What is a Forex Broker in Online Currency Trading

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Contents

Online Forex Trading: A Beginner’s Guide

What is Forex Trading and how does it work?

At FXTM, we are committed to ensuring our clients are kept up-to-date on the latest products, state-of-the-art trading tools, platforms and accounts.

For those just getting started, we have created a comprehensive Beginner’s Guide to introduce you to forex terminology, answer common FAQs and, most importantly, keep things simple.
Looking for a breakdown of forex terminology? Head over to our glossary page.

What is the forex market?

What is forex trading?

What is a forex broker?

What is the forex market?

Foreign exchange (also known as forex or FX) refers to the global, over-the-counter market (OTC) where traders, investors, institutions and banks, exchange, speculate on, buy and sell world currencies.

Trading is conducted over the ‘interbank market’, an online channel through which currencies are traded 24 hours a day, five days a week. Forex is one of the largest financial markets, with an estimated global daily turnover of more than US$5 trillion.

What is forex trading?

Forex trading is the act of buying or selling currencies. Banks, central banks, corporations, institutional investors and individual traders exchange foreign currency for a variety of reasons, including balancing the markets, facilitating international trade and tourism, or making a profit.

Currency is traded in pairs, in both spot and futures markets. The value of a currency pair is driven by economic, political and environmental factors, such as wars, natural disasters, or national elections.

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What is a forex broker?

Brokers act as intermediaries, facilitating trades by providing clients access to the 24-hour interbank
in order to conduct trades.

FXTM offers a number of different accounts, each providing services and features tailored to our clients’ individual trading objectives. Discover the account that’s right for you on our account page. New to forex trading? Learn about the markets by opening a demo account page.

Understanding Currency Pairs

All transactions made on the forex market involve the simultaneous purchasing and selling of two currencies.
These are called ‘currency pairs’, and include a base currency and a quote currency. The diagram below represents the forex pair EUR/USD (Euro/US Dollar), one of the most common currency pairs traded on the forex market.

Sell 1 Euro for 1.0916 US Dollars

Buy 1 Euro for 1.0918 US Dollars

Ask Price – Bid Price

1.0918 – 1.0916 = 0.0002 (2 pips)

Ask Price – Bid Price

1.0918 – 1.0916 = 0.0002 (2 pips)

Base Currency

The base currency is the first currency that appears in a forex pair. This currency is bought or sold in exchange for the quote currency.
So, based on the example above, it will cost a trader 1.0916 USD to buy 1 EUR.
Alternatively, a trader could sell 1 EUR for 1.0916 USD.

Quote currencies

The second currency of a currency pair is called the quote currency. In EUR/USD for example, USD is the quote currency.

Ask Price

TThe ask price is the value at which a trader accepts to buy a currency .

Bid Price

The bid price is the value at which a trader is prepared to sell a currency.

Spread

A spread is the difference between the ask price and the bid price. In other words, it is the cost of trading.
For example, if the Euro to US dollar is trading with an ask price of 1.0918 and a bid price of 1.0916, then the spread will be the ask price minus the bid price. In this case, 0.0002.

A point in price – or pip for short – is a measure of the change in a currency pair in the forex market.
The acronym can also stand for ‘percentage in point’ and ‘price interest point’. A pip is used to measure price movements, and it represents a change in a currency pair. Most currency pairs are quoted to five decimal places.

Note: Forex prices are often quoted to four decimal places because their spread differences are typically very small. However, there is no definitive rule when it comes to the number of decimal places used for forex quotes.

On the forex market, trades in currencies are often worth millions, so small bid-ask price differences (i.e. several pips) can soon add up to a significant profit. Of course, such large trading volumes mean a small spread can also equate to significant losses.
Always trade carefully and consider the risks involved.

Visualising
Currency Trades

Trades & Key Terminology

A ‘position’ is the term used to describe a trade in progress. A long position means a trader has bought a currency expecting its value to increase. Once the trader sells that currency back to the market (ideally for a higher price than he paid for it), his long position is said to be ‘closed’ and the trade is complete.
A short position refers to a trader who sells a currency expecting its value to decrease, and plans to buy it back at a lower price. A short position is ‘closed’ once the trader buys back the asset (ideally for less than he sold it for).

