage person to have a trading account with his or her own name attached to it, but in order for this to happen, a parent or guardian must also be involved with the account.

There are a few different ways this can happen. These may vary across countries so it’s best to check locally.

1. The parent or guardian can open a guardian account for the child. This is an account in the parent’s name, with legal title to the assets in the account and all capital gains and tax liabilities produced from the account belonging to the parent. The parent has total ownership, responsibility, and control of the account, but the named child can trade live on it…
2.   A child can have a custodial account. In this account, the child owns the assets contained within the account, but the parent has control of the investment decisions and any withdrawals which might be made. With this type of account, withdrawals or capital gain tax liabilities are taxed in the child’s name - not the parent’s. Of course, this can be an advantage over the guardian account (in which taxes fall under the parent’s name, at their marginal tax rate), since children often pay little to no tax.
3.   If a child has already been earning an annual income and filed their taxes for at least one year, then they would be eligible to open an IRA account with their parent’s help.

Having said all of the above, your preferred broker does not have to offer any of the above. This is understandable when you think of the instances where children have incurred large mobile phone bills yet the courts have found the parents not liable for these and the children too young for the contract to be enforced. The last thing a broker wants is to get dragged into problems on tax liability, negative balance responsibility, family disputes, etc.

Title: Re: Beginners Guide To Forex
Post by: Caesar on October 18, 2019, 05:02:38 PM
Choosing A Broker, Part 1

Check if the broker you are considering is regulated. If they aren’t, that should be a big red flag against using them. The main regulatory bodies are;
United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
Australia: Australian Securities and Investment Commission (ASIC)
Switzerland: Swiss Federal Banking Commission (SFBC)
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
France: Autorité des Marchés Financiers (AMF)
Canada: Autorité des Marchés Financiers (AMF)
Avoid anyone regulated in Cyprus*, Vanuatu, St Vincent, or anywhere else where the “regulation” is not worth the paper it’s written on.
*Cyprus is improving, but I personally would still be wary.

If possible, try to use someone regulated in your home country. At the very least, if something goes wrong you can take it up with a local regulatory body, law enforcement, fraud helpline, politician, or even get your local Watchdog-type TV programme involved. Difficult to do this if you’re thousands of miles away and don’t know anyone.

Don’t choose a broker based on who gives the biggest account bonus or cash back. If they need gimmicks like that to attract custom, they probably aren’t worth trusting your hard earned cash to.

Well worth noting is that the Financial Services Compensation Scheme (FSCS) in the UK have confirmed that non-UK residents who have forex accounts with FCA -regulated brokers get the same level of protection as UK residents
I don’t know if other regulatory bodies with compensation schemes follow suit, but this should be good news for anyone living in a country which has poor or zero regulations as they can enjoy a decent level of protection by signing up to a UK regulated broker

Title: Re: Beginners Guide To Forex
Post by: Caesar on October 24, 2019, 01:53:38 PM
How To Read A Brokers Quote

When you look at a price quote on your brokers screen, you will see something like the image below.
This is a typical quote for Eur/Usd, and as Eur is named first this is the base currency.
As highlighted in red, the first set of numbers is the price that you would sell at. The second set is the price which you would buy at.
Most forex quotes will show 5 digits after the decimel. The fourth digit after the decimal is known as a pip and the fifth is a pipette
The difference between these prices is the brokers spread, in this case 0.6 pips (or 6 pipettes, but most people work in pips)
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 24, 2019, 01:56:54 PM
Demo Or Live Account?

Not everyone will agree with this, but I recommend you start with either 1 or 2 demo accounts.
My reasoning is that you can use this to find your way around different brokers trading platforms before you commit any money- you may be less inclined to leave if you’ve already transferred money to them. Also, its quite likely that you will make mistakes when you start, I clicked “buy” instead of “sell” on my very first trade! You can also practice different trading strategies without risking real money.

As soon as you feel confident and ready to trade, open a live account. Only deposit the minimum amount the broker allows, and trade micro lots (you probably traded full lots on demo with the $100k play money you had).
You will find live trading very different to demo trading, purely because every penny you lose is coming out of your pocket! Try not to let this affect you, just as you shouldn’t get over-excited when you gain. Stick to your trading plan and money management rules regardless.

Title: Re: Beginners Guide To Forex
Post by: Caesar on October 26, 2019, 05:23:35 PM
Types of Currency Pairs

Their are numerous currency pairs available to traders and the 7 most popular of these are known as the majors. These are the most frequently traded pairs, accounting for about 80% of forex trading volume, and have the greatest liquidity, meaning getting in and out of trades with fairly small spreads is easier.

