How do I Invest in Forex Trading

 Trading Forex

Unlike most financial markets, the OTC (over-the-counter) foreign exchange market has no physical location or central exchange and trades 24-hours a day through a global network of businesses, banks and individuals. This means that currency prices are constantly fluctuating in value against each other, offering multiple trading opportunities.

At City Index, you can speculate on the future direction of currencies, taking either a long or short position depending on whether you think the currency’s value will go up or down. The below video shows you how to trade the EUR/USD currency pair with CFDs.

Forex Trading steps

1. Choose a currency pair

Decide which currency pair you wish to trade. With over 65 currency pairs to choose from, picking a trading opportunity that’s right for you is important. 
City Index’s technical and fundamental research tools can help you spot currency trading opportunities to suit your trading style. We recommend that you take your time to understand the amount of price volatility associated with the currency pair to help manage your risk.




2. Decide on the type of Forex trade 

There are three ways to trade forex with City Index Spread Betting, CFD or Forex Trading. Each has its particular stake size:

In spread betting you trade pounds per point movement

In CFD trading you trade a quantity of CFDs in the unit of the base currency (currency on the left). For example if you trade GBP / USD your stake would be in Pounds, while in USD / JPY your stake would be in US Dollars

In Forex trading you buy lots, in the unit of the base currency (currency on the left)

For example if you trade GBP / USD your stake would be in Pounds, while in USD / JPY your stake would be in US Dollars (the minimum stake size is 1000)




3. Decide to buy or sell 

Once you have picked a market, you need to know the current price it is trading at, which you can do by bringing up an trade ticket in the platform. All forex is quoted in terms of one currency versus another. Each currency pair has a ‘base’ currency and a ‘quote’ currency. The base currency is the currency on the left of the currency pair and the quote currency is on the right. Put simply, when trading foreign currencies, you would:

BUY a currency pair if you believed that the base currency will strengthen against the quote currency, or the quote currency will weaken against the base currency. 

Your profits will rise in line with every increase in the exchange price.

For every point the exchange price falls below your open level, you will incur a net loss.

SELL a currency pair if you believed that the base currency will weaken in value against the quote currency, or the quote currency will strengthen against the base currency.

Your profits will rise in line with each point the exchange price falls.

For every point the exchange price rises above your open level, you will incur a net loss.

Spread - Forex pairs have two prices.
The first price is the sell price (known as the bid) and the second price is the buy price (also known as the offer).  The difference between the buy price and the sell price is known as the spread, and is basically the cost of the trade. 




4. Adding orders

An order is an instruction to automatically trade at a point in the future when prices reach a specific level predetermined by you. You can utilise stop and limit orders to help ensure that you lock in any profits and minimise your risk when your respective profit or loss risk targets are reached.

While not compulsory, given the volatility in FX markets, using and understanding risk management tools such as stop loss orders is essential.

A stop loss order is an instruction to close out a trade at a price worse than the current market level and, as the name suggests, is used to help minimise losses. There are two types of stop loss orders - standard and guaranteed.




A standard stop loss order, once triggered, closes the trade at the best available price. There is a risk therefore that the closing price could be different from the order level if market prices gap. 

A guaranteed stop loss however, for which a small premium is charged upon trigger, guarantees to close your trade at the stop loss level you have determined, regardless of any market gapping.

A limit order is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in price targets.

Standard stop losses and limit orders are free to place and can be implemented in the dealing ticket when you first place your trade, and you can also attach orders to existing open positions. 


5. Monitor and close your trade

Once open, your trade’s profit and loss will now fluctuate with each move in the market price. 

You can track market prices, see your unrealised profit/loss update in real time, attach orders to open positions and add new trades or close existing trades from your computer or app on your smartphone and tablet. 

6. Closing your trade

When you are ready to close your trade, you simply need to do the opposite to the opening trade. Supposing you bought 3 CFDs to open, you would sell 3 CFDs to close. By closing the trade, your net open profit and loss will be realised and immediately reflected in your account cash balance

 Tips to learn forex trading from today 

Follow these steps and you’ll get on the right path to becoming a great trader. Many of the steps listed here:

 

1. Commit to learning everything about forex trading




If you’re starting from the very beginning, it is very likely that you don’t know too much about forex trading.

Sure, you may have decided that of all the instruments to trade, forex is the one for you, but you need to know all the basics.

There are many terms and phrases you need to understand.

Do not make the mistake of thinking that forex trading is like gambling. Forex trading is really a game of probability, and so you need to understand how it works.

You shouldn’t be making trades without understanding your chances of making a profit or a loss.

When it comes to doing your initial research, this may take some time and it is important to be patient at this stage.