For example, if the currency pair EUR/USD was trading at 1.0916/1.0918, then an investor looking to open a long position on the euro would purchase 1 EUR for 1.0918 USD. The trader will then hold on to the euro in the hopes that it will appreciate, selling it back to the market at a profit once its price has increased.

An investor going short on the EUR would sell 1 EUR for 1.0916 USD. This trader expects the euro to depreciate, and plans to buy it back at a lower rate if it does.

What are the most traded currency pairs on the forex market?

There are seven Major currency pairs on the forex market. Other brackets include Crosses and Exotic currency pairs, which are less commonly traded and all relatively illiquid (i.e., not easily exchanged for cash).

MAJOR CURRENCY PAIRS

Major currency pairs are the most commonly traded, and account for nearly 80% of trade volume on the forex market.
These currency pairs could typically have low volatility and high liquidity.

They are associated with stable, well managed economies, are less susceptible to manipulation and have smaller spreads than other pairs.

CROSSES

Cross currency pairs – Crosses – are pairs that do not include the USD.
Historically, Crosses were converted first into USD and then into the desired currency, but are now offered for direct exchange.

The most commonly traded are derived from Minor currency pairs (e.g. EUR/GBP, EUR/JPY, GBP/JPY); they are typically less liquid and more volatile than Major currency pairs.

EXOTIC CURRENCY PAIRS

Exotics are currencies from emerging or smaller economies, paired with a Major.

Compared to Crosses and Majors, Exotics are much riskier to trade because they are less liquid, more volatile, and more susceptible to manipulation.

They also contain wider spreads, and are more sensitive to sudden shifts in political and financial developments.

We’ve created a table below which showcases several different currency pairs from each bracket, as well as some nicknames which were coined by traders themselves.

7 MAJOR PAIRS

7 MAJOR PAIRS

6 MINOR PAIRS

6 MINOR PAIRS

6 EXOTIC PAIRS

6 EXOTIC PAIRS

Brackets

MAJOR CURRENCY PAIRS

MINOR CURRENCY PAIRS

EXOTIC CURRENCY PAIRS

Nicknames

Abbreviations

N. Zealand Dollar

UNDERSTANDING FOREX CHARTS

CANDLESTICK CHART

A candlestick is a chart, also known as a Japanese Candlestick Chart, that is often favoured by traders due to the wide range of information it portrays. The chart displays the high, low, opening and closing prices.

A candlestick has three points: open, close and the wicks.
The wicks show the high to low range and the ‘real body’ (wide section) shows investors if the closing price was higher or lower than the opening price.

If the candlestick is filled, then the currency pair closed lower than it opened. If the candlestick is hollow, then the closing price is higher than the opening price.

BAR CHART

A bar chart shows the opening, close, high and low of the currency pair’s prices.

The top of the bar represents the highest paid price and the bottom indicates the lowest traded price for that specific time period.

The actual bar represents the currency pair’s overall trading range and the horizontal lines on the sides represent the opening (left) and the closing prices (right).

A bar chart is most commonly used to identify the contraction and expansion of price ranges.

LINE CHART

A line chart is easy to understand for forex trading beginners. In a line chart, a line is drawn from one closing price to the next.

When connected, it is easy to identify a general price movement of a currency pair throughout a time period and determine currency patterns.

NEED TO KNOW MORE ABOUT TRADING FOREX?

How to start trading with a forex broker

A broker such as FXTM acts an intermediary between the traders and the liquidity providers. It facilitates in the execution of clients’ orders.

It is recommended to choose a licensed, regulated broker that has at least 5 years of proven experience. If your broker abides by regulatory rules, then you can be sure that they are legitimate.

Once you have an active account, you can trade — but you will be required to make a deposit to cover the costs of your trades. This is called a margin account.

However, it’s really important to remember that becoming a profitable trader isn’t an overnight process. It takes time to become familiar with the markets, and there’s a whole new vocabulary to learn. For this reason, reputable brokers like FXTM offer a Demo account. This is a great way to experiment with different trading strategies – but with virtual money and none of the risk!

