From this article you will know the details on how to start trading transactions with Forex. Surprise, surprise, there are a lot of things to consider.
Here you can learn how to select a broker, create an operations account, invest funds, use a terminal to operate and other useful things to start trading transactions with Forex.
Brokers under regulation
In the process of learning how to start trading with Forex, as a first step you have to create a secure trading environment. The protection of your investment begins with the choice of a broker!
Operating with financial markets is a regulated activity in most countries of the world and is undoubtedly a regulated activity in the world’s financial centers, such as the United Kingdom, the US, the EU, Japan, Australia, Canada and some others. Regulated activity means that there is appropriate legislation and a dedicated government or separate government institutions that grant licenses and regulate financial brokers. These institutions have an arbitrary position so as not to hinder their relationship with the broker.
If a broker does not have a license, you will be protected only according to the terms of the contract, which is not acceptable.
Be very clear that when it comes to brokers, there may be several legal entities under a single brand. Before signing a contract as a user, make sure that you are making a deal with an entity that has a license, unless your goal is another.
Otherwise, you can choose between several suppliers of purchase accounts and each broker or bank have their unique points of sale that fit the different business needs and tastes.
Brokers for the execution of orders
The second step in selecting a broker is to find out which order execution model they use. In a nutshell, there are two types – with or without a money table.
The brokers that occupy these money tables are often referred to as Market Makers. A market maker, instead of simply being an access provider, is a type of broker that creates a market for you by showing you the actual price, but does not let your orders reach the Interbank market, you keep your money if you lose or give your own money if you have profits. It is called a market maker since the broker is the only other party involved in the negotiation
Brokers or accounts without a Money Table are also called the Electronic Communication Network (ECN) and simply function as access providers between you and the interbank market. These accounts allow a greater depth of the market, typically have floating spreads and the time to execute the orders is greater. When an order is placed in that account, the ECN broker processes it and sends it to the market. In this way, instead of negotiating with your broker, you are doing it with one of the millions of participating traders.
For many traders a broker market maker is not an option and they prefer to opt for ECN, but is it really bad for the broker to be a market maker?
Short answer – if the broker obtained his license from a difficult financial authority such as the FCA in the United Kingdom or ASIC in Australia or through the regulator that works with the Markets in Financial Instruments Directive, MiFID for short in English) in the EU – you can feel comfortable, because you are safe from (a) the broker manipulating your funds or altering the charts and (b) your funds are held in a separate account in case the broker or the bank declare bankruptcy.
Another point that could really matter is the speed of execution of orders, since even an electronic signal has a delay. It takes more time than a given order from your computer to reach the broker’s server and from it to the server of your liquidity provider and vice versa, which delays that the order arrives directly to your broker. Therefore, if the speed of order execution is vital to your trading strategy, perhaps you should consider a broker with a Money Table.
Now, that you have selected a broker, let’s continue with the second step: select and open a trading account.
A trading account with a broker is very similar to your normal debit account with a bank with a small and very important difference – you can use the funds in your account to take advantage of the financial market. In this example, you can use the funds to start online sales transactions.
There is a wide variety of trading accounts that are offered by most Forex retail brokers for your choice.
The things that you have to pay attention to will depend a lot on what you are planning to trade and how. The accounts vary in terms of the minimum of the initial deposit, the leverage provided, the financial instruments available for the purchase and sale operations and some minor sale and purchase characteristics.
There are micro accounts that allow operations with only $ 10 using the smallest volumes available as a batch or a micro-lot of 0.01. These types of accounts sometimes allow up to 1: 1000 of leverage allowing the trader to obtain considerable gains or losses from the beginning of Forex trading transactions. The list of instruments in such accounts is generally limited to 20-30 of the most popular currency pairs.
There is always a kind of “standard account” available. This type of account allows not only to start trading transactions with Forex, but also to start CFDs and negotiable futures contracts on metals and energy. In other words, most of the instruments available with a particular broker will be available in the standard account. The initial deposit of this account ranges from $ 100 to $ 200. The leverage is more modest and the spread (difference between the price of supply and demand) is probably around 1-2 pips for the main currencies.