A key thing to point out at this stage is that you’ll never really complete this step. The learning process is never-ending, there’s always new stuff to learn about forex trading.

Learning forex trading should be part of your trading routine, you need to make time for it every day, even if you’re a professional.

When you stop learning forex trading, you start putting yourself at risk. People forget things and start getting into bad habits.

 

2. Choose a broker

There are quite literally millions of different forex brokers to choose from and you should look at what each one offers.

If you did the first step right, then you should be able to understand what they are offering and how this compares to other brokers. If not, then you need to do more research!

Ideally, you should stick to a well-known broker, one that many people use and is trustworthy. You should be able to check reviews brokers and see what people are saying.

It is best to avoid lesser-known brokers as it can be harder to tell if they are scams or not. Further to that, they will likely not offer the same quality service a well-known broker will.

You also do not need to pay too much attention to special offers for new traders. If a broker is good, they shouldn’t need to offer you anything extra.

But none of this really matters if the broker you choose is not regulated! This is the most important thing to look for. If you can’t find out who regulates them, stay away.

And preferably, the country that regulates the broker should be the same as the one you reside in.

 

3. Open an account




Brokers typically offer a range of different accounts and at first, it can be difficult to choose what account will suit you because you probably don’t know what trading style you will implement.

As a beginner, it would be wise to open an account that doesn’t require too much money and allows you to trade in small quantities.

You don’t need to worry about leverage or a wide range of forex pairs at this point. Leave these to the professionals.

At Trading Education, we advise against setting up a demo account because this can give you false expectations about how the market moves.

Demo accounts also typically give traders far too much fake money to play with which removes the element of risk, which is always present in real forex trading.

It is important to bear in mind that although choosing the right account is useful, it probably won’t be the last account you open. 

As you perfect your skills, you may consider different options.

 

4. Get a trading platform

Getting straight to the point, many forex traders use MetaTrader 4, widely known as MT4 (and to a lesser extent, MetaTrader 5 - MT5).

In fact, MT4 has pretty much dominated retail forex trading for the last two decades.

Because of this, there is a lot of documentation available to help you learn to trade forex on their platform and there are plenty of people to ask for help and forums to check.

There is nothing wrong with trying out other platforms, but MT4 will be easier to get started with at the beginning.

You should also check what your broker is compatible with. It is quite rare for a good quality broker not to work with MT4.

That said, your chosen broker may also offer their own platform, and some are fairly good.

As you can imagine, without a platform you basically cannot trade. Ideally, you should dedicate a good deal of time to learn how forex trading works on your trading platform.

 

5. Devise a risk management strategy




Putting together a risk management strategy is a crucial step before starting to trade. 

You are completely free to start trading forex at this point now you have a broker and a platform, though it is highly advised that you spent a little more time preparing yourself.

A risk management strategy is basically a set of rules you apply to yourself to minimise the effects of losses.

A well-known risk management strategy is to only trade 1% of your what’s in your trading account per trade.

By doing this, your trading account will last a lot longer and you will be able to learn more about forex trading from each trade.

Learning to recognise risk goes hand in hand with the next step… 

 

6. Learn how to analyse the forex market

By learning how to analyse the forex market, you will be able to enhance your risk management strategy and improve your chances of making a handsome profit.

You’ll learn what opportunities are worth getting involved in and which ones aren’t.

There are many ways you can learn to analyse the forex market. Most forms of analysis can either be categorised as ‘fundamental’ or ‘technical’.

Fundamental analysis is where you estimate how the market will likely move based on news events.

Typically, such traders will take into consideration things like GDP, unemployment, inflation, etc. Usually, this kind of information is readily available on a forex economic calendar.

Technical analysis is a much broader topic and includes a variety of different market tools, often referred to as ‘indicators’.

They can measure a number of things and many traders feel it is smarter to rely on technical analysis which can be measured more accurately.

To really learn forex trading, you should have knowledge of both technical and fundamental analysis.

 

7. Start making trades




Now you know the basics, it is time to start dipping into a little bit of trading.

You can’t really learn forex trading until you start doing it and for many, this will be the real turning point.

By turning theory to practice, you will see what really works for you and what doesn’t. Any plans you originally made may go right out the window.

Some elements you thought were easy might turn out to be hard and vice versa. You’ll also see how trading affects you mentally as well.

But whatever you do, don’t expect to immediately start winning. You will make plenty of losses. However, this shouldn’t get you down, it is completely normal.

If all you do is make losing trades, don’t worry. Think of these losses as an investment to learn forex trading. If you keep at it long enough, it will pay off.