Once you’re ready to move on to live trading, we’ve got a great range of trading accounts to suit you.

Learn forex trading

As a global broker, we’re firm believers that developing a sound understanding of the markets is imperative to a trader’s potential to succeed. That’s why FXTM offer a vast range of industry-leading educational resources in a variety of languages which are tailored to the needs of both new and experienced traders.

These include free webinars, Ebooks, articles and more. Prefer to learn from an expert in person? We also hold insightful seminars and workshops in various regions around the world that a cover a multitude of topics.

There are also many forex tools available to traders such as margin calculators, pip calculators, profit calculators, economic trading calendars, trading signals and foreign exchange currency converters.

Forex widgets can help to enhance your trading experience. Some of the more popular widgets include Live rates feed, Live Commodities Quotes, Live Indices Quotes, and market update widgets.

MT4 & MT5 Webtrader Platforms

A forex trading platform is an online software which enables investors to access the foreign exchange market. It can be used to open, close and manage trades from the device of their choice and contains a variety of tools, indicators and timeframes designed to allow you to monitor and analyse the markets in real-time.

As a leading global broker, FXTM are committed to providing services tailored to the needs of our clients. As such, we’re s proud to offer our traders the choice of two of the industry’s leading forex trading platforms; MetaTrader 4 (MT4) and MetaTrader 5 (MT5). They are both available on a PC, Mac, mobile (iOS and Android) or tablet.

MetaTrader 4

MetaTrader 4, also known as MT4, provides access to a range of markets and hundreds of different financial instruments, including foreign exchange, commodities, CFDs and indices.

It provides you with all the tools you need to both manage your trades and analyse the markets, whilst also being completely free to download.

With the MetaTrader 4 platform, you’ll enjoy easy-to-read, interactive charts that allow you to monitor and analyse the markets in real-time. You’ll also have access to more than 30 technical indicators which can help you to identify market trends and signals for entry and exit points.

MetaTrader 5

MetaTrader 5, or MT5, is the newest and most advanced online and free trading platform. Trading on MT5 via FXTM gives you even greater access to financial markets including foreign exchange, commodities, CFDs, stocks, futures and indices.

Its diverse functionality, fundamental and technical analysis tools, copy trading and automated trading equip you with the best tools and instruments available.

Other great benefits of MT5 include a multi-threaded strategy tester, fund transfer between accounts and a system of alerts to keep up to date with all the latest market events. Traders can also communicate through the embedded MQL5 community chat to network with other traders and share tips and strategies.

These platforms, combined with innovative services such as FXTM’s Pivot Point tool and FXTM Invest, as well an award-winning Customer Support team, ensures FXTM traders have all the resources they need to trade with confidence.

You can find out more about our trading platforms, or download MT4 and MT5 from our trading platforms page.

Still not trading with a world-leading broker? Sign up today.

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ForexTime Limited (www.forextime.com/eu) is regulated by the Cyprus Securities and Exchange Commission with CIF license number 185/12, licensed by the Financial Sector Conduct Authority (FSCA) of South Africa, with FSP No. 46614. The company is also registered with the Financial Conduct Authority of the UK with number 600475.

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Risk Warning: Trading Forex and Leveraged Financial Instruments involves significant risk and can result in the loss of your invested capital. You should not invest more than you can afford to lose and should ensure that you fully understand the risks involved. Trading leveraged products may not be suitable for all investors. Before trading, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. It is the responsibility of the Client to ascertain whether he/she is permitted to use the services of the FXTM brand based on the legal requirements in his/her country of residence. Please read FXTM’s full Risk Disclosure.

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Forex Trading 2020 Guide

Foreign exchange trading begins with selecting a forex broker which for Australian forex traders needs to be ASIC regulated or for FCA in the UK with the trading account determining the forex trading platform used such as MT4, risk management tools, financial services offered and currency trading education.

By Justin Grossbard / Updated: Monday, April 06th, 2020

How To Trade Forex Effectively

While most individuals understand that forex trading strategies are critical when navigating markets they often overlook the importance of a forex trading platform. These fx platforms have different functionality, latency and charting that are critical to trading on margin. The forex broker selected will set the trading platform options available, financial market and features.

