What is the foreign exchange market - a complete overview of the concept and types of international foreign exchange markets + instructions for trading on the foreign exchange market for new participants

So, you have decided to try your hand at such an interesting and potentially profitable craft as trading. But you don’t yet know where to start your work, how to go from a beginner to an established trader with a minimum of financial losses and a maximum of gained experience. Then you have come to exactly the right address, because why go through the rake when others have already done it before you, in particular your humble servant.

And based on my thorny path, I want to give you not just some advice on how to and how not to start trading on Forex, but to provide you with a step-by-step action plan, following which you, if you do not become a seasoned professional, will be helplessly dangling in the ocean financial markets will definitely stop, having found your course on the island called “Financial Well-Being”.

Well, or during the learning process you will simply understand that trading is not your thing and give up further attempts to master it, which, by the way, will also be a valuable decision. After all, in this world there are a lot of ways to make money, and from all of them you need to choose exactly the one that suits you.

Before we get started, I want to give one good piece of advice: don’t buy into the promises of paid courses to teach Forex trading. Believe me, there is nothing exclusive in them, there is nothing that is not freely available on the Internet. The only thing that these kinds of courses can give is an incentive to master them from start to finish for the simple reason that you paid a considerable amount of money for them.

And so, I repeat, all the necessary information on trading on the Forex market is abundantly presented on the Internet. This website “Trader's ABC” is no exception; by the way, new interesting articles are periodically published on it and in order to be constantly aware of these updates, I recommend subscribing (to do this, join us on social networks).

So let's get started:

What is Forex and what should you pay attention to before playing?

Forex (ForEx, foreign exchange), FX or currency trading is a decentralized global trading system in which all world currencies are exchanged. Forex is the largest and most liquid market, with an average daily trading volume of over $5 trillion.

Liquidity is the ability of assets to be quickly sold at a price close to the market price.

All market participants buy or sell a currency in the hope that in the future its value will rise or fall relative to the value of another, in order to then profit from the difference in price.

How to make money on Forex: TOP 8 methods for today

Due to the fact that the market operates 24 hours a day and 5 days a week, Forex is divided into 4 separate exchanges:

• New York (13:00 - 22:00 GMT +0);
• London (08:00 - 17:00 GMT);
• Tokyo (00:00 - 09:00 GMT);
• Sydney (22:00 - 07:00 GMT).

This means that you can play Forex on any day except Saturday and Sunday. In addition to these, local exchanges are also available for interbank currency exchange, for example the Moscow MICEX-RTS and the Frankfurt Stock Exchange. At the same time, you can notice that sometimes the trading sessions of the two exchanges overlap:

• London and New York (12:00 - 16:00);
• Tokyo and London (07:00 - 09:00);
• Sydney and Tokyo (00:00 - 06:00).

The most profitable time to play Forex is the intersection of trading sessions

At the moment of “intersections” the market becomes most liquid, the volume of trade exchange increases several times. The Forex market is much more active than the securities market, and trading itself is carried out through over-the-counter transactions.

An over-the-counter transaction is a transaction in various financial instruments, such as shares, bonds or depositary receipts, which is concluded by the parties directly, and not through an exchange. Most OTC transactions are concluded with the help of market makers (brokers), however, unlike exchange trading, in the over-the-counter market the organizer is not liable in the event of failure by one of the participants. To conclude over-the-counter transactions, it is not necessary to reserve funds on the eve of trading, since participants in transactions pay directly.

Macroeconomics plays an important role when concluding deals. For example, a decision made by the Central Bank of the Russian Federation will affect the value of the ruble; speculation in the market can lead to both an increase and a decrease in the value of a currency pair.

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In addition to state-owned banks, the main participants in the interbank market are firms conducting foreign trade operations. For example, these could be large companies such as Apple, Microsoft, Nestle, or various funds, a striking example is the Quantum fund of George Soros.

Other market players are various brokerage companies, state currency exchanges (MICEX-RTS), individuals and various organizations, and commercial banks. The latter own more than 95% of the total Forex currency volume.

The rapid development of electronic technology has paved the way for small and medium-sized investors who have also found their niche in over-the-counter exchange. To start playing Forex, all you need is an Internet connection.

All this makes profiting from market prices relatively straightforward, especially when you compare Forex to the stock market.

Forex has gained popularity among ordinary traders due to its relatively simple and accessible way of accessing the interbank market.

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Modern market makers provide stable access on several platforms at once - from web applications and desktop versions to smartphone applications.

With the MT 5 terminal it became possible to play Forex directly in the browser, without installing software on your PC

Forex market: why is it so attractive and how much can you earn here?

If you are not yet familiar with the concept of “Forex”, then in a nutshell we will explain what it is.

The Forex market is an over-the-counter interbank currency exchange market, that is, it does not have a single center (platform) where players, or as they are commonly called, traders, make transactions for the purchase and sale of currencies.

Unlike commodity and stock exchanges, Forex appeared later, in 1971, after the dollar was pegged to gold. Since then, exchange rates have become “floating” and it has become possible to exchange one currency for another.

For example, you can now freely buy dollars for euros, exchange francs for pounds or yens.

When a transaction takes place on Forex, it is customary to talk about such a concept as a “currency pair”.

That is, on the one hand is the currency that they want to buy, and on the other is the one for which they are buying the first one. This situation with the free conversion of one currency into another gave rise to the idea of ​​​​earning money from the difference in the rates of these currencies.

Let's not go far and take the most obvious example of a currency pair: the US dollar and our Russian ruble.

This pair will be designated as follows: USD/RUB .

For example, today the cost of one dollar is 63 rubles 20 kopecks .

Now let’s imagine that today we bought 100 dollars at the current rate, that is, we invested 6,320 rubles .

2 days passed and the dollar began to cost 65 rubles 70 kopecks . This means that by selling dollars now, we will earn 250 rubles (6320 - 6570 rubles) . Doesn't seem like much, right?