It is also possible that you may find yourself in the reverse situation; you keep winning. Here you should be cautious and remember that you are still new to trading, you are not invincible!

You may also find that from this point you start to find things that you want to research more in order to improve your trading.

 

8. Learn forex trading styles

Now that you’ve started trading, you can start refining what works for you.

This step will take a long time and just like the first step, never really ends (we repeat that a lot!). You should always be trying new things.

‘Forex Trading style’, for most people, this usually comes down to one specific question; are you a ‘day trader or a ‘swing trader’?

Day trading is essentially a full-time job, you do it throughout the day. Typically, day traders will open positions in the morning and close them in the evening.

Swing trading is more long-term, though it requires less time. Swing traders may close a trade days, weeks or even months after opening them.

Some believe that the ‘real money’ is in swing trading, others disagree and prefer day trading.

As a beginner, you probably have less time to trade and so swing trading may be a better option as you can do it in the evening after work, for example.

Then, as you become more experienced, you can consider day trading.

 


9. Keep a trading journal




Keeping a trading journal is how you learn to perfect your trading style.

With such a journal, you would log all your trades, taking note of why you entered a position, how large your position was and what the outcome was.

By doing this, you can see what works for you and what doesn’t. If you don’t keep a trading journal, you will never learn forex trading and will be doomed to repeat the same mistakes.

You may be familiar with this famous phrase from Albert Einstein:

“The definition of insanity is doing the same thing over and over again but expecting different results”.

In forex trading, this phrase especially rings true. Without a journal, there are many things you won’t notice about your trading strategy.

Only when you put them on paper will they become obvious, which can hopefully lead to change and improvement.

 

10. Continue to learn forex trading

As we have mentioned throughout this article, learning to trade forex never stops! Even professionals are still learning to trade forex.

You need to continue to dedicate time to learning new things about forex trading. Don’t think that trading is solely the act of trading itself!

But keeping your knowledge sharp, you will be able to find more opportunities to make a profit.

As mentioned in the first step, when you stop learning forex trading you are putting yourself at risk.

Learning forex trading doesn’t always mean to learn something new, sometimes it serves to remind you of things you forgot and must relearn.

 

How to Settle Down and learn the techniques for trading Forex

Forex (FX) trading can be as simple or as complicated as you want it to be. In the beginning forex trading seems like it is simple. Forex is a marketplace for trading in currencies. Traders will use these trades to speculate and hedge for profit as well as for commerce and other purposes. The FX market is the largest, most traded exchange in the world and is used by individual traders, financial institutions, broker, and institutional investors.

It may seem like your only job as a trader is to pick the direction of a currency pair and collect your profit. However, forex trading takes time, patience, and experience. You will need a combination of fundamental and technical analysis skills and an understanding of the factors that move the currencies traded on the foreign exchange marketplace. Or, maybe you are hoping to find a precise forex trading system on the internet. If only it were that simple.

Hedging Forex

Hedging is a way to reduce risk by taking both sides of a trade at once. If your broker allows it, an easy way to hedge is just to initiate a long and a short position on the same pair. Advanced traders sometimes use two different pairs to make one hedge, but that can get very complicated.

For example, say you decide that you want to go short on the U.S. dollar and the Swiss franc (USD/CHF) because you see it sitting at the top of a recent price range. You decide to initiate your short. After setting up your short, you start thinking that the USD/CHF is looking a little strong, and you think that it might break upward and make your short an expensive one.

To do an advanced balancing act, you start looking at other USD pairs. You find that the euro to dollar pair (EUR/USD) tends to move inversely—opposite—to the USD/CHF. To complete your forex hedge, you go short on EUR/USD. The USD ends up breaking resistance and moves strongly against the CHF. Your short EUR trade becomes a winner, and your USD/CHF trade is a loser, but your risk is limited because they almost even out.

Position Trading

Position Trading is trading based on your overall exposure to a currency pair. Your position is your average price for a currency pair. For Example, you might make a short trade on EUR/USD at 1.40. If the pair is ultimately trending lower but happens to retrace up, and you take another short at say 1.42, your average position would be 1.41. Once the EUR/USD drops back below 1.41, you will be back in overall profit.

Trading Forex Options

A forex option is an agreement to purchase a currency pair at a predetermined price at a specified future date. For example, say you are long the EUR/USD at 1.40, and you feel that there is a chance that it will fall to 1.38 in overnight trading. Not wanting to risk a deeper reaction, you decide to put a stop at 1.3750, setting up a potential loss of 250 pips.

250 pips sound really painful, so you decide to use a forex option to lessen the pain. You purchase an option for the overnight hours with a strike price of 1.3750. If the EUR/USD goes up and never touches 1.3750 overnight, you would lose the premium that you paid for your currency option.