Before trading there are three critical elements to consider:

1) Selecting A Forex Broker

When choosing a forex broker the first step is to ensure they are regulated with:

  • Forex trading in Australia regulated by the Australian Securities And Investment Commissions (ASIC).
    • View our forex broker in Australia page.
  • Forex trading in the UK regulated by the Financial Conduct Authority (FCA)
  • Forex trading in South Africa is regulated by the FSCA.
    • View our forex brokers regulated by the FSB (FSCA) section.
  • Forex trading in Indonesia regulated by the Bank of Indonesia.
  • Forex trading in South Korea by the Financial Exchange Commission.
  • Forex trading in some European countries by the Cyprus Securities and Exchange Commission (CYSEC).

Most forex brokers offer a demo account that can be upgraded to a live account and may require more detailed personal information and funding that exceeds the minimum balance requirement of the Fx broker.

i) Pepperstone – 10/10

Pepperstone is a Melbourne based ECN forex broker allowing trading directly with liquidity pools.

Their main features include:

  • The use of either the MetaTrader 4 (MT4) or cTrader forex platform
  • Industry-leading leverage of 500:1
  • Fast execution speed with the use of Equinix servers in New York and London.
  • Award-winning (Investment Trends) customer service
  • Buy and sell cryptocurrencies, Index CFDs, futures and commodities

Pepperstone’s offering of the most popular forex trading platforms, low spreads and commissions, high leverage and execution speeds are why they are recommended for intermediate to expert forex traders .

ii) Easy Markets – 9/10

Easy Markets are a Cyrus based forex broker with a Sydney offer and locally regulated for Australian forex trading.

Their main strengths are:

  • Deal Cancellation allowing forex trades to be cancelled within 60 minutes
  • Risk management safeguards including guaranteed stops and negative balance protection as standard
  • Fixed spreads and no commissions providing transparent trading costs
  • 300+ markets including the option to buy and sell cryptocurrencies
  • 400:1 leverage when trading foreign exchange

Easy Markets offering of transparent trading fees combined with unique risk management tools makes them the ideal forex broker to beginner forex traders of those with a low-risk profile .

iii) AxiTrader – 8.5/10

AxiTrader Pty Ltd is similar to Pepperstone offering ECN forex trading in a fast foreign exchange environment.

Their key strengths are:

  • The offering of the most popular forex trading platform – NextGen
  • Added NexGen platform features including autochartist
  • Fast execution speeds thanks to Equinix data centres
  • Automation trading using Expert Advisors (EAs) and DupliTrade
  • Leverage of 400:1 on currency pairs

AxiTrader only offers MetaTrader 4 which can be limiting for some traders but if this is your preferred forex trading platform this may be the right forex broker for you. Their enhanced trading features including EAs are ideal for traders looking for tools to assist their trading.

iv) GO Markets – 7.5/10

GO Markets is a Sydney based forex broker with a tiered service approaching.

The brokers’ core features are:

  • The offering of MetaTrader 4 Genesis with enhanced features and charting
  • Low spreads and fees depend on the deposit made within the account
  • Extra financial services including buy and selling of binary options
  • 300:1 leverage available
  • VPS option to speed up the forex trading environment

GO Markets is an excellent option but only for those that opt for their new GO Markets PLUS account. This account has the lowest fees with raw spreads and Australia Dollar $3.00 per side commission. The issue though is that regularly the minimum deposit is $10,000 making this broker only suitable for high volume currency traders. If you’re a high-frequency trader, then you should consider this forex broker.

v) Plus500 – 4.5/10

Plus500 is a public listed company that has an office in Sydney.

The forex broker offers to trade with:

  • 300:1 leverage
  • Their own forex trading platform
  • CFD Trading Platform
  • No commission trading with variable spreads
  • Share trading of the ASX 200 and other financial services
  • Risk Management tools including guaranteed stops

Plus500’s key strength is their offering of financial products outside of CFD trading such as shares. Their CFD trading platform is very unique to the other Australian Forex brokers which are both their strength and weakness if you want to change brokers at a later stage. They are work considering if you are looking for something unique from your forex brokers.