Although that's not bad either.

So why do some people make huge amounts of money here? Maybe they invested several million?

Not at all! It’s just that in Forex you can use leverage and it will allow you to earn hundreds of times more. Let's figure out what it is and how it works.

The concept of leverage or how to turn $100 in one day into $1000

Let's say you only have $100 . This is a very small amount and the earnings from it will be small. However, when trading, your broker gives you the opportunity to use leverage.

Leverage is additional capital that your broker gives you so that your trade volume is many times larger than the initial amount available.

Typically the leverage is 1 to 100 (although you can choose a different size).

Example of how leverage works

Let's take the same numbers as in the first case.

You have $100 , but thanks to the broker, you get 100x “co-financing” of your trade and now you are making a $10,000 .

Now, with the same fluctuations, your profit will not be 250 rubles as in the first case, but 100 times more, that is, 25,000 rubles . But this is already interesting, since in most Russian cities this amount is close to the average wage.

Fact

In one trade you can earn as much as many people earn in a month. But here we must not forget about the risks.

The use of leverage also quickly contributes to the loss of capital in illiterate trading.

Thus, you, dear friend, can predict your income using simple mathematical calculations with only $100 in your pocket to play Forex.

It is the possibility of obtaining such fabulous profits on invested capital that attracts the foreign exchange market. Every day, thousands of new traders around the world come here in hopes of getting rich quick.

Fact

It has been proven that stock trading is one of the most profitable types of legal activity.

And if you understand this, you can not only earn good money using your own funds, but also manage substantial sums, trading with much lower risks, and receiving your percentage of the profits received in the management process.

All this once again clearly shows that you can earn thousands of percent per annum on Forex.

Next, let's look at the pros and cons of the foreign exchange market.

How to play Forex. Preparation of basic knowledge

But, despite its apparent simplicity, the first impression of the interbank market can be deceiving. Any beginner who starts playing Forex has every chance of quickly wasting all his initial capital.

This can happen for several reasons, for example, because a novice trader simply does not know or does not understand basic Forex terminology. Therefore, to start playing Forex correctly, you need to at least study the trading glossary.

Basic and quoted money

The first thing you need to know is the currencies you are trading. The hard currency that you sell (or vice versa, buy) is called the base currency. The price of 1 base currency is always measured in the price of the quoted one.

The second currency you spend on purchases is called the quoted currency. The base price is always expressed in the quoted price. The base and quoted fiat money together make up a currency pair. Example: GBP/USD, USD/JPY.

In the first pair, the base currency is the pound sterling (GBP), so we use the US dollar (USD) to purchase it. In the second, we spend Japanese yen (JPY) to buy the American dollar (USD). In a pair, the base currency is always written first, the quote currency second.

Exchange rate of a currency pair for playing on Forex

The exchange rate tells us how much quoted money needs to be spent to purchase basic money.
As mentioned earlier in the article, the exchange rate is affected by various events that can be related to the currency, both directly and indirectly. The most significant are inflation, political stability and central bank actions. Also, the exchange rate on the interbank market can be changed due to the “intervention” of government and large economic structures.

For example, the central bank of Republic N may buy/sell a large portion of its own currency, thereby causing fluctuations in the market and creating demand for fiat money. Thanks to fluctuations, traders begin to play in Forex, benefiting from the fluctuations.

Despite this, the huge size and volume of Forex simply does not allow one to manipulate funds for a long time, so after an increase in value, either stabilization or collapse will follow. These “excitements” allow traders to play on Forex and make profits from them.

You can play Forex correctly in both directions. The collapse of the ruble exchange rate after the March elections made traders betting on the fall rich

Trading positions

There are two positions in total – long & short positions. Long – when a Forex player buys one currency, while trying to close the position with as much profit as possible. For example, with a Long position we will sell US dollars to buy the British pound.

An example of a “long” position in trading

Short – the investor tries to sell the currency, while expecting its price to decline. In this case, the trader benefits from the fall in the market rate. In other words, we will sell the British pound to buy the US dollar.

Example of a short position on Forex

Bid and Ask in a Forex game

The Bid value is the price at which the broker will buy the base currency from you in exchange for the quote currency.
The Bid displayed is the best available price at which the exchange participant can sell fiat funds on the market. Ask, i.e. The bid price is the price at which the market maker will offer the base currency to the investor in exchange for the quote currency. Ask price is the best available price at which a Forex player is willing to buy on the market.

Using different versions of trading terminals, both desktop and mobile, a trader needs to take into account that the cost of currency pairs is almost always indicated in Bid.

An example of supply and demand designation in the MetaTrader 4 terminal

Spread

In short, a spread is the difference between supply and demand.
When buying currency from a bank, we can see the difference between the purchase price and the sale price. This is the spread. It is the difference between Bid and Ask that is the bank’s earnings from the exchange. Spread is the most important part of trading on the interbank market; the profit of the broker and trader depends on it. It is impossible to play Forex correctly without calculating the spread. For example, consider the AUD/USD currency pair. The purchase price (Bid) is 0.7682, the sale price is 0.7686

This means that the market maker buys the Australian dollar from the trader against the US dollar at 0.7682, and sells at 0.7686, the difference of 0.0004 points is called the spread.

How to learn to trade Forex: scheme of work + tips for beginners

It should be understood that Forex is not axleboxes or faucets that give out small things in a couple of clicks on advertising links. The foreign exchange market is very complex, and learning to trade successfully here can take months, if not years, of hard study and development of practical trading skills. In this article we will only briefly go over the main points that will help you start trading with Forex. To dive deeper into the niche, we advise you to take a comprehensive approach to solving this issue, devoting time to a variety of methods of self-improvement in Forex.