There is often a trading account with more tight spreads for the type of scalper trader. They usually make a minimum deposit that is $ 1000 with 1: 100 of leverage or less.
Sometimes brokers have VIP accounts with additional features, such as financing bonds, no swap, no spread, refunds and other features to attract heavyweight traders. Generally speaking, if you deposit enough money, you can negotiate almost anything with a broker.
Whatever type of account you have with your broker, be sure to read and understand their detailed description, which should include at least information about margin levels.
When reading guides on how to trade with Forex or when reviewing the Forex forums, sooner or later you will find yourself debating whether a high leverage is a good thing or something bad. It is worth mentioning that no broker, broker that operates with raw materials or any financial broker offers leverage as high as Forex brokers. When it comes to high leverage, there is a thin line between use and abuse.
There is a significant point to understand that is hidden by a technicality of how leverage works. Leverage influences the margin, however, does not influence the value of the pip. The volume of sales transactions if it does.
It is true that a high level of leverage can be used to operate with higher volumes. Performing excessive transactions (Overtrading) either by opening too many orders or orders that are too large, would simultaneidad lead to a decrease in the free margin and an increase in the value of the pip. As a result, the purchase account becomes much more susceptible to margin calls, since it simply can not withstand market volatility. This is an example of how you should not start trading transactions with Forex. Little money and risky handling can leave your account empty before you even start trading with Forex.
On the other hand, assuming that all other things are equal and that a high level of leverage is used to operate the same volumes as you would with a low operating leverage, you will have a larger free margin while maintaining the same pip value. As a result, your account may have a much higher volatility!
First of all, never negotiate with funds that you can not lose, just use risk capital. Starting to trade transactions with Forex is like starting any financial negotiation, a risky business. Marketing with the money that one can afford to lose alleviates the tension in the trader’s psyche, which will be put to the test, especially in the early stages of learning how to start trading transactions with Forex.
Most beginning traders are cautious with their initial deposits but often deposit much larger sums after savoring the buying and selling operations. This usually means two things: that they lost their initial deposit, while their anxiety and emotion grew. They aim to recover with the help of additional funds and larger volumes. Sooner or later the strategy of double or nothing inevitably leads to disaster. In Forex, sooner than later.
Statistically speaking, you have almost a 99% chance of losing your initial deposit. All traders have losses and it is inevitable, but an important experience to have.
If you ever lose funds when operating, consider it a penalty for committing an error when negotiating or as your teaching expense for starting forex trading transactions. The market is not your enemy, nor is the broker or the trader. Are you!
The questions are always: what have you learned by making a costly mistake? and are you prepared not to repeat it again? As simple as that.
A trading terminal or a trading platform is software through which a trader performs operations.
When you are learning how to start forex trading transactions from home, many traders start by familiarizing themselves with the platform. There are several types, usually more than those offered by a single broker, but they all work more or less the same and include a list of financial instruments available for trading, a terminal with information about your balance, margin, own capital, free margin and operations in progress and the real-time screen graph that informs you of the time of action of the price of a selected instrument. Once you become familiar with the use of one of the platforms, you will understand them all.
For a fundamental type of trader, the platform is nothing more than a tool for placing orders. However, for the most technical trader, the platform is also an analysis tool, since it allows various charting techniques, as well as the use of technical indicators.
That the buying and selling operations begin
Anyone interested in how to start trading transactions online with Forex, you are advised to read as much as possible of the subject. There will be a lot of duplicate information, especially at the entry level, but as you read things will be clarified and you will have a better idea of what to do next.
This contains the basic concepts on how to start trading transactions online with Forex. If you have never made sales transactions, open a demo account at this time. It will take you 5 minutes of your time, at no cost and it will give you a hundred new questions. Questions are a good thing! As long as you are curious and learning about something new, you will be moving forward. You can start by researching all the information available on your broker’s website on how to start online forex trading transactions. That should give you an advantage.
Practice in a demo account the time necessary to understand the technical aspects, to learn the real marketing, to feel what it is to be part of the market, to feel how the tick chart becomes a real account. There is no need to dive into the deepest part, but you can not learn to swim in an empty pool. In the same way, you can not learn how to start Forex, making purchase transactions in a demo account.