Warning: Your capital is at risk

Overall, if you can’t decide which forex broker based on the information above, then view the best forex broker comparison table.

2) Selecting A Forex Trading Platform

When currency trading there are three trading platforms options to view charts, news and make trades. These are the:

  1. MetaTrader Trading Platforms
  2. cTrader Trading Platforms
  3. Propriety Trading Platform

MetaTrader Fx Trading Platform

MetaTrader by MetaQuotes is the most popular currency trading platform worldwide offering:

  • MetaTrader 4 – The most used trading platform known as MT4 released in 2005
  • MetaTrader 5 – An improved version of MT4 from an automation perspective released in 2020

Below compares MT4 to MT5 to help decide which trading platform is ideal for your trading need.

MetaTrader 4 MetaTrader 5
Function Easy Installation
Supports continuous zooming
Multiple time frames to analyse quotes
Four zoom modes
Flexibility With MAM, MT4 can manage multiple accounts MT5 can manage multiple account
Graphic Easy to follow currency indicators Large icons with improved speed
Speed Slower Faster
Timeframes 9 with limited charting capabilities 21 and unlimited charting
Tick Charts Not available Available with one-click trading
Trading Indicators 30 38
Analytics 33 68
Hedging Yes No

cTrader Trading Forex Platform

cTrader by Spotware is the second most popular forex platform worldwide and is tailored towards intermediate to expert traders with features including:

  • Professional analysis and charting
  • Depth of market functionality
  • Extensive historical data access
  • Cloud-hosted solutions

Propriety Online Trading Platforms

A large number of forex brokers offer their own online trading platform including:

These platforms often have unique features such as DealCancellation for EasyMarkets which is not available with MT4. It’s hard to generalise about these currency trading platforms as they vary but they do make it hard to switch forex brokers long-term. Once a forex trader gets used to a platform, it can be difficult to move to another one. This is why MT4 remains the most popular platform despite it been created over a decade ago.

3) Selecting A Trading Strategy For Currency Markets

There are two common types of trading strategies:

  1. Fundamental Analysis
  2. Technical Analysis

Although investors of different types will evaluate and analyse both of these systems, the truth of the matter is that they are very different and not suitable for all investors. A full range of courses and ebooks to can be found at the website Trading Strategy Guides.

Here is further analysis and breakdown of both fundamental and technical analysis fx trading strategies.

What is Fundamental analysis?

The first thing to look at with trading currency strategies is what is most commonly referred to as fundamental analysis. With fundamental analysis, traders analyse the market and measure currencies based on a variety of different fundamental factors. These factors are often much more calculated, while, as you’ll read later, technical analysis looks more at patterns and price movements.
When an investor uses fundamental analysis, they look to the intrinsic value of a currency. They can do this by looking at industry conditions and the economy, as well as management and condition of particular companies in an economy. Those interested in fundamental analysis also look at earnings, assets, liabilities, and expenses of an economy, in order to help them get a better idea of what could happen in the near future.

What are the advantages of fundamental analysis?
One of the first advantages of a fundamental analyst is that investors immediately have all of the information that they know right on the table. They can look at economic indicators and expectations and then make moves based on what they think will happen to the values of the currency. In addition, fundamental analysis puts a strong emphasis on patterns based on the calendar. For example, many economies have shown common patterns from year to year, which can be used as a helpful way to determine whether or not it should be invested in.

Many will argue that the fundamental analysis of currency trading is much more likely to pay off in time. However, that’s not to say that it doesn’t come with its downsides.

What are the disadvantages of fundamental analysis?

As mentioned above, fundamental analysis of FX trading is likely to pay off in time, but not necessarily anytime soon. Many experts say that fundamental analysis of foreign exchange takes too long to evaluate. In some cases, a person may make the evaluation and it could take quite some time before the expectations occur. This means that they’ll have to hold out for a much longer time than with other methods.

In addition, the process of fundamental analysis is said to take too long and can be time-consuming and tedious. Most investors want to turn around their results as quickly as possible. Therefore, they don’t want to waste the time that is often required in order to consider the economic indicators that come with this process. If expectations are not met, some investors may also leave early, which can harm the overall process of the investment to begin with.