The 7 major pairs are;
Eur/Usd also known as 'fibre'
Usd/Jpy a.k.a. 'gopher'
Gbp/Usd a.k.a.'cable'
Usd/Chf a.k.a. 'swissie'
Aud/Usd a.k.a. 'aussie'
Usd/Cad a.k.a. 'loonie'
Nzd/Usd a.k.a.'kiwi'

They are associated with stable, well managed economies, and are less susceptible to manipulation  than other pairs.

The next most commonly traded pairs are the minors which include;
Eur/Gbp 'chunnel'
Eur/Jpy 'yuppy'
Gbp/Jpy 'guppy'
Nzd/Jpy 'kiwi yen'
Cad/Chf 'loonie swissie'
Aud/Jpy

The minors are typically less liquid and more volatile than Major currency pairs.

Then we move on to exotics which are currencies from emerging or smaller economies, paired with a Major.

Compared to Crosses and Majors, Exotics are much riskier to trade because they are less liquid, more volatile, and more susceptible to manipulation.

They also contain wider spreads, and are more sensitive to sudden shifts in political and financial developments. These would include pairs such as those below
Usd/Try
Usd/Mxn
Gbp/Nok
Eur/Try
to name but a few
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 26, 2019, 05:31:44 PM
Reading Forex Charts

Your broker will allow you to choose how you want to view your charts. You can change the background colours, what indicators you want to see, and what types of patterns you want to look at. Below we show some of the options you will have, which you choose is entirely down to personal preference.

Candlestick charts

Also known as a Japanese Candlestick Chart, a candlestick chart is favoured by traders due to the wide range of information they portray. The chart displays the high, low, opening and closing prices for the time period you are looking at- so in a 1 hour chart, a candlestick represents price movement within one hour.


The main part of the candlestick is the body which shows us the opening price level and the closing price level. The 2 lines sticking out of the body are the wicks and these show the high and low points that price reached within the time.
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 26, 2019, 05:42:20 PM
Continued from above...

Bar Charts

Next we look at bar charts, which show the same information as a candlestick chart but in the form of a bar.
The actual bar represents the currency pairs overall trading range and the horizontal lines on the sides represent the opening (left) and the closing prices (right).
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 26, 2019, 05:45:37 PM
Continued from above...

Line Charts

And finally we have line charts. These are fairly easy to understand, it is simply a line joining one time periods closing price to another, so identifying price direction is clearer than with candlesticks or bars, although you do lose the information these 2 show you.

Title: Re: Beginners Guide To Forex
Post by: Caesar on October 28, 2019, 05:42:54 PM
Types of Trading Strategies

Whatever trading strategy you choose to use, you should choose one that suits YOU as an individual - your goals, your lifestyle, your commitments, your financial status, your personality. Just because a particular strategy works for one person does not mean it will work for another, we are all different in many ways.

Below we show you the general types of strategies available, when you decide which type suits you best you can then start planning your trading around this.

Day Trading
Day traders open and close trades over the course of the day, usually holding positions for only a few hours. Day trading removes the risk that occurs when you leave a position open overnight.
To succeed at day trading you need to capitalise on the volatility of an asset, placing several short-term trades in the expectation of making a relatively small gain per transaction. This can be a high-intensity and high-stress trading style so you need to be able to fully concentrate on the market and be in a position to react quickly to positive or negative developments.

Scalping
The brokers friend. Scalp traders target intraday price movements and aim to make very small, very frequent profits. They typically only hold positions for a few seconds or minutes.
Scalping suits traders who are willing to monitor data all day long. You need to be comfortable making quick decisions and have a high appetite for risk – a couple of large losses could wipe out your profits for the day. Brokers love this because their spread is the same whether you make 1 trade a day or 100 - but if you make 100 then they get 100 spreads off you.

Position Trading
Position traders take a longer-term view of the market than day or scalping traders so this suits traders who don’t want to have to constantly monitor the markets. Position traders have to be resilient enough to ride out potential dips in the market, so patience is a virtue here.
Position traders may use fundamental analysis to identify the asset they want to invest in, and then use technical analysis tools to spot the most effective entry and exit points.

Swing Trading
Swing trading follows the same basic premise as position trading, but looks to the intermediate term (unlike day trading which looks to the short term). Useful in volatile markets where there is no clear trend, swing trading is somewhere between position trading and day trading, looking for medium-term price movements from which to profit.



Title: Re: Beginners Guide To Forex
Post by: Caesar on October 31, 2019, 03:39:04 PM
Indicators

There are a whole bunch of indicators out there, but what do each of them do? Below is a list of some of the most popular, the ones you are most likely to consider at some point or other. We are not recommending any of these, this is just an explanation of what they are.