1) Trading scheme on the Forex currency market

Unlike the classic representation of currency, Forex has a different notation system. Each fiat currency symbol is expressed using a three-character code. For example, EUR/USD means that you will have to trade through the euro/dollar, and the base currency will be the euro, and the quote currency will be the dollar.

Bid is the fiat value at which the trader is willing to trade his asset.

Ask – the value of an asset, formed based on demand. At this price, the second party is ready to purchase currency notes from a Forex trader.

Spread is a one-time payment of commission in favor of a brokerage company when opening a transaction on the trading platform.

Margin is a collateral amount blocked on a trader’s account with a broker when working through leverage. Depending on the amount of leverage, a person can trade Forex by depositing amounts that are 100 or even 1,000 times less than required by the terms of the contract.

To trade Forex, you must have sufficient initial capital. If previously, 100,000 fiat was required to start on Forex, now, thanks to leverage, even beginners can trade on this foreign exchange market. It is enough to have a couple of hundred dollars in your pocket.

The diagram above shows the essence of how a trader can trade Forex. Despite the large amount of theoretical information on Forex on the Internet, it is impossible to understand all the nuances of work without the practical application of the acquired knowledge, and therefore, go to a demo account as soon as you understand the basics of trading in relation to the foreign exchange market.

2) How to start trading Forex – step-by-step instructions for today

Getting started is the hardest thing, and when it comes to Forex, it’s three times more difficult. According to statistics, only 5% of traders continue to trade on Forex after losing their first deposit, the remaining 95% merge and turn into “haters” of the trend, who, using all possible methods, strive to belittle the capabilities of this foreign exchange market in terms of its potential for earning a carefree life .

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To make your entry into the niche less problematic, we decided to create step-by-step instructions that will enable a novice trader to understand the question of how to start trading on Forex.

Step #1. Learning Theory

Theoretical knowledge should always precede practical knowledge; otherwise, the duration of learning how to trade Forex can drag on for many years of trial and error. So, a theoretically savvy trader must have a good knowledge of 5 Forex market instruments.

The theoretical basis of a novice trader consists of:

1. Fundamental analysis.

   This tool is necessary, first of all, for traders who plan to trade Forex over long time periods. Its essence is the study of world news that can affect jumps in currency pairs.

   The simplest example is rising unemployment. The stronger it is in a country, the lower the exchange rate of the national currency.

2. Technical analysis.

   The basis is the cyclical nature of the Forex market. The easiest way to track all these changes is with the help of graphs. Modern trading platforms have all the necessary functionality to track matching patterns.

   With the help of indicators and price movement charts, it is convenient to trade short-term transactions on the Forex currency market, since when tracking long-term positions, the intervention of a fundamental element of research will be required.

3. Capital Management.

   A large bet or a small one - this question constantly torments novice traders who want to trade on the Forex market with maximum financial benefit. Inept distribution of funds can lead to a quick loss of the deposit, and this is a direct path to those 95% of traders who were led by their greed and were unable to optimally resolve the capital issue with their Forex broker.

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4. Psychology of trading.

   Trading Forex means exposing yourself to constant stress. The most vulnerable categories of traders work in the medium and long-term Forex markets.

   How to get rid of trembling in your fingers when opening another trade? There is no single cure. Everyone decides for himself what is closer to him - meditation, alcohol (in moderate doses) or a couple of drops of Corvalol.

5. Planning and statistics.

   Deal has been completed successfully? Write down the sequence of actions preceding success, preferably specifying as many nuances as possible. If you want to successfully trade Forex, be prepared not only to study and analyze other people’s literature, but also to understand your own mistakes.

   Planning successful algorithms will secure your capital in your broker account and help you achieve positive trading results in a shorter time.

The theoretical section should also include courses, training videos and other events showing how to learn to trade Forex. If finances allow, it would not be a bad idea to hire a mentor - an experienced trader who has been working in his niche for several years. Naturally, he won’t reveal his extremely profitable trading strategies for the pennies that you pay him, however, he will still be able to get a couple of practical tips + basic practical experience in Forex trading.

Step #2. Choosing a Forex Broker

Forex is designed in such a way that access to it by individuals is directly prohibited.
For this reason, there is a need for an intermediary - a legal representative of a trader in the foreign exchange market. A brokerage company is exactly the intermediary that fills this niche, but, by the way, it does not do it for free. Criteria for selecting a broker in the Forex market:

• reliability level.

  All other criteria will lose their meaning if the company takes your money and announces its closure. There are plenty of Forex scammers in 2020.

  Before trading with a particular broker, you need to very carefully study the reviews about this representative office, find out the operating life of the site’s domain, check the license, the company’s registration address, etc. The more points your candidate gets, the better;

• authority in the Forex market.

  Advertising does not always show the influence of a broker, however, this tool makes traders talk about the company, and that is already something. As a rule, beginners go to trade with freshly baked resources, which give out big bonuses and pleasant incentives.

  Remember - more freebies are not always better for a trader. While encouraging in one thing, a Forex broker can infringe on the rights of a trader in another, not allowing trading on the market according to the desired strategies and algorithms;

• spread

  Most Forex brokers allow you to trade the foreign exchange market with adequate commissions on trades. On average, from 0.1 to 0.8% for each open order. If you are a beginner working with a “cent” account, trading with a commission of 1% will not be so expensive, however, turning contracts of a couple of thousand dollars daily, even 0.5% can result in a fairly large amount of funds;

• comfort of the Forex platform itself.

  Learning to trade in the foreign exchange market through terminals created by amateurs is also a pleasure. The trader will lose a lot of time + it will complicate the transition to more reliable platforms in the future, since building a terminal interface for a pro will have fundamental differences from what a person dealt with before;

• support + withdrawal of funds.

  Ideally, when a person starts trading Forex, he should be sure that his earnings can be easily transferred to a bank card. Payment systems such as QIWI, Webmoney or Yandex.Money are a less profitable option + working with these tools is not functionally equivalent in all countries of the world.