What is technical analysis?

On the opposite end of the spectrum of fundamental analysis, technical analysis looks at possible price movements in the future as a way to predict patterns that couple result in financial gains. Those that rely on this type of investment have a variety of different types of graphs, and they are able to use this evidence that they have in order to make market predictions. While technical analysis typically looks at the current intrinsic values, technical analysis look at Bollinger bands to see how quickly a prove moves and what happens when it breaks out of an expected guideline. It also helps to determine how long it’ll take before the band comes back to its original status. Many technical analyses assume that the tighter a band is, the more likely it is that a big move is coming in the future.

What are the advantages of technical analysis?

The advantage of technical analysis is that it’s truly one of the most revealing ways to evaluate foreign exchange. After all, the price never lies and you have exactly what you need in front of you. In addition, the greatest advantage may be the fact that it can be done incredibly quickly, in comparison to the fundamental analysis method. By looking at trend analysis and moving averages, technical analysis is often thought to be done very quickly and therefore it is considered to be an advantage by those that want quicker returns.
Furthermore, it’s important to keep in mind that technical analysis is well established. Many people have used technical indicators, such as the RSI, for quite some time and been pleased with the results that they get in return. Another benefit is the fact that there is no slow stochastic guesswork necessary. In all, many people believe that technical analysis has fewer downsides and is suitable for all investors unlike fundamental analysis.

What are the disadvantages of technical analysis?

A disadvantage of technical analysis is that it can be very hard to understand and master. For example, understanding Fibonacci numbers can be very difficult to comprehend for those who have never been educated with it before. It requires for your predictions to be reliable and accurate, or else they could be completely off altogether. In some cases, technical analysis is also thought to be subjective. With this mindset in place during the analysis of the foreign currency, the numbers may not be as truthful as they are assumed.

Which strategy is right for you?

The truth of the matter is that each person is going to have their own ideas for what is best for foreign exchange investing and when it comes to trading/investing there is no real right or wrong answer. It’s just a matter of what each person thinks they might have more success using or have had success with in the past.

For some, the ideas and concepts that come with fundamental analysis may be easier to grasp. On the other hand, technical analysis may be more interesting for those that are eager to get involved as fast as possible and is the one that is often easier to grasp because it doesn’t involve extensive research. It’s basically just reading charts and graphs etc while fundamental analysis can often involve lots and lots of research into financial data, economic data, interest rate data etc.
Whatever the case may be, it’s important that investors find forex strategies that are best for them and then develop a process that helps them with the best Forex investing possible.

What Is Trading On Margin And Do I Need It?

Trading on margin when fx trading is the act of borrowing money from a forex broker to trade on currency markets. The amount borrowed will be a multiple of the deposit and will need to meet the initial margin requirements. Leverage amplifies the modest movements of forex markets to make sizeable profiles or losses.

Example Trading On Margin Scenario 1

The first scenario is a trader who trades with a 100:1 leverage level. The deposit is $100 which effectively allows $10,000 to be traded on currency pairs. In this scenario, the currency movement was 0.5%. Such as movement would lead to a profit of $50 or a loss of $50 (which effectively is 50% of the deposit).

Example Trading On Margin Scenario 2

The second scenario is a trader who trades with a 500:1 leverage level. The deposit is $100 which effectively allows $50,000 to be traded on a currency pair. In this scenario, the currency movement was 0.1%. Such a move would lead to a profit of $50 or a loss of $50 (which effectively is 50% of the deposit).

What Leverage Is Offered By Forex Brokers?

Trading on margin is determined by the forex broker and can vary by the account chosen of the brokers’ discretion. While leverage is suitable for all investors the level chosen should reflect the risk appetite and experience of the fx trader.

The maximum leverage of the ‘top 10’ Australia forex brokers for FX trades are:

Trading on margin can vary by currency pairs. Exotic currency pairs often have lower leverage as they are more volatile than highly traded currency pairings such as EUR/USD. Consider your financial situation when choosing the currency pairs your trading.