MACD Moving Average Convergence Divergence.
This assesses the strength and direction of an underlying trend and helps flag a potential change in price ahead.
MACD takes the difference between two exponential moving averages (using closing prices) – the 12-day EMA and the 26-day are the most commonly used. Then the “signal line” (a 9-day SMA of the MACD itself) is placed over the MACD. It’s called the ‘signal line’ because when the MACD line crosses it, it’s a signal to either buy or sell.
When the MACD crosses over the signal line, this may signal an upward trend and could be a sign to buy. If it crosses below, thats a downward trend and a time to sell.
Divergence is when the lines go in opposite directions, pointing to a possible reversal.

Parabolic SAR
A trend-following indicator, this is displayed as a series of dots either below or above the price bars (depending on the direction of the trend) and is calculated using the most recent highest and lowest prices and an acceleration factor.
Signals are generated when the dots swap from above to below the price. It’s best for gauging momentum in the short term only and therefore likely to be most helpful for day traders.

RSI Relative strength index
Most useful in ranging markets, this helps show possible overbought or oversold scenarios.
If the RSI goes above 70, it is considered overbought. If it goes under 30, it is considered oversold. The 50 mark is also generally used to confirm a trend

Stochastic Oscillator
Like the RSI, this is useful in ranging conditions. 2 lines (called %K and %D) measure an asset’s closing price against the high and low ranges of its price over an adjustable period of time. The typical period of time is usually 14 periods, but you can alter this to reduce or increase the indicator’s sensitivity to the market.
This is used now to alert traders to overbought or oversold conditions. When the lines are above 80, an asset is thought to be overbought (and the trend likely to reverse so traders should sell) and when they are below 20, an asset is thought to be oversold (so traders should buy).

Bollinger Bands
Helpful for forecasting market movements. In a steady market, the upper and lower bands tend to act as support and resistance levels, encouraging prices back towards the middle in a phenomenon known as the ‘Bollinger Bounce’.

Ichimoku Kinko Hyo
Designed to give traders all the information they need using just one indicator, it can be hard for novice traders to read at first. It measures momentum as well as forecasting zones of support and resistance.
The five lines (tenkan-sen, kijun-sen, senkou span A, senkou span B and chikou span) are calculated using the highest high prices and the lowest low prices of different lookback periods. The lines show different key levels of support and resistance, as well as signals for reversals and tactical places to plot your stop loss points. Despite all this, most experts recommend using other forms of technical analysis with it.
Title: Re: Beginners Guide To Forex
Post by: Caesar on October 31, 2019, 03:40:32 PM
Using Indicators

Whether or not to use indicators, and which to use, can be a very emotive subject. Some traders swear by them, others swear at them.
Before choosing which indicators to use, or not use, study this subject and practice on demo so you understand what purpose each has and what its limitations are.
What I would STRONGLY recommend is that, particularly for new traders, you start with the bare minimum number, perhaps only 1 or 2. Putting loads of indicators in your charts may look good and might impress friends who have zero forex knowledge, but they are only likely to complicate your analysis and make decision-making harder. You can always change them or add more as you gain experience and fine tune your trading plan.
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 01, 2019, 12:22:08 PM
Types of Orders

True to form, forex gives you a choice of types of orders you can place and you really need to understand the differences between them. So, here goes!

Market orders
A market order is a buy or sell order in which the broker is to execute the order at the best available current price. Note, the price you see when you click is NOT guaranteed.
Entry orders
A request from you for your broker to buy or sell a specified amount of a particular currency pair at a specific price. The order will be filled if/when the requested price is hit.
Stop Loss orders
An instruction from you to close a position when it reaches a specified price. It is designed to limit a trader’s loss on a position, however in most cases the broker cannot 100% guarantee being able to achieve this, so will close at the best possible price obtainable. Traders are strongly recommended to use stop loss orders to limit their losses.
Take Profit Orders
An instruction from you to close a position when it reaches a predetermined profit exit price. It is designed to lock in a position’s profit (not to be confused with Trailing Stops). Once the price surpasses the predefined profit-taking price, the take profit order becomes market order and closes the position.
Good Until Cancelled (GTC)
In forex, most of the orders default as GTC, meaning an order will be valid until it is cancelled, regardless of the trading session. The trader must specify that if they wish a GTC order to be cancelled before it expires, usually by entering a closing date/time or by manually closing the order. Generally, the entry orders, stop loss orders and take profit orders in online forex trading are all GTC orders.

The above are the basic orders types available in most of them trading systems. Some trading systems may offer more sophisticated orders.
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 03, 2019, 08:07:02 AM
When To Trade

For all intents and purposes,  the forex market is open 24 hours a day, 5 days a week between 22:00 Sunday and 22:00 Friday GMT, so wherever you are there should be a time when you can trade.
Within that period,  the 4 main markets have their own local opening/closing times.
Sydney 22:00-06:00 GMT
Tokyo 00:00-08:00 GMT
London 08:00-16:00 GMT
New York 13:00-21:00 GMT

The busiest time, when most trading is done and the market is most liquid,  is 13:00-16:00 GMT daily as this is when the London and New York markets overlap.