  Another nuance is the response from the support service. If a Forex company makes its client wait for more than a day, it would be best to refuse further cooperation with this broker.

More than 60% of brokerage houses offer Forex trading using bonus funds - this can be either a profitable deposit or free access to the top strategies of the company’s leading traders (if it has any).

TOP 3 best Forex brokers:

1. https://freshforex.org

   

   A broker that has given hundreds of thousands of traders the opportunity to trade Forex. The company was founded in Russia in 2010. Regulated by the SVGFSA. The platform allows you to trade automatically + has a pending order function. Every month, competitions are held among traders - whoever can trade the most profitably will receive impressive bonuses from the administration.

   In terms of platforms, a trader can trade Forex here via MT4, MT5 or via a web terminal, the functionality of which is significantly reduced. In addition to the Demo account, the Forex broker provides Classic, Market Pro and ECN deposit options, each of which has its own pros and cons. There is no minimum deposit; however, the broker recommends trading on Forex starting with $20 in the account. 45+ currency pairs are supported, and leverage reaches a ratio of 1:2000. Payment between the parties occurs both through payment cards and banks (cards or accounts);

2. https://alpari.com/ru

   

   One of the oldest brokerage companies in the Forex market, which opened its first branch back in 1998. Representative offices of this broker are available in 10+ countries, and not only in the CIS. This site is suitable for both types of Forex investors - those who want to trade and those who just want to invest. For the latter, the company offers PAMM accounts with a lot of nice additions. For completely “green” traders, the broker offers simple courses for beginners, which will describe the basic concepts and diagrams of exactly how to trade Forex at the moment.

   In addition to classic currency pairs, the Forex broker also offers trading on the binary options market. The broker does not set a minimum amount to start trading on the Forex market, however, to start you will have to deposit at least 10 conventional units into a deposit. In addition to rubles, a person can top up his account with dollars, euros or even gold at the current world exchange rate. Leverage allows you to trade on Forex at a ratio of 1:1000. The spread is from 0.2 points, and the stop-out level is from 10% to 60%. Earnings are withdrawn to RuNet cards and payments - more than 30 payment options;

3. https://www.forex4you.com/ru

   

   The brokerage company was founded in 2007. From the list of candidates under consideration, it has the widest network of representative offices around the world. The majority are states of the post-Soviet space. Regulatory activities regarding a Forex broker are carried out through the FSA. The site is localized + has Russian-language support. Features include swaps for open positions, trailing stops and hedging. It is possible to trade on Forex in one click + there are trading applications for IOS and Android.

   The minimum deposit with which a trader has the right to enter the Forex market is $1. The broker supports more than 55 currency pairs; in addition, there are sections for trading gold, oil and other commodity assets. Leverage allows you to trade in a ratio of 1 to 500 (the maximum allowable value).

We have listed only 3 brokers that allow you to profitably trade on Forex without being deceived by the administration, however, there are many more adequate companies - ForexChief, InstaForex, Adamant Finance and others. If you focus on promotional offers and various bonus programs for starting on Forex, it would be a good idea to surf the web yourself and choose the options that will be optimal for you. Fortunately, you already have the criteria for selecting a bona fide Forex broker.

Step #3. Selecting a financial instrument + Demo account

After installing and analyzing the trading platform with which the trader will trade on Forex, you need to decide on the asset that will be used as the basis for your speculative activities.

More than 90% of users are not particularly versed in the currencies of other countries, therefore, the best solution for a beginner would be to choose fiat currency, which he is familiar with first-hand. For example, the currency pair dollar/euro or ruble/dollar.

Characteristics of currency pairs:

1. Volatility.

   The rate of change in the price of an asset over different time periods. With high volatility of the pair, the trader has a chance to earn more on Forex, however, the risk of failing the transaction also increases proportionally.

2. Liquidity.

   The parameter is responsible for the demand for the asset at the current moment. It is easy to guess that if there is a high demand for a currency, trading it on Forex will be much more profitable.

3. Predictability.

   How easily a trader can “read” changes in the value of an asset due to any changes in the global or large regional markets.

All pairs with high volatility have a very high level of forecasting - it is this fact that ensures their great popularity compared to other competitors. Experienced traders who have been trading on Forex for several years now prefer to work on cross-rates - this reduces the amount of effort spent on technical/fundamental analysis + allows them to speculate more profitably in any situation regarding the value of an asset in the Forex market.

The second important point in the third step is the Demo account. As of 2019, 96% of brokerage houses provide the opportunity to train on a deposit with virtual currency. This kind of enticement is useful not only for traders, but also for Forex brokers themselves, as it allows them to retain a certain percentage of those users who came to the trading platform just for fun.

How to trade Forex using a Demo account:

1. Choosing a broker.
2. Register with the company and open a Demo account.
3. Next, the merchant receives an account with $1,000+. Most brokerage companies offer to trade Forex through a demo account for as long as you like. If the deposit ends, the user makes a request to the system and again receives a certain amount of virtual currency at his disposal.
4. Practicing all kinds of strategies.
5. Making a stable profit for several months in a row.

When a person learns to trade on Forex, losing less than gaining, only then will it be possible to leave the team of virtual speculators and join the professional traders of the Runet.

Step #4. Choosing the optimal strategy

Poking random buttons on a Demo account and getting a profit from a couple of guessed orders is not the result that a novice Forex trader should strive for. We have already made a reservation about fundamental and technical analysis, without which it is almost impossible to achieve intelligible results in this field. The resulting theoretical basis is the basis for developing your own strategy, which will allow you to trade on the Forex market with minimal losses or without them at all.

Before choosing the direction of development of your personal strategy, you need to decide on the time frame for trading, since the principle of work at each of the intervals is very specific. Tactics that are suitable for short-term transactions will in no way be able to satisfy long-term speculative Forex trading.

