Forex Trading Basics – Understanding Currency Trading
As you already know, in our blog we share our experience, trading strategies, and many Forex trading basics tips.
In this lecture, I will cover some of the basic Forex terminologies. Moreover, I will share some tips that will help you to get started with Forex trading if you are a complete beginner.
These Forex basics tips might be very useful to some of you as this way you won’t repeat the common mistakes that most beginner traders do.
Forex Basics: Choosing a Broker
So the first step you take, even before you start trading, is to choose a broker.
For the beginners who aren’t familiar with the basics of Forex trading, the brokers are the companies that provide access to the trading platforms.
We use them to participate in the market. How usually does it go? You choose a broker and fund your trading account.
You open an account, you fund it, for example with $1,000. And then you use this amount of money to trade, to buy different assets, to sell, and so on.
One of the major problems in the trading industry at the moment is the scam brokers.
As you may know, I’m originally from Bulgaria. And unfortunately, Bulgaria is the spot where there are hundreds of scam brokers located. They don’t work just with Bulgarian clients. Actually, they don’t accept Bulgarian clients as well, at all. But Bulgaria is the place where they found it easiest in Europe to locate their offices.
There are hundreds of scam brokers. And it’s very hard for beginners to recognize when a broker is a scam until they lose their money.
What these brokers do usually is to find the so-called leads. These are the contacts they gather, usually from online ads. It could be a fancy YouTube video where traders are showing off with jet planes and expensive cars. They tell you that you can earn the same money very quickly.
And you just register, you leave your email, phone, and immediately you will receive a call from the experienced trader who will sell you anything very well. And they will ask you to deposit even through the phone, to give your credit card details over the phone to fund your account, and unfortunately, you will never see your money again.
There are thousands of people scammed daily.
Go For a Regulated Broker
Forex trading basics Rule #1 – go for a regulated broker.
We had so many people in the Academy coming after they were scammed, but unfortunately, we cannot help with anything.
Don’t ask us for that. There are some institutions that help scammed people from brokers, not sure. At the same time, there are scam companies that are helping you to get rid of the scam and to get your money back. So they will make more money from you promising they will give back your money from some scam broker.
It’s a really bad practice, and I hope you’re reading this Forex trading basics lecture before you experience such a scam broker.
To make it easier for our students, we have created a trusted brokers page. If you visit our website and you click on the Brokers section, you will see trusted brokers that I’ve been using personally.
We are testing different brokers all the time. And we are looking for the regulations, this is very important.
So, for example, in Europe, it’s a very strong regulation to have FCA, which is in the UK actually, the Financial Conduct Authority. In addition, we have CYSEC in Cyprus, and there are different regulators around the world.
There are different regulators in the United States, there are different regulators in Asia, in Africa. And actually, the scam brokers usually do not mess with the US. This is the only country they avoid for some reason.
Understanding Forex Trading Live Account & Demo Account
So you choose a regulated broker, this is the number one thing.
And then you have 2 options. To open a Demo account, or you can open a live account. The Demo account is a virtual account and if you’re a beginner, I would suggest you go for it to get familiar with Forex trading basics. Moreover, there, you have no limitation with the starting amount.
With most of the brokers, you can open a Demo account with $1,000, with $15,000, with $50, $100,000, anything. I would suggest you choose an amount that will be similar to the amount you would be investing or when you open a live account. If you are planning to open a live account with $1,000, then go for a Demo account with $1,000.
This way, you will see realistically what are the risks, how much you can achieve. And, for example, many people want to start trading with $200 which is absolutely fine. If you can afford that much, of course, you will be starting with that much.
But don’t expect from $200 to make $1,000 at the end of the month. This will be unrealistic to have 500% of a profit. I don’t say it’s not possible, I say it’s not realistic to have it as a constant result.
So start with a small amount that you feel comfortable with and you are not risking a lot. Basically, this should be an amount of money that you are capable of losing.
And before you open the account, keep in mind to choose good leverage or appropriate leverage for your trading.
Forex Basics: Leverage in Trading
Now, what is the leverage?
