Welcome to the best FREE ‘how to start trading forex course’ on the internet!
If you want to take your forex trading skills to the next level, this forex course is for you.
We won’t leave anyone behind.
If you’re just starting out or have been trading forex for six months, 12 months or longer, without much success, we’ve got you covered in our FREE forex course.
Lesson one (the one you’re reading now) is for beginners and eases you into forex trading. If you’re not a beginner, feel free to skip to the next lesson. But, we encourage you to read every lesson because we give pro-tips at the end of each lesson. There’s a pop quiz at the end of each lesson as well, to test your forex understanding.
To start, if you didn’t know, ‘forex’ is the shortened term for ‘foreign exchange’ and it’s the world’s largest traded market. The daily turnover from buying and selling currencies is more than $5 trillion! No other market comes close to forex’s size. That’s why you can make lots of money, if you take the time to learn how to start trading forex.
Prior to 1996, only large companies or the wealthy could trade forex. Now, with the existence of the internet, ordinary traders ― like you ― can trade forex with as little as a few cents at a time. In fact, that’s the perfect amount to start trading forex, build your confidence, and eventually take your trading to the next level.
What is forex trading?
Let’s understand how forex works…
Traders, investors and corporations participate in the forex market.
But they all have different goals.
Some want to make a profit and some want to ‘hedge’ themselves from making a loss.
For example, a gold company sells gold for the prevailing gold price at the time. If the company believes the gold price is at risk of falling, it might sell more of its gold to protect its profits ― especially if it has high production costs. That, my friend, is the art of ‘hedging’ and companies do it all the time.
Of course, traders are in the game of making money ― lots of money. Forex gives you the chance to make profit in two ways. The most famous is buying low and selling high. But there’s another way ― selling high and buying low!
This is called ‘short selling’.
Forget about the technicals for now. It’s really easy. If a currency seems expensive, you can sell it and buy it back at a lower price to make a profit.
How to start trading forex: The forex rule book
Here’s a few basic forex rules worth knowing at the start:
- Currencies are traded five days a week, globally, around the clock.
- The financial epicentres include London, New York and Tokyo. The first opening hour of these countries’ stock markets is when you tend to get the biggest moves in currencies.
- Forex is the highest liquidity market in the world. Liquidity is the ability to enter and exit the market at a quick pace for a fair market price. You might not think this matters. But it matters when exchange rates change in the blink of an eye ― especially when fresh news hits the headlines.
Where is the forex market located?
The forex market doesn’t have a central marketplace. For example, the stock market has a processing centre in each country, such as the New York Stock Exchange (NYSE).
Forex is a world market.
The forex market is connected by servers from large banks and trading companies. But there’s an acceptable trading timeframe since forex is a global market. The Asian session marks the open and the US market is known as the close.
Pay attention to the main players in these time zones.
Who are the major forex players?
The major players are banks, large corporations and trading companies. The main players dictate the price trend.
It’s the speculators’ job to trade ― and make money ― around the trend.
Speculators are often referred to as ‘retail traders’. ‘Retail traders’ are given their name because of the amount of money they trade.
The term ‘retail trader’ is often used in a derogatory way.
Most people believe ‘retail traders’ don’t know what they’re doing.
Over 90% of retail traders lose money.
That’s because most retail traders DONT bother learning how to start trading forex – they just start trading and get into trouble.
Indeed, most people open a trading account and learn as they lose money. Some give up. Others seek help. If you take the time to learn HOW to start trading forex, before you actually start (like your are right now), you’ll have the confidence and the knowhow to be a successful forex trader.
At the end of the day, retail traders ― due to their trading size ― can buy and sell quicker than the main players who trade large sizes.
That’s a major competitive advantage.
Who controls the forex market?
You can understand who controls the forex market by looking at the different layers. Although the forex market doesn’t have a centralised exchange, it does have a regulation system that keeps the prices in check and it consists of three tiers:
- Top tier
The interbank market level where large banks trade with one another. This is known as the primary market, where banks trade billions of dollars with each other.