Trading strategies are divided into:

• short-term

  Or, as they are also called, scalping. You have to trade on time intervals from a couple of minutes to half an hour for each transaction. The profitability is not so great + a lot depends on luck. You will have to make a huge number of transactions per day, and the final profit is unlikely to recoup the effort expended. In addition, no one canceled the unsuccessful outcomes;

• mid-term.

  Traders trade using these strategies from a couple of days to a couple of weeks. A well-predicted direction that can allow you to earn very substantial sums in just a couple of months of working on the Forex market;

• long-term.

  Here the trader will keep the trade open for a period of time from a couple of weeks to a couple of months. To successfully trade over long periods, you need a solid starting capital and a clear understanding of the movement of the global trend, which not even every professional can achieve.

Fundamental analysis is practically useless when scalping, so if you do not want to give your money up to luck, we recommend trading using medium-term strategies. With a purely technical analysis, there is a chance to “catch” a small part of the profit, but, as a rule, strategies that actually produce good results on patterns cost a lot of money, and for a beginner without a substantial starting capital, this is unaffordable.

Step #5. Real account + risk management

Start with a “cent” account, not a dollar account. The main difference between them is the minimum transaction amounts and the starting deposit size. So, if you decide to trade on a full-fledged account, you will have to shell out up to $2,000 from the start, and when working on an alternative deposit, no more than $150.

A sudden transition from demo trading can also affect the trader’s psychological state. With 70% of successful transaction outcomes previously, the figure may drop to 35%-40%. There is no need to panic about this – this moment is in the order of things for absolutely all trading beginners. The duration of this condition is from a couple of days to a couple of weeks.

Risk management rules:

• at least 1/2 of the capital remains in liabilities.

  When actively trading on Forex, count on only 50% of your funds - this will allow you to carry out transactions more thoughtfully + will protect you from completely losing your deposit;

• use stop losses.

  Special protective orders that stop trading when the loss limit is reached;

• don't chase the trend.

  You need to trade Forex within reason. If your transactions are successful, you don’t need to be led by excitement and wait for the line that will lead to maximum profit - you can gape and lose everything.

By adhering to simple rules for managing Forex trading risks, even a novice speculator who has only recently switched from a demo account can achieve success. Naturally, he will not operate with five- or six-digit figures, however, with a deposit of 2000-3000 dollars, an income of 400-600 Franklins per month will become a very real phenomenon, which is already quite good.

Follow the described 5 steps from start to finish, and you will notice how from an inexperienced speculator you turn into a trading “shark”, capable of making a profit from most currency pairs available from the most popular brokers on the Internet.

Forex for beginners. How to make money on Forex?

What is Forex? How to make money on the Internet?

How to play Forex correctly: choose a currency pair

In many ways, the choice of a currency pair is a predetermining factor; the choice will affect not only your trading style, but also your future profits. You need to start playing Forex by studying the economies of those countries whose currencies you are going to trade.

Consider the following example: if a trader believes that the Russian economy will strengthen, then it is worth trying to trade with a ruble pair, buying rubles in exchange for the money of the country whose fiat funds are weaker, and vice versa, you can sell rubles in exchange for, say, US dollars .

Pay attention to the trade policy of the state whose currency you are going to trade. If its economy is developing steadily, and its GDP shows annual growth, there is a high probability that the money of such a state will be highly liquid and profitable for trade.

This is why many traders prefer to play Forex with currency pairs that include the Swiss franc (CHF), yen (JPY), euro (EUR), pound sterling (GBP) and, in part, the Australian and American dollar.

Despite the fact that the latter has been steadily falling in price for more than 60 years, the US dollar is still the main currency on Forex, the share of dollar currency pairs in 2020 amounted to 62.1% of the total trading volume.

The depreciation of the American dollar can be seen by the increase in the cost of gold against the USD

The influence of politics on trading

It is impossible to play Forex correctly without taking into account the political component.
Political stability and decisions made within the state, just like the economic climate, affect the value of the state currency on the interbank market. All sorts of political events, such as elections, can cause the price to rise or fall. Additionally, if a country's government relaxes economic growth rules, cash is likely to increase in value.

Daily economic reports allow you to quickly navigate the economic climate. For example, reports on a country's GDP or reports on other economic factors such as employment and inflation will influence the value of a country's currency.

Any news affects the market climate. If you play Forex correctly, you can use volatility to your advantage

How to play Forex: calculating profits

There is no point in starting to play Forex without knowing exactly how to calculate your profits.
The minimum unit of price change is 1 point (pip). When prices change, one pip almost always equals 0.0001, with the exception of the Japanese yen, its pips are written with two digits after the dot. Quite popular among traders is a trading strategy based on frequent and quick opening and closing of positions, which is called pipsing.

Piping (pips, scalping) is one of the trading strategies. The purpose of pipsing is to take a small (in points) profit, while each trade can use all the funds in the trading account. It follows that with a large position volume, the profit in money can be large and even very large.

For example, considering the currency pair NZD/USD or GBP/USD, the value of one pip would be equal to $1 if the trade was made in the amount of 10 thousand units of the base currency.

For pairs in which the dollar is not the quoted currency, the price of one pip will be different: when buying a Swiss franc (USD/CHF), the cost of a pip will be approximately $1, while the cost itself will not be constant, but will begin to change depending on the exchange rate of the Swiss hard currency .

Thus, opening a long position on EUR/USD, the value of the position increases from 1.2345 to 1.2357, this will mean that your profit from the transaction was 12 points.

Then multiply the number of pips by which the open trade increased/decreased by the exchange rate. This calculation will show exactly how much profit you ultimately received from the transaction, this will allow you to play Forex correctly and calculate further actions.