This is the amount of money that the brokers will give you. To trade with as an extra. Or if I will try to explain it in simple words, this is the money that the broker will borrow to you.
For example, if you use leverage 1 to 100, this means that if you fund an account with $1,000, you will be able to trade with $100,000.
And if you put all of your money into a single trade, of course, you can do a huge profit. But at the same time, you can blow your account immediately.
So this is where money management is crucial, and you should never trade with all of your money. Especially if you are not familiar with Forex basics and you are trading with huge leverage.
And for the beginners who are still getting a better understanding of Forex trading, the leverage, the money the broker borrows you is not a loan. You’re not supposed to give that money back to the broker.
This is just a financial practice and it’s not only with the Forex trading leverages, it’s used in many different fields. But with the Forex trading, it works that way. And, for example, in 2018, in Europe, we accepted the ESMA restrictions where now in Europe, we are limited with the leverage.
For example, with Cryptocurrencies, we have a maximum of 1 to 2 leverage. This means that if I have $10,000 in the trading account, the maximum I can trade with is $20,000 which is a very huge limitation compared to what I was used to and many of our traders in Europe. But that’s it.
These are the regulations and obviously, we have to follow them. And in different countries it’s different. And, of course, if you see leverage 1 to 2000, for example, I have seen such brokers, pay attention that this could be a scam broker.
Basic Forex Trading Strategies
Now, the next thing when you open an account and you choose your broker, you open an account, you set up, you install the platform, is to have a trading strategy.
Now, there are so many strategies. The first thing is it’s important to use a strategy. You cannot just buy and sell randomly by looking at the chart especially if you don’t have experience. You will end up losing money.
From where to get a strategy? I can talk a lot about that.
Definitely, YouTube is a fantastic place from where you can find free video tutorials on Forex trading and get some free strategies. And personally, I have uploaded many free videos with strategies on YouTube. Moreover, we have a separate category with articles about trading strategies in our blog.
Forex Basics Courses in the Academy
Why do we do that?
We do a lot of things in the Academy. We do paid courses, we have free courses. And usually, with the paid courses, we upload some of the videos as free lectures on YouTube so the students and the traders can see what this course is about or what we cover, what type of strategies.
And, for example, I have a few courses where I show 5 strategies. I have one course for Forex, I have one for crypto where I show 5 strategies, how to be executed manually and how to trade them automatically.
So what I would normally do, I will just upload one of the strategies free on YouTube so everyone who wants to use it, it’s OK to use it. And at the same time, if you like it, then you might be interested to buy the complete course and access the other 4 strategies. This is how personally we do it.
Now, most of the traders that are profitable are not likely to share their strategies for free as I do. That’s a personal choice. You cannot blame them as well at the same time, because they spend a lot of time creating the strategies, testing them, and there is this kind of, you know, a selfish approach that the traders don’t want to share their strategies. Or they may charge you a lot of money to give you their strategies.
YouTube Video Tutorials on Forex Trading
So YouTube is a place where you can find great video tutorials on Forex trading and I think great strategies. But, of course, most of them are for promotional purposes. And three, I would not suggest you go for strategies that are from the broker.
Most of the brokers have education on their websites. They will say this is what you need to do.
The regulated brokers don’t give promises. They just walk you through some basic education that is not enough. If the broker gives you promises, again, that’s a sign that this is a scam broker.
But if you see the Forex basics education of the brokers and you test it and you go for it on your live account or even a Demo account, you will see that 99% of the time, you will be losing.
The Market Maker Broker
The brokers do not want you to make profits, keep that in mind. It doesn’t matter if it is a scam or a regulated broker. They don’t want the clients to make money and especially if they are market makers.
So what is the market maker broker?
This is where all the funds and the transactions stay within the broker.
So I open an account with broker A, for example, if that broker is not a market maker, what they will do, they will transfer all the positions to a bigger broker.
Then some of the brokers are just transferring some of the positions to other brokers and they usually benefit from the spread. And for the beginners, the spread is the difference between the Buy and the Sell price or the Bid and the Ask price. When we buy an asset, we buy it on the Ask price, when we sell, we sell it on the Bid price.