Roughly 21% of trading takes place during the Asian session (Sydney and Tokyo hours), 32% during the London period, and 19% during the New York session.
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 05, 2019, 04:58:01 PM
Choosing A Broker Part 2

Regulation of brokers

A definition
The objective of regulation is to ensure fair and ethical business behaviour. In their turn all foreign exchange brokers, investment banks and signal sellers have to operate in compliance with the rules and standards laid down by the Forex regulators. Typically they must be registered and licensed in the country where their operations are based. Licensed brokers may be subject to recurrent audits, reviews and evaluations to check that they meet the industry standards. Foreign exchange brokers may have capital requirements which require them to hold a sufficient amount of funds to be able to execute and complete foreign exchange contracts concluded by their clients and also to return clients’ funds intact in case of bankruptcy.[citation needed]
Each Forex regulator operates within its own jurisdiction and regulation and enforcement varies significantly from country to country. In the European Union a license from one member state covers the whole continent under the Mifid regulation and has resulted in regulatory arbitrage where companies select the EU country that imposes the least controls such as CySEC in Cyprus. Not all foreign exchange brokers are regulated and many will register in jurisdictions that impose low-regulatory environments such as tax havens and corporate havens that form part of offshore banking.
Source:Wikipedia
The above should help clarify why I recommend not using brokers regulated in Cyprus or some of the more exotic offshore nations. If a broker chooses to base themselves in these places, they are not doing so for the benefit of retail traders. Note this covers signal sellers as well as brokers
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 08, 2019, 01:11:27 PM
K.I.S.S.
Keep It Simple, Stupid! At the risk of offending anyone, this should be one of the golden rules for new traders.

Keep your charts simple.
Don’t over-complicate them with indicators that you barely understand.
Keep your pairs simple.
Trade a currency pair you understand a bit about. Exotic pairs may seem tempting to you, but do you understand what moves the Klingon currency? Likewise, it’s probably a good idea as a beginner to trade pairs where you are available to trade during their busiest times, that way you have more chance of catching a big move or closing a trade ahead of news events (Not during News Events, I would never recommend this for inexperienced traders)
Keep your trading simple
In general, try not to over-complicate any aspect of your trading. Try not to over analysis the charts or news events, this can lead to trade paralysis where traders can neither enter new trades nor close existing trades because they are confused by information overload.


Title: Re: Beginners Guide To Forex
Post by: Caesar on November 11, 2019, 09:24:58 AM
Create a Journal

Starting a journal to log your trades is one of the best things a new trader can do. A journal can be just a note/notebook or an excel document. An excel document is particularly useful as you can add screenshots of the trades you open.
Note your trading plan at the start of the journal, that way you can refer to it before, during, and after each trade if you need to.
In the journal, note the date and time, reasons for opening the trade, expectations, Stop Loss and Take Profit positions, and how you felt when you entered the trade.
You can add progress notes about how the trade behaves, if that’s in line or contradictory to your thoughts, anything you feel relevant.
Finally, when you close the trade, note the outcome, how you felt during and after the trade, and how you feel you could have improved it.
This may seem like a lot but, particularly when you are just starting out, it will help you develop and fine tune your trading. As you become more experienced you will likely reduce your notes as your trading plan settles and your emotions become detached from your trading.

Later on you may want to open a myfxbook or similar account, which will track your trades and give you a wealth of information about them. I would suggest not doing this until you have a bit of experience trading as the amount of information can be over-whelming and might actually harm your trading. Also, by making your own notes you will gain a better understanding of yourself as a trader, something myfxbook will never give you.
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 12, 2019, 10:05:41 AM
Why Do So Many Traders Fail?

Depending on who you speak to, the failure rate for new forex traders is somewhere between 70 and 95%. Thats right, as many as 19 out of 20 new traders will fail and either blow their account or quit because they couldn’t make it worth the time. Most regulated brokers now show what percentage of their traders lose money. This does not reflect badly on the broker, it shows how badly prepared many new traders are.
So, why is this?
There are more reasons than you might imagine, I’ll list as many as I can here and will add more as they come to mind, or as my fellow traders remind me of them. So, in no particular order;

Not Maintaining Trading Discipline
One mistake many traders make is to let emotions control trading decisions. Becoming successful forex can mean achieving a few big wins while suffering many smaller losses. Experiencing many consecutive losses is difficult to handle emotionally… Trying to beat the market or giving in to fear and greed can lead to cutting winners short and letting losing trades run out of control. Adhering to a well-constructed trading plan is key in maintaining trading discipline.