If the EUR/USD falls and touches your option and your stop loss, you would receive the profit from your option, depending on how much of a premium you paid, and you would realize the loss of your long trade on the EUR/USD. The options profit would make up for some of that loss on your currency trade.

Scalping

Scalping is making a very short-term trade for a few pips usually using high leverage. Scalping typically is best done in conjunction with a news release and supportive technical conditions. The trade can last anywhere from a few seconds to a few hours. Many beginning forex traders start with scalping, but it does not take long to figure out how much you can lose if you do not have any idea what you are doing. In general, scaling is a risky strategy that does not pay well in comparison it's a risk. If you are going to make scalping trades, it is best to do them in conjunction with your overall trading position, not as a primary method of trading.

Advanced Forex trading is about seeing all your options when you make a trade. Aside from using masterful risk management and extreme caution, advanced trading can be an alternate way to make profits and control losses. Advanced trading techniques are just about using the behavior of the market to your advantage. Learning to use advanced techniques properly is what will give you the edge that will make you stand apart from the average trader.


The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

How to sell bitcoin trading forex today

Ways to deal bitcoin

There are two ways to deal bitcoin: buy the cryptocurrency itself in the hope of selling it on at a profit, or speculate on its value without ever owning the token. The latter is how CFDs work. 

A CFD enables you to trade a contract based on prices in the underlying market. It is a leveraged product, meaning you can put down a small initial deposit and still gain the exposure of a much larger position. This can magnify your profits, though it can have the same effect on your losses. 

Do I need to use an exchange to trade bitcoin?

When you trade bitcoin you never interact directly with an exchange. Instead, you trade on our buy and sell prices, which we source from a number of exchanges on your behalf. In order to take a position on bitcoin’s price, then, all you need is an IG trading account.

Bitcoin exchanges work the same way as traditional exchanges, enabling investors to buy the cryptocurrency from or sell it to one another. But there are a number of advantages to cutting them out of the equation entirely:

• They lack proper regulation, public records and the infrastructure needed to respond quickly to support requests
• Their matching engines and servers are unreliable, which can result in the suspension of markets or reduced execution accuracy
• They impose fees and restrictions on funding and withdrawing from your exchange account, while accounts themselves can take days to acquire

By trading bitcoin CFDs, you also gain significantly improved liquidity at your chosen touch price. When you buy and sell direct from the exchange, you generally have to accept multiple prices in order to complete your order.

What moves bitcoin's price?

While bitcoin’s volatility makes the cryptocurrency an attractive opportunity, it also makes it a particularly risky market to speculate on. Its price can shift significantly and suddenly – and since the bitcoin market operates around the clock, this is liable to happen any time of day. 

As a decentralised currency, bitcoin is free from many of the economic and political concerns which affect traditional currencies. But as a market still in its adolescence, there is a lot of uncertainty entirely unique to the cryptocurrency.

Any one of the following factors could have a sudden and significant impact on its price, and as such you need to learn to navigate the risks they may open up.

Bitcoin supply

There may be a finite supply of bitcoins – 21 million, all of which are expected to be mined by 2040 – but even so, availability fluctuates depending on the rate with which they enter the market, as well as the activity of those who hold them

BTC Market cap

The value of the bitcoin market – and how valuable it is perceived to be – both influence whether traders will look to get in on a surging opportunity, or short the latest bubble

Bad press

All currencies are affected by public perception, but no more so than bitcoin, whose security, value and longevity is in question even at the best of times

Integration

Bitcoin’s profile – and confidence in traditional currencies – will depend on its integration into new payment systems, crowdfunding platforms and more

Industry adoption

Bitcoin is yet to be embraced by businesses across the globe, and it remains to be seen what impact a more significant standing on the corporate stage will have

Key events

Any number of major events could have serious implications for the cryptocurrency, including regulation changes, security breaches, macroeconomic setbacks and more 

Bitcoin trading strategies

Day trading

Take a position based on anticipated short-term movements, and close it out at the end of the trading day.

The strategy for you if: you want to respond to short-term opportunities in the bitcoin market, in light of developing news or emerging patterns.

Scalping

Place frequent, intraday trades on minor price movements.

The strategy for you if: you want to put yourself in a position to make small, continuous profits, rather than wait for one significant breakout or breakdown.

Swing trading

Catch trends the moment they form, and hold onto the position until the trend runs its course or shows signs of a reversal.

The strategy for you if: you want to capitalise on opportunities from market momentum.

Automated trading

Automate your trading processes to react to changeable market conditions on your behalf.

For you if: you’d prefer to be a passive trader.

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