Remember, these are the maximum trading on margin available with these forex brokers and not all traders will have access to these levels. It’s important that before you request for high leverage that you fully understand the risks of CFDs trading. It’s also worth considering risk management tools such as guaranteed stops, DealCancellation and negative balance protection.

Consider A Demo Account

It’s recommended to start trading in a simulated environment using a free demo account most fx brokers offer. This will help simulate trading on the foreign exchange market and get the trading experience needed prior to using real money. A demo account can be followed by a small initial investment with a foreign exchange broker that offers a low minimum deposit. It’s important to read the
product disclosure statement to understand the limitations of a demo account and funding requirements.

Benefits Of Foreign Exchange Trading

24-hour forex market – Whether you want this to be your full-time or a part-time job, currency trading Australia brokers operate from 5 p.m. ET Sunday to 5 p.m. ET on Friday giving you the opportunity to buy and sell whenever your schedule permits.

Liquidity – Unlike many other markets, the forex Australian trading market is the most liquid of the financial markets and offer the ability to trade big amounts of volume in and out of the trading markets with minimum impact.

Leverage – leverage amounts are changeable or may not be available all the times. For example, with 500:1 leverage, if you invest only $100 you’ll control $50,000 units. But keep in mind that, although leverage helps to build profits in no time, it can also cause catastrophic losses in a short period of time.

Opportunities in trading – Besides technical trading, most currency trading Australia markets offer other opportunities to trade primary changes in the economy all around the world. All changes and developments are tracked through monthly events and calendars. View our 2020 forex statistics to learn more.

Low cost in currency trading – With most currency trading Australia brokers spread is the cost to trade. They tend to be much tighter than stocks.

Margin-based trading – These accounts differ from the regular credit card accounts where you have to open an account with a broker first and then deposit money into the account (fund the account)

Understand The Risks Involved When Foreign Exchange Trading

Before trading its important to understand the risks involved when trading currency markets.

Leverage Risks – As we mentioned above, leverage amounts are changeable and as it can help you gain profit in the same way it can cause you large losses quickly.

Price risks – As in any trading market, forex prices are determined by long-term and short-term demand and supply. This can make prices move fast and often unpredictably. Traders need to apply some risk-management techniques for every trade they make. Using stop-loss orders can help determine the maximum exposure users will have in given positions.

Rate risks – in cases when the interest rate of different currencies comparing to others decreases or increases dramatically, the exchange rate and trading prices can also dramatically change.

Dealing with unregulated forex brokers overseas is the final risk warning which is why comparing the fx brokers shown on this site is recommended. This may be the highest risk warning of the above factors so it’s strongly recommended to check regulation prior to signing up and trading underlying assets. You should also read their financial services guide.

Currency Trading FAQs

Australian’s can legally trade forex through an ASIC regulated forex broker with the Australian regulator which have their own legal restrictions. ASIC has limitations on initial credit card deposits to a maximum of $1,000 when opening an FX account.

Is Currency Trading Taxable In Australia?

The Australian Tax Office focuses on any traders profits and/or losses after expenses on currency trading, shares or even cryptocurrencies. Trading in Australia receives no tax exemptions and should be self-accessed.

How Many Forex Trades Are Made Each Day?

There are no limits on the number of forex trades that can be done hourly or daily. The only limit to trading is the total size of the trades at any one time which must meet the margin call amount set by the forex broker.

IC Markets as an example forex broker has a margin call amount of 0.2%. An example of trade that is denominated in USD purchases a standard AUD/USD lot at an exchange rate of 0.7999. Using the calculation (100,000/500 * 0.7999) there is a margin requirement of $159.98 for the trade.

Once a broker reaches the margin requirement they will be exited from their positions (normally automatically) to avoid a negative balance. In extreme turbulence, slippage can occur leading to losses exceeding the deposit which should be understood by traders.

How to calculate profit when trading?

Leverage allows online trading at a multiple of their deposit (up to 500:1 with some forex brokers). Each pip of movement for the EUR/USD will result in a profit/loss of $10 for a standard lot. A mini lot, on the other hand, will result in a pip movement of $1 profit/loss. When trading other currencies the “pip value” can be lower or higher. For example, the AUD/USD on the 02/01/2020 is 1.43 Australian dollars.