Poor Risk and Money Management
Too many new traders are so focused on how much they can gain in a trade that they forget how much they can lose.
Traders should know exactly how much of their account is at risk and are satisfied that it is appropriate in relation to the projected benefits BEFORE they open a trade, and should place their Stop Losses accordingly. As the account grows, capital preservation becomes more important. Using different trading strategies and currency pairs, together with the appropriate position sizing, can insulate a trading account from unfixable losses. Later, traders can split their accounts into separate risk/return tranches, perhaps with different brokers, where only a small portion of their account is used for high-risk trades and the balance is traded conservatively. This type of strategy can help ensure that low-probability events (Black Swan events) and broken trades are less likely to destroy one’s trading account.

Leverage
Leverage gives traders an opportunity to enhance returns, but is a double-edged sword that magnifies the downside as much as it adds to potential gains. The forex market allows traders to leverage their accounts as much as 1000:1, which can lead to massive trading gains in some cases and crippling losses in others. The market allows traders to use vast amounts of financial risk, but in many cases it is in a trader’s best interest to limit the amount of leverage used.
Not only does leverage magnify losses, but it also increases transaction costs as a percent of account size. If a trader with a $500 account uses 100:1 leverage to buy five mini lots ($10,000) of a currency pair with a five-pip spread, they incur $25 in transaction costs [($1/pip x 5 pip spread) x 5 trades]. So, before the trade even begins, he or she has to catch up, since the $25 in transaction costs , or 5% of their account. The higher the leverage, the higher the transaction costs as a percentage of account value, and these costs increase as the account value drops. This is great for the broker, and one reason why new traders are encouraged by them to scalp since the revenue for the broker is high, relative to the small account value.
In some countries leverage is legally limited to 50:1 or less and new traders in particular may find this a sensible level. If a broker is offering you leverage of 400, 500, or more, then they are almost certainly operating outside regulation and you should be asking yourself 'Do I really want to place my money with a company like this?'

Trading Without A Plan
Similar to money management in many ways, this refers to the extraordinarily high number of new traders who simply jump into trading with no idea of what they can reasonably expect to get from a trade, how they would get it, and often absolutely no knowledge of the forex business. Its like opening a High Street shop without knowing what you are going to sell, how much you need to sell at, or if prospective customers would be interested in what you sell.
Take the time to learn forex. Only then will you understand how to devise a strategy and trading plan that suits you as an individual. We are all different, with different hopes, pressures, finances, etc, so you can’t simply copy someone else’s strategy and plan, it needs to be tailored to you.





Title: Re: Beginners Guide To Forex
Post by: Caesar on November 13, 2019, 04:20:59 PM
Emotions And Greed

Emotions and Greed will destroy your account. No doubt about it, if you can’t get both of these under control then your days as a forex trader are numbered.
Greed, excitement, euphoria, panic or fear are all perfectly natural emotions but we need to separate these from our trading lives. So how do we do this?

Begin with small amounts.
By reducing our risk, we can be calm enough to realize our long term goals, reducing the impact of emotions on our trading choices. Think about it, compare how you would feel if you risked and lost a few dollars you found in an old jacket you were about to throw away, with losing next months rent? It makes sense to start small until you’ve built up some experience.

Have a plan
Create a simple trading plan, something along the lines of “If Xyz/Abc does this, then go long (buy)”, “If Xyz/Abc does that, then go short (sell). If Xyz/Abc does neither of the above, do not trade”. Then stick to the plan. Sometimes you may miss out on a potential profit, other times the trade may reverse just after you enter, and you lose money. But because you stick to a plan, this is easier to accept because you know that even the best plans will have bad days. The key is, you partly automate your trading, not by buying an EA but by behaving robotically and sticking to your rules, removing a lot of the emotions. If the plan consistently fails you, you can always revisit it to see how it can be improved.

Don’t revenge trade
It’s very tempting to enter a new trade simply to try and make up losses from earlier trades. Please don’t do this, your judgement is likely clouded by the loss you’ve just had. Better to turn off your pc and do something relaxing for a few hours, returning only when you feel refreshed and clear headed

Be patient
If you can't see a trade that fits your trading plan, turn your pc off and take a break. If the opportunity isn't there you can't force it. Don't take trades for the sake of it, forex will still be around later today, tomorrow, and next week.
Title: Re: Beginners Guide To Forex
Post by: Caesar on November 15, 2019, 02:40:40 PM
Cut Losses, Let Profits Run.

Sounds easy, and it is, but you’d be surprised how many new traders struggle with this.

The basic idea behind this is that you should first endeavor to manage your risk by using stop losses in a disciplined way. Decide BEFORE you enter a new trade where your stops will be. I’ll discuss this in another post but it’s important to use these to limit any losses to acceptable levels.