Examples of calculating the value of a point:

• Currency pair: GBP/USD Lot: 10000 Point value = (10000*0.0001)/1 = 1$
• Currency pair: USD/CHF Lot: 100000 USD/CHF rate = 1.6815 Point value = (100000*0.0001)/1.6815 = $5.95
• Currency pair: EUR/JPY Lot: 1000000 EUR/JPY rate = 115.54 USD/JPY rate = 132.58 Point value = (1000000*0.01)/132.58 = 75.43$
• Currency pair: EUR/GBP Lot: 20000 EUR/GBP rate = 0.6128 GBP/USD rate = 1.4228 USD/GBP rate = 1 (GBP/USD rate) = 1/1.4228 = 0.7028 Pip cost = (20000*0.0001)/0.7028 = $2.85

To make it easier to calculate the value of a pip, each trading platform has a built-in value calculator, so now Forex players do not need to manually carry out calculations.

However, when starting to play on Forex, you may encounter a situation where automatic calculation of the cost of pips will not be available; for this purpose, the platforms (MT 4 and MT 5) have detailed help with all the formulas.

Choosing a broker for playing Forex

Due to the huge amount of capital, only the largest market participants - commercial banks, various corporations, funds and state banks - can afford direct entry into the interbank market.
But this does not mean that no one except them will be able to make a profit from the exchange of funds. There are several ways for small players to enter the market, one of them is through a broker.

Forex brokers act as intermediaries between the interbank market and their clients. Brokers can be both commercial companies (Citibank, FOREX.com) and private professional market participants.

To start playing Forex, a future trader will need a fairly large amount. Despite the fact that many companies allow you to open accounts with $100-250, on average you will need a minimum of $1000-2000 to get started.

And even with such amounts, the monthly profit will be quite modest; on average, an investment of $1000 will provide an income of 2-6%.

All trading strategies that promise income of 10-15% can be considered unsafe, since they most often imply an aggressive approach to trading, so the chance of “burying” your account increases significantly

1) How to choose the right Forex broker

Without the right choice of a Forex broker, it will be impossible for a trader not only to make a profit, but simply to play on Forex. Therefore, when choosing a broker, you must be guided by the following factors:

• Experience. Choose companies that have been on the market for more than 10 years. This type of experience shows that the broker knows what he is doing and knows how to take care of his clients. In addition, usually fraudulent companies cannot provide services for more than 2-3 years.
• Company regulation. When starting to play Forex, you need to be confident in the integrity of the broker. Typically, regulators are either government or special private bodies. The regulator ensures that brokers comply with all terms of the contract. The regulator also resolves all controversial situations that may arise between the trader and the company.
  The most “influential” regulators are:

  Swiss Federal Banking Commission (SFBC);

• National Futures Association (NFA), Commodity Futures Trading Commission (CFTC);
• German Federal Financial Supervisory Authority (BaFIN);
• French Financial Market Authority (AMF).

Unfortunately, in the Russian Federation there is not yet a single forex regulator that would itself be regulated by government agencies, and those that exist are created by other Russian brokers, and often act as levers of pressure on traders and other forex companies.

Having decided on the choice of a Forex broker, ask them for information about accounts: the minimum amount to start trading, the type of account (personal or managed), as well as the presence of an automatic trading system, manager support, and more.

However, the variety of services provided and financial instruments are not the only differences between brokers.

2) Broker differences

Quote is the price of a unit of the base currency, presented in units of the quoted currency. The quote consists of two digital values. The first number means the Bid of the base currency at which the participant can sell it. The second value (Ask or Offer) indicates the price at which the participant can buy the base currency for the quoted currency.

One of the main differences between brokers is quotes. Each quote is formed based on the supply and demand of all market participants, but due to the fact that Forex is a global market, the values ​​obtained for these same quotes may vary.

To obtain quotes, market makers can use a variety of information platforms, such as Reuters-2000, Reuters-3000, Bloomberg, Bank of America, EBS and others.

Often large companies and organizations have their own department that deals with technical and fundamental market analysis.

Despite this, most transactions in the market are carried out between two participants, based on this it is clear that any transaction is a purely personal matter between two traders. As a result of each such transaction, a quote is formed, since information about them is instantly sent to the terminals of all participants.

Therefore, there is no specific pricing policy for playing on Forex; interbank is the embodiment of the concept of “free trade”, and any prices here are formed by supply and demand.

So for any Forex broker, discrepancies in prices (up to 14-20 points) are the norm, since there is no uniform information about the cost of a particular currency.

How to quickly achieve success - the main stages of Forex trading

Any professional growth can be represented as a sequence of steps, Forex is no exception. Successful traders follow the path described below.

Stage 1. Select a broker

In a separate article “Forex Brokers” we will talk about what to rely on when choosing a broker. There are several factors, first of all, licensing (in Russia so far only three brokerage firms have licenses).

The second is trading conditions: minimum lot, number of instruments, spread size. After reading all the articles in the stock trading cycle, you will understand how to figure it all out and not get confused.

Stage 2. Learning to work in the trading platform

As a rule, brokers provide trading instructions, but this does not always happen. Below we will talk about trading in the most popular platform today called MetaTrader4.

It is important to be able to work with tools, use alerts, and trade “in one click” - without all these skills it will be difficult for you.

We strongly recommend that you work with reliable brokerage companies.

Stage 3. Gaining knowledge

If you do not understand financial markets, you will not be able to trade, this is an unambiguous fact. In previous articles, we gave several instructions for “mastering” the market.

You shouldn’t think that to succeed in Forex you need to study for five years, like in a university - if you spend 2 hours every day for two to three months, you can form a good understanding of the market and master several strategies.

This will be enough for a successful start, but in the future you will need to continue learning.

Stage 4. Replenish your trading account

When we open a trade, we set a Stop Loss level - if the price goes against us and reaches it, the trade will be closed with a minimal loss. Losses due to Stop Loss should not exceed two percent of capital.

Almost all traders agree with this: 2% reserve the right to make another 49 transactions and “win back”; psychologists have noted that due to such losses, we do not lose control of our minds, but continue to think sensibly.