Electronic Broking Service (EBS), which aggregates offers and bids from varying banks. This is a wholesale electronic trading platform, which is used to compete with the interbank market. If you’re trading a couple of million dollars, you can access this market.
The retail brokers.
Here’s the thing about trading forex…
The world’s largest financial institutions have the most capital to trade. Therefore, they basically dictate the market price for currencies. This is crucial to understand. Here’s the Euromoney market share data from 2018:
Other forex market participants include central banks. A central bank buys and sells currency in order to increase or decrease the value of its nation’s currency.
This is called central bank intervention.
Central banks buy and sell currencies for various reasons, such as shoring up confidence of the monetary system. A central bank might also want to maintain its currency within a certain range. The Bank of China ‘pegs’ (keeps) its currency in a range against the US dollar.
That leads us to the next question…
What do we trade in forex?
It can be summed up in one word: Currency.
A currency’s price is influenced by the state of the country’s economy. It’s often seen as a reflection of how well the economy is doing. If a currency’s price rises, you can interpret that as the country have a strengthening economy. Also, if a currency is rising, people tend to have more confidence in that currency.
During the 2008 global financial crisis, people bought US dollars. No matter what you think about the US dollar, it’s the world’s reserve currency. That’s why traders saw it as a safe haven when the financial system was falling apart. Until the US dollar isn’t the world’s reserve currency, that will keep happening during future financial crises. That’s a key takeaway on it’s own right, which you will only read in lesson one: ‘how to start trading forex’.
Nevertheless, some other major currencies are the euro (€), the Japanese yen (¥) and the British pound (£).
Currencies are influenced by the laws of supply and demand. In short, a currency’s price fluctuates when there are imbalances in the market.
Think about it this way…
When one currency is deemed more valuable than another, there’s a surplus of demand (lots of buyers), which makes it more expensive. As buyers run out of energy and start to hold back from accumulating, it leads to sellers outnumbering buyers and the price moves back down.
On the flip side, if there is a surplus of supply (lots of sellers), it means the currency is cheaper and is considered less valuable. As sellers run out of energy, it leads to buyers outnumbering sellers and the price moves up.
This happens all the time throughout the day.
Some other factors which move exchange rates are related to the macroeconomy. These are macro events which can impact the price of a currency, and they include:
- Inflation – positive or negative changes
- PMI ― Purchasing Manufacturing Index reports
- Central bank monetary policy ― i.e. money printing
- Public debt – i.e. emerging countries who can’t pay their debts have weaker currencies
- Interest rate differential ― i.e. if a country has higher interest rates than another country, it can attract investment into its currency
- Geopolitics and the political landscape of a country
Your ‘Start With Forex’ takeaway: How to Start Trading Forex
We made this lesson on how to start trading forex easy. We’ll take this a step further in the next lesson, so get ready. That said, if you remember one thing from this lesson, let it be this ― the trend is your friend! There’s a million ways to make a million bucks. But the easiest way is to go with the trend. That’s because the main players dictate the trend.
You don’t have to be an overnight hero!
I’ve lost lots of money learning how to trade. And most of it was from betting against the trend. In short, if the trend is up, you buy. If the trend is down, you sell.
You’ll learn other ways to profit as you dive deeper into this free forex course. My favourite way to trade is using a calculated fundamental approach, together with a strong technical outlook. Being an experienced investment analyst turned trader, I’ll give you some insight on how to trade forex using my world view throughout this free forex course.
You don’t want to miss any lessons since there are ‘nuggets’ hidden throughout this free forex course, such as talking about the GFC and the US dollar above. These ‘nuggets’ get even deeper throughout this free forex course, mind you.
Anyway, for now, you should start buying strong currencies and selling weak currencies. How to trade the forex market is what we’re teaching throughout the rest of our course.
If you’re ready to better understand forex trading terms, you’ll appreciate the next forex lesson. Mind you, it’s going to be more than just theory, as you’ll see. In the next forex lesson, we’ll start to get into some of the practical stuff. So, if you’re ready to read ‘Understanding Forex Trading Terms’, click here.
To your trading success,
Start With Forex
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Lesson One: How to Start Trading Forex?