Next, allow your profits to accumulate when you have a winning position. Traders often use trailing stops for this purpose but I believe these are of limited use and, in most cases, will probably mean you get stopped out earlier than you wish. Setting a fixed stop and a take profit at positions in accordance with your trading plan is probably better for new traders. You can always move your stop above break even manually as your trade moves into profit.

In trading, it’s not what you make, profits take care of themselves; it’s what you don’t lose that really matters. Most traders, even newbies, win more often than they lose...fact! Research has found that, across the 15 most commonly-traded pairs, traders close in a winning position approx. 60% of the time.
So, how come they blow their accounts?
Simple, the same research, across the same 15 pairs, found that while the average number of pips won in a successful trade was 55.2, the number of pips lost in unsuccessful trades was a whopping 100.8 - almost twice as many!
This highlights why new traders need to Cut Losses, Let Profits Run, and one of the keys to this is knowing how and where to place your stops when you first enter the trade.

Fixed Stops
First, calculate the maximum amount of pips you would be prepared to lose before entering the trade. For example, say you're trading 10,000 units of EurUsd. Each pip movement has a value of $1. If you can only afford to risk $20, and your brokers spread is 1 pip, then you could place your stop at no more than 19 pips (20 minus 1 for the spread) from your entry point.

However, this doesn’t mean you should place it there. Consider the following;
   1.What is your Risk:Reward (R:R) level? If you’re looking to win 20 pips with a R:R of 1:2, your stop should be at around 10 pips.
   2.Where are the Support and Resistance (S&R) levels? As price frequently returns to these levels, its prudent to place your stop on the side of these that you don't expect price to reach - if you enter a buy trade at 1.1200 and Support is at 1.1185, its worth making sure your stop is below 1.1185, so long as you don't go outside your 19 pips acceptable risk.

Trailing Stops
These are stops which can follow your trade as it moves into profit. Say you set the Trailing Stop at 10 pips. As soon as your trade is 10 pips in profit, the Trailing Stop is activated, right on your breakeven point. This ensures that, even if price then reversed and fell, you would be stopped out without a loss. Its useful if you are away from your pc and want to protect your trade to a degree but I wouldn't recommend using it if you are able to watch live, for the reason that since price rarely moves in a straight line, a Trailing Stop is likely to stop you out of many trades before you can maximise your profit.


Title: Re: Beginners Guide To Forex
Post by: Caesar on November 16, 2019, 02:02:41 PM
Bad Runs

We all get them, bad runs. You think you've cracked it and kapow!! you go on a losing streak that wipes out weeks of profits. So, what can we do about these dry runs? I’ll be interested to see how others deal with them, but here’s what I do myself.

First, I’m not throwing the baby out with the bathwater. I know my strategy and trading systems are sound, so I’d be a fool to disregard them. My Money Management is tight, but not watertight, so thats one area I’m working on - I’d rather lose a few pips than a bucketload right now because, no doubt about it, losing affects your confidence.

Second, I’m not entering new trades while existing trades are running a loss - I may miss a few opportunities but its prudent to protect what money you have.

Thirdly, I’m getting out ahead of high impact news - you may have already noticed that the market reaction to news is extremely unpredictable.

And thats basically it, until the dry run ends I would trade like a kitten. No risky moves, double checking everything, holding onto my money until I turn things around. I might not get rich in the coming weeks, but I sure as hell won't go bust either!
Title: Re: Beginners Guide To Forex
Post by: Sharkie on May 03, 2020, 01:36:28 PM
Check if the broker you are considering is regulated. If they aren’t, that should be a big red flag against using them. The main regulatory bodies are;
United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
Australia: Australian Securities and Investment Commission (ASIC)
Switzerland: Swiss Federal Banking Commission (SFBC)
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
France: Autorité des Marchés Financiers (AMF)
Canada: Autorité des Marchés Financiers (AMF)
Avoid anyone regulated in Cyprus*, Vanuatu, St Vincent, or anywhere else where the “regulation” is not worth the paper it’s written on.
*Cyprus is improving, but I personally would still be wary.