Calculations show that for trading on time frames from 15 minutes to 1-4 hours, to cover Stop Loss with two percent of capital you need at least two hundred dollars - this is the optimal deposit size for a successful start.

Stage 5. Choose a strategy and follow it

The essence of any strategy is the excess of the number of successful transactions over unsuccessful ones, so when trading you must be guided by a clear plan.

We will look at short-term and intraday strategies in the future, and you will figure out where to enter a trade, where to exit, and at what level to set the Stop Loss.

How to play Forex with leverage? Why is it needed?

Leverage is the ability to play large sums on Forex, while using a relatively small amount of personal funds.
Accordingly, the higher the leverage value, the more the trader risks when opening a new deal. The amount of leverage depends on the broker and the type of account, on average leverage does not exceed 100:1, but sometimes you can find leverage in the ratio of 250:1 and even 1000:1.

A 50:1 ratio means that for every $1 in your account, you can open up to $50 worth of trades. For example, if a player has $10,000 in his account, the market maker gives him the opportunity to make trades up to $50,000.

Another feature of leverage is that it can reduce the overall margin on an account. When trading equity, the margin is typically up to 50% of the total available capital, with a leverage of 50:1, this value drops to the equivalent of 2%.

Margin is a collateral that provides the opportunity to obtain a temporary loan of money or goods that are used to carry out speculative stock exchange transactions during margin trading. A marginal loan differs from a simple loan in that the amount of money received (or the cost of the goods received) usually exceeds the amount of collateral (margin).

The presence of leverage with a broker is a rather valuable indicator, since in this case a trader can play Forex and make large profits with less investment.

However, high leverage can be extremely dangerous, especially in cases where the trade goes against the player, since losses are multiplied in the same way, and instead of $5, the trader will lose $250.

Simply put, when trading with leverage, a trader has every chance of losing even more money than he currently has in his account. Although most brokers have protective stop orders to prevent such losses, they do not always work.

In the context of the Forex market, equity is the amount of free funds in a trader's account, that is, funds that can be used for trading. When you open a new position, your equity also changes. If the position is profitable, equity increases; if the transaction is unprofitable, equity decreases.

What are the risks when trading on the Forex currency market - 5 main risks

On the website of any broker, in fine, fine print, it will be written “Trading in the foreign exchange market involves the risk of loss of capital.”

Unfortunately, this is true. What risks do traders most often encounter? And how to avoid them?

Risk 1. Change of course

The simplest and most banal thing is that the market sometimes goes against the trader and eats up the entire deposit. The only way to protect against this risk is to set up a protective order called a Stop Loss.

The Stop Loss principle is as follows: when the price reaches a certain value, the broker automatically closes the deal, even if the trader is not sitting at the computer at that moment.

The “Moose” level must be set at the moment of opening a trading position, since the market is capable of sharp price fluctuations (especially when important economic news is released).

In what cases is it advisable to set a larger or smaller Stop Loss? This issue is discussed in detail in the material “Trading on the Currency Exchange”.

Risk 2. The emergence of panic

You will feel the first attack of panic when you open your first position on the market and see a minus on your account due to the spread paid.

The difficulty of trading in financial markets lies not so much in understanding strategies, but in the ability to control oneself and not give in to emotions.

Panic causes loss of power over reason - the trader blindly follows emotions. Speculators can open positions where they should not, close ahead of schedule, etc.

Risk 3. Psychological risk

The market is a large gathering of people. People influence each other. Therefore, when everyone buys dollars for 80 rubles. counting on the increase in their value - how to resist? If the crowd is selling the collapsed shares of Sberbank, where can one find a reason for optimism and confidence in growth?

A trader should not follow the psychology of the crowd. He must think with his own head if he does not want to lose money. The market does not want individual individuals to earn: the more some earn, the less others will receive.

Hence the consequence - all the people around you in the foreign exchange market are your enemies, dreaming of getting your money. So don't give in to the crowd if you don't want to blend in.

Risk 4. Non-market risk

Loss of money may occur due to non-market reasons. A simple example: you opened a trade, haven’t set your Stop Loss yet, and suddenly the lights in your apartment go out. The news came out, the market went against you, and while the electricians were fussing with the wires, the deposit was gone.

Risk 5. Risk of losing your deposit when trading with leverage

Let's say a dollar costs 60 rubles. We have 6,000 rubles, there is no leverage. How many dollars can we buy? 6000/60 = $100. In what case will we lose the deposit? When 1 dollar will cost 0 rubles.

What if we use a leverage of 1:10? Now we open a deal for an amount ten times greater than the existing one. That is, 60,000 rubles. In total, we bought $1,000. How much should the dollar fall in price for us to lose all our money (we have 6,000 rubles)?

For 6 rubles. If a thousand dollars purchased falls in price by 6 rubles, the total loss will be 6,000 rubles. - all our money. The result is that we flew out of the market.

Opening an account and first trades in the Forex game

Once you have decided where and how to play Forex, have chosen a currency for trading and a broker, you need to move on to the next step - opening a trading account.

To do this, you need to register on the website of the company you are going to trade with. Typically, broker managers require confirmation of the trader’s identity; either a driver’s license or passport is used for authentication.

Registration data usually includes:

• FULL NAME;
• citizenship;
• Country of Residence;
• Place of Birth;
• Date of Birth;
• floor;
• residential address;
• various contact details (phone, mail, email);
• details for transferring funds.

After filling out information about himself (usually in a PDF file), the trader will need to activate the account.

You shouldn’t immediately top up your account and start playing Forex for real money; almost all Forex brokers have demo accounts on which you can practice trading without the risk of losing your money.

Such demo accounts are good because they have almost all the main features of real accounts, including real quotes and price movements.

The only negative is that test accounts are temporary, and some trading instruments are not available as such.