Or if you buy EURUSD, you will be paying a little bit more expensive price from the 2 prices that you see and when you close the position, you are closing it at the lowest price. This is the spread. This is where the broker benefits. But if the broker is a market maker, they will be happy if you lose your money. Because the money will stay with them.
Do not go for education from the brokers
So I would strongly suggest not to go for the education from the brokers. You can read it as a resource, you know, just to learn the Forex basics terminologies, I’m explaining some of them in this video.
But if you want really a profitable strategy, then you should be taking it more seriously.
It should be a trusted resource and usually, what is considered as a trusted resource is if the trader is actually showing live trading. This is what I do in most of my courses or I can say all of my courses.
I demonstrate trading with the strategies, I share my screen, and I show realistic results, I always show losses as well because, with every strategy, there are losses, there are profits.
There is no perfect strategy
And I want everyone who takes a course of mine or a strategy or a Robot to keep in mind that there are losses and I just show it so the people will decide. Are they willing to take the risk to have losses? Or are they going to look for a strategy that will have no losses?
There are no strategies, guys, that will have no losses. Every strategy at one moment will bring you losses. There is no perfect strategy that will bring you only profits, keep that in mind.
The Never Losing Formula
The best that I show, for example, is the never losing formula which I called for the cryptos and it was popular much, it’s popular in the Forex market for many years.
But I just recalculated the formula for the cryptocurrencies so when you’re buying and you go on a loss, there is an option to hatch, to sell opposite with a bigger lot, and then if the price goes again, then we buy again and sell again and it’s a range in which we buy and sell until the price breaks and we exit always on a profit.
That’s the idea of the formula. The course is called Cryptocurrency Bitcoin Trading Robot Never Losing Formula if you want to check it out.
I show many examples I have updated recently because the course was launched back in 2017-18 when everybody was crazy about Bitcoin and I showed a system from where you can avoid the losses. And many of the traders ask me if this is still working. Yes, it is.
Many of the students are still using it. I get daily reports about that system because it’s a lot of people taking it and I’m still using it as well when I’m in front of the computer. And I have recorded fresh examples as well.
Forex Trading Basics: The Signals
So, about the signals, the paid signals, this is what is very popular, I would suggest you stay away from signals. A few of the providers are realistic and these are usually the groups where professional traders stay between the signals and they provide signals.
Most of the people and most of the websites that are offering Forex signals are not scams, not all of them. But usually, what they do, they’re looking for monthly subscriptions. You subscribe and they give you some signals.
Usually, they use Expert Advisors, Robots that are not very profitable or they are profitable one month and the next they will be losing. And then you just test it for a few weeks, months, and then you quit.
And new people will come, new people will subscribe, and this is how they make money. From the volume of people subscribing to their signals and not from the trading itself.
And one thing to keep in mind, if you’re using signals, you will not learn anything because they will just send you an email, a pop-up on the phone or depends how they are doing it, what they’re using, and you will see buy EURUSD at $118.50, Stop Loss $118.30, Take Profit $118.90, for example. I’m just picking some numbers right now.
You don’t know why is that, what’s the reason, what’s the strategy behind it, what they have in mind. And at the end of the day, you will spend a few hundred dollars, maybe thousands, and you will not have sustainable results.
So better look for free strategies and video tutorials on Forex trading over YouTube. There are paid courses, of course, there are paid systems, Robots.
Nowadays, over the internet, there are so many reviews. If someone is a scammer, you will find immediately reviews about it.
Pay attention to the Robots and the providers of the systems to be trusted, to have good reviews.
And you will know if this is trusted or not. Just make research before you buy any trading system, strategy, or Robot.
Nowadays, it’s very easy to find out which are the scammers. The brokers, the traders, the people who are teaching, there is always a review if they do any bad practices.
The Bottom Line
These are the very important tips when you are starting and if you have any questions about it, let me know in the comments below. I’d be happy to answer. I will see you in another lecture.
Have a great day and enjoy trading.