Thank you for this. I wasn’t aware of this at all and was just looking at recommendations online.
😁
Title: Re: Beginners Guide To Forex
Post by: Sharkie on May 25, 2020, 01:50:26 PM
I do not get how leverage is bad for you if you place stops every time. Surely that would stop me losing more than I am comfortable losing?
Title: Re: Beginners Guide To Forex
Post by: Caesar on May 25, 2020, 02:13:53 PM
Hello Sharkie

In theory,  your stop should prevent you losing more than you expect.  However, occasionally the market moves so fast that price can go beyond your stop in milliseconds so your stop can trigger well above/below your chosen spot. Also,  especially if you leave trades open the weekend or public holidays,  there can be a sizeable gap between where price closed on Friday and where it reopens on Monday and this could also bypass your stop.
Title: Re: Beginners Guide To Forex
Post by: Kaitsu on May 25, 2020, 02:29:52 PM
I do not get how leverage is bad for you if you place stops every time. Surely that would stop me losing more than I am comfortable losing?
Leverage is not "bad" in itself, it is how it is used that can make it dangerous. The higher the leverage rate the smaller the initial margin requirement. Therefore, this allows a trader to take larger positions for the same amount of equity compared with a lower leverage rate. But this means the risk exposure is correspondingly higher because of the greater pip value with a larger position.

Therefore, either the same stop level will mean a bigger loss or the stop is moved closer to the open position to maintain the same loss potential. And a reduced stop distance increases the risk of accidental stop hits.

In practice, if one is using a sensible risk exposure of say 1 or 2 percent of total equity at any time across all open positions, then the amount of leverage actually used is probably not really relevant as it will be quite low anyway.

When people say that leverage is dangerous they are normally talking about using (or abusing!) an extremely high  leverage rate in order to open excessively large positions to try and gain extraordinary profits very quickly - but the down side is just as great and therefore an excessive risk of severely damaging, even destroying, one's account.

So using leverage is really just about a compromise between using your money to create an exposure that is nominally greater than the money value itself (i.e. leverage of greater than 1:1), and avoiding an excessive risk of losing seriously damaging amounts.

Hope this helps!
Title: Re: Beginners Guide To Forex
Post by: Sharkie on May 25, 2020, 02:38:36 PM
What would be a sensible leverage to use? I will only start with a small amount of money, would it be safer if I just used 1:1 until I understand trading better?
Title: Re: Beginners Guide To Forex
Post by: Kaitsu on May 25, 2020, 02:53:40 PM
What would be a sensible leverage to use? I will only start with a small amount of money, would it be safer if I just used 1:1 until I understand trading better?

Leverage of 1:1 means your equity would be the same as the nominal size of the instrument. e.g. if 1 microlot is $1000 then youwould need $1000 to trade it! Effectively, 1:1 leverage is when your money is in a bank deposit account.

Are you trading a live account or a demo?

The ESMA regulations governing european brokers limit leverage for retail clients to 30:1 and I think that is quite ok and a conservative level. If you are with a broker outside the ESMA area and which is properly regulated and offers higher than 30:1 then I would recommend no higher than 100:1.

I think the more important factor to consider is your pip value v. your stop level. If you don't wish to risk more than say 30$ on a trade, then first establish where your sensible stop loss level is, then estimate the number of pips from stop to entry level and then work out your max position size. E.g. is stop distance is 60 pips then your max risk exposure will be 50c per pip to keep your loss potential to $30. And 50c per pip equates to approx 5 microlots depending on the instrument.
Title: Re: Beginners Guide To Forex
Post by: Magyar on June 10, 2020, 03:50:06 PM
Can I say how much I appreciate all the information that has been put here for people like myself to read. I have spent a lot of time here the recent months reading this and feel that I understand better than before.
I know it will still be hard to be profitable over time like @PipMeHappy says on another post. But if I had tried trading before reading this I would have been like lambs to the wolf.
Title: Re: Beginners Guide To Forex
Post by: PipMeHappy on July 01, 2020, 05:43:41 PM
@Markaria all I can say is: keep going... unless it makes you ill or penniless or drives people close to you away, then there is no reason not to continue trying.

I actually have not told my other half about my recent turn toward profitability as a while back I was trying to get her excited about trading but she is not keen on the idea, so I have had to pretty much keep it a secret. I do not like keeping secrets and of course it has made the journey more difficult as I always had to do this when she was not around, being very subtle. I suppose mobile trading helps to be very quick at checking positions etc. and I just put one position on at a time, so I can work with that, it is possible to combine it with keeping this something private.

There is something to think about... Do others approve of what you do?
Title: Re: Beginners Guide To Forex
Post by: Caesar on July 01, 2020, 06:42:56 PM
If she's  anything like my wife,  she's probably glad that you're not getting under her feet
Title: Re: Beginners Guide To Forex
Post by: eddieb on July 02, 2020, 08:56:45 AM
It was my wife who originally suggested I try forex trading
Title: Re: Beginners Guide To Forex
Post by: Magyar on July 04, 2020, 08:45:05 AM
There is something to think about... Do others approve of what you do?
@PipMeHappy
Thank  you for your supporting.
I haven't discussed forex with others, I do not think they really understand it. That is why forum is good, we can talk to people who do understand and have had same problems as us.
Title: Re: Beginners Guide To Forex
Post by: Pipstar on July 07, 2020, 03:13:50 PM
Thank you for the guide, nice and straightforward. If theres anything I think of Ill post here.
 :D
Title: Re: Beginners Guide To Forex
Post by: PipMeHappy on July 07, 2020, 04:32:25 PM
There is something to think about... Do others approve of what you do?
@PipMeHappy
Thank  you for your supporting.
I haven't discussed forex with others, I do not think they really understand it. That is why forum is good, we can talk to people who do understand and have had same problems as us.