The Basics of Profitable Forex Trading - 5 Golden Rules for the Beginner Trader

As we approach the end of this material, we will point out five rules that should never be violated by those who want to trade successfully in the foreign exchange market.

The largest Russian brokers provide free training for everyone who wants to learn trading.

Rule 1: Always control your emotions

The great trader of our time, Alexander Elder, says that most people on the stock exchange are controlled by two emotions: fear and greed. They equally deprive one of the ability to think rationally.

Never follow your emotions, no matter where the price goes - in your direction or against you. Emotions definitely lead to death; strategies require cold calculation and sober reason.

Rule 2. Strictly follow the chosen strategy

As we have already said, strict adherence to the chosen strategy will not give you constant profits, but will increase the number of successful transactions compared to unsuccessful ones, so you should not deviate from the intended trading plan under any circumstances.

If you doubt the logic of a strategy, do not use it on a real account - conduct a thorough analysis on a “demo” account, and then risk your own hard-earned money.

Rule 3. Manage risks wisely

Set a Stop Loss according to your strategy, measure the distance to it and determine how much you will lose if the price touches it. If possible losses exceed two percent of your capital, do not open a deal.

Do not try to take big profits by risking large sums. A more reasonable way is to increase the deposit or take money under management (through the PAMM account service), receiving more profit with the same risks.

Rule 4. Always study

To successfully follow the strategy, basic knowledge and understanding of the very essence of the trading plan is enough. But if you have a burning desire to become a real professional, study constantly, love the market.

Rule 5. Practice constantly

You need to trade Forex every day, no matter how much time you devote to it: constant trading builds a trading skill, without which success is impossible.

It is advisable to keep a diary in electronic or printed form and write down the results in it, provide printouts of graphs, and note your emotions.

Further trade

Once you have tried out the demo account, you can start trading with real money. It is not necessary to play Forex on your own; many brokers provide personal managers who help beginners, and PAMM accounts are available for more advanced speculators.

A PAMM account is a specific mechanism for the functioning of a trading account, which technically simplifies the process of transferring funds on a trading account into trust management of a selected trustee for conducting transactions on financial markets.

Despite outside help, every novice trader needs to learn how to independently analyze the market and assess the financial situation on the interbank market. This is especially true for those who have chosen a specific currency pair or other financial instrument for trading.

Technical analysis: involves analyzing previous charts, viewing and searching for certain patterns in price rises and falls, and comparing them with real world political or economic events.

Fundamental analysis: includes the study of the economic component of a single country (for example, the Russian Federation), its economic relations with its neighbors, analysis of the fall and strengthening of the national currency, and more.

Sentiment Analysis: This type of analysis is quite subjective. In it, the trader tries to analyze the general mood in the market, i.e. what type of players is most common - “bullish” or “bearish”.

How much do you need to invest to play Forex?

The amount of initial investment determines not only the potential profit, but also the amount of margin, as well as the potential degree of risk. You can decide on the amount of starting capital based on your success in trading on a demo account.

For example, if you are going to play on Forex with volumes of 100 thousand units with a margin of 1%, the optimal amount to start trading will be 1000 US dollars.

Most traders believe that for safe trading, the volume of each transaction should not exceed 2-5% of the total equity in the account.

Stop loss and take profit

On each trading terminal, the trader has access to special actions, the so-called. “pending orders”, which are triggered automatically, without investor intervention. By setting stop and take, the player regulates his future profit or loss in advance.

Placing automatic orders to close a position helps traders cope with unforeseen circumstances without requiring them to be in front of a monitor.

Stop loss and take profit are most useful in situations where the market is in an extremely volatile state and the liquidity of the traded lot is increased. This is possible, for example, at the intersection of trading sessions, or during the release of important news.

Volatility is an indicator of the securities or currency market, showing the level of its volatility in a certain period.

An example of setting stop-loss and take-profit in the MT 4 terminal

Earning money on the Internet. How to play Forex?

Forex for dummies – basic terms and concepts

We will talk about Forex terminology throughout all articles devoted to this topic. Within the framework of this material, we will only cover the concepts of “trend”, “support and resistance” and some others.

You can get acquainted with these fundamental names in more depth in the material “How to play on the stock exchange”.

Most of the time, the foreign exchange market is in motion, which can go either up or down. Therefore, the first two types of trends: upward (also known as upward or bullish), downward (also known as downward or bearish).

For successful trading, remember the key definitions:

A bullish trend is observed when a new peak updates the previous one, and a new trough does not fall below the previous one.

In a downtrend the situation is reversed:

A bearish trend is observed when a new depression updates the previous one, and the new top does not rise higher than the previous one.

An example of a bullish trend that is apparently close to ending or has already ended:

Ended bearish trend:

Sometimes prices move in a “corridor”: they either rise or fall within certain limits. We wrote earlier that a similar situation is often observed for several days before planned important news.

“Corridor movement” is called a sideways trend (also known as horizontal or neutral). For this trend, it is important to remember the following:

A sideways trend is observed only when the amplitude of fluctuations is at least 300 points.

If this rule is not observed, trading should not be carried out under any circumstances. In the example below, we see a sideways trend with an amplitude of 158 points - not enough to open positions.

Let us summarize the above in table form:

During the movement, prices rely on or are pushed away from invisible lines, which are called “support and resistance lines.” To carry them out, it is enough to connect the peaks or troughs.

If the price breaks through support or does not reach resistance, this is a signal of a weakening trend. If the price does not reach support or breaks through resistance, an acceleration signal:

The price on the screen above “confirmed” the support (yellow line), but did not touch the resistance (blue line) - the reversal signal was confirmed: the market did not update the top, and then broke through the support.

Let us remember one more very important point:

Transactions can only be opened in the direction of the trend - if it is upward - buy (Buy), if downward - sell (Sell)

These were the general principles of making money on Forex for a beginner, but everyone wants to become a professional, right?