@Markaria Thanks, indeed, a forum is one of the only places for lone-traders like us! Unless you work in the trading world, there will be very few people in your immediate circles that are likely to live and breathe fx/trading charts... though most people have some kind of understanding of -  and a few have an actual interest in - 'the markets'... but it is a very small minority who would like to meet over a coffee and pour over charts together...

:)
Title: Re: Beginners Guide To Forex
Post by: eddieb on July 07, 2020, 06:59:53 PM
, a forum is one of the only places for lone-traders like us
How very true!
Even when we have completely different strategies there is always some common area of interest. And of course, its useful for double checking that you have understood something, whether that be technical or just general.
Title: Re: Beginners Guide To Forex
Post by: BWS on July 08, 2020, 02:41:17 PM
Thank you for the guide, nice and straightforward
I'll second that @Pipstar
I have seen 'beginners guides' elsewhere that try to explain everything and end up just overloading the new students with stuff they don't really need to know, certainly not in the early years of their development.
Title: Re: Beginners Guide To Forex
Post by: Pipstar on July 28, 2020, 09:47:28 AM
I actually have not told my other half
Naughty man, keeping secrets from your wife. I should warn you, she will know. We ladies have a sixth sense and pick up on things you men wouldnt believe.
I bet if you told her now she would say 'Ive known that for ages, just been waiting to see how long it was before you got round to telling me' LOL
Title: Re: Beginners Guide To Forex
Post by: ElvisChute on July 30, 2020, 04:10:05 PM
My lady knows what I do but doesnt understand it. And thats how I like it!
Title: Re: Beginners Guide To Forex
Post by: Kim on September 08, 2020, 06:12:14 PM
but doesnt understand it
Maybe she's just letting you think that's the case. Its like cars, we let the men think we don't understand them so the men do all the maintenance and cleaning of them. We just borrow the keys when we need to.
Title: Re: Beginners Guide To Forex
Post by: Gazza on October 20, 2020, 02:33:35 PM
Reading Forex Charts

Your broker will allow you to choose how you want to view your charts. You can change the background colours, what indicators you want to see, and what types of patterns you want to look at. Below we show some of the options you will have, which you choose is entirely down to personal preference.

Candlestick charts

Also known as a Japanese Candlestick Chart, a candlestick chart is favoured by traders due to the wide range of information they portray. The chart displays the high, low, opening and closing prices for the time period you are looking at- so in a 1 hour chart, a candlestick represents price movement within one hour.


The main part of the candlestick is the body which shows us the opening price level and the closing price level. The 2 lines sticking out of the body are the wicks and these show the high and low points that price reached within the time.

Does anyone know the percentages of people using different types of candle sticks? Most of what I have seen on websites or youtube seem to be the chubby, coloured ones and not the stick figures. Or maybe Im looking in the wrong places  :D
Title: Re: Beginners Guide To Forex
Post by: eddieb on November 01, 2020, 05:51:05 PM
I don't ever remember seeing that mentioned nor the question asked either?
So long as you find one that you like, it shouldn't matter what anyone else prefers anyway.
Personally, I  prefer my candlesticks coloured red(down)  and green ( up). But each to their own.

Namaste
Title: Re: Beginners Guide To Forex
Post by: PipMeHappy on November 01, 2020, 10:24:24 PM
@Gazza

Do not know the answer to that but you may enjoy this:

https://school.stockcharts.com/doku.php?id=chart_analysis:equivolume
Title: Re: Beginners Guide To Forex
Post by: Gazza on November 06, 2020, 03:00:03 PM
Thanks @PipMeHappy
Title: Re: Beginners Guide To Forex
Post by: Caesar on February 19, 2021, 07:43:03 PM
If any of you are interested in using volume data in your trading, pipmehappy has posted a useful video on this topic here
https://www.notthenoobs.com/index.php/topic,259.msg3780.html#msg3780
Title: Re: Beginners Guide To Forex
Post by: LuckyMac on June 26, 2021, 05:06:42 PM
Really nice post this. Im going to direct some of the people who have asked what is forex in essence. Thanks for posting!
Title: Re: Beginners Guide To Forex
Post by: Caesar on September 09, 2021, 12:08:18 PM
You are welcome @LuckyMac

I hope this proves useful!