A scenario a strategy allows a loss of up to 5 pips with an attempted profit of 10 points for a $10,000 account.
With the risk of 5 pips a trade size of 6.9 mini lots. This is $34.50 of risk for each individual trade.

A successful exchange rate trading strategy will see a broker winning at least half the time. Making 10 trades daily over the month (20 days) would result in 200 trades.

If 50% were successful = 100 * $10 * 6.9 mini lots = $6,900
If 50% were unsuccessful = 100 * 5 * 6.9 mini lots = ($4,980)

The total net profit in this example would be over a month $1,920.

What hasn’t been factored in above are online trading costs through the forex broker which vary by account. Keeping these costs down can there be critical to a traders bottom-line.

How to make a fx trading robot

An fx trading robot is most commonly created as part of the expert advisors package of the MetaTrader 4 trading platform. It adopts a forex strategy into automated trades at rapid speeds.

To create a trading robot you need to:

  • Create or adopt a trading strategy
  • Integrate trading signals to the strategy
  • Ensure the forex robot executes the trades
  • Adopt trading features such as trailing stops and time-based conditions

How safe is trading forex?

Leverage is the variable that increases risk when fx trading. Trading with the maximum leverage available 500:1 means that a movement of just 0.2% will lead to a total loss of a trade or the amount doubling. Choosing the right leverage profile should match the traders experience level and risk appetite.

Another risk for fx trading is sudden movements in forex markets (exchange rate) from market evens such as rate decisions. Sudden movements may lead to stop-loss orders been exceeded (called slippage) leading to losses exceeding safeguards. To help manage this risk some forex brokers offer:

  • DealCancellation (only EasyMarkets offers this)
  • Guaranteed Stops
  • Minimum Balance Protection

What is a base currency?

Foreign exchange brokers offer different base currencies when trading currency. The most popular base currency for Australian forex traders are:

  • Australian Dollar
  • British Pound
  • Euro
  • US Dollar

Once a base currency is selected it can’t be changed for most fx brokers so it’s an important choice to make. Normally the base currency is the local currency of a forex trader. So Australian currency traders for example, will normally select the Aussie dollar as their base currency.

In Summary

Before you open an account and commence CFD trading, choosing the right currency broker is the foundation when trading Australian securities including currency.

Beginner forex traders should be looking for modest leverage, risk management features and strong customer support. EasyMarkets meets these criteria and also offers fixed spreads making trading fees transparent.

Intermediate forex traders should be looking for higher leverage, a solid trading platform and low spreads and commissions. AxiTrader is such a forex broker offering the most popular MetaTrader 4 platform plus added charting and trading features, low ECN spreads and leverage of 400:1

Expert forex traders should focus on the execution speed of the broker, platform and spreads. Pepperstone Pty Ltd is such as forex broker offering 500:1 leverage, ECN trading including low spreads and fees and ‘Edge Technology’ offering up to 12x improvement in execution speed and 10x latency reduction.

All traders should review the risk warning related to trading with leverage and understand the risks.

What Is Forex Trading?

Foreign exchange trading (termed forex trading) allows a currency to be bought and sold through Australian forex brokers. The five main components to consider when currency trading are:

  • The forex broker to trade through impacting spreads
  • The forex trading platform used (such as MT4)
  • The leverage levels which impact risk
  • The use of risk management tools like guaranteed stop loss
  • Currency trading such as fundamental vs technical analysis

Forex trading platforms such as MetaTrader 4 allow foreign currencies including the USD to traded by Australian traders. FX trading requires leverage due to the small movements in exchange rates with spreads and commissions the fees charged by brokers.

FAQ’s About Currency Trading

1) What is currency trading?

Currency trading in Australia is speculating on the value of a currency pairings such as the Australian dollar (AUD) compared to the US Dollar (USD). Currencies fluctuate 24 hours a day during weekdays (not the weekend) providing a wide range of hours to make trades.

As the percentage change of any currency-pairing is often very small, leverage (also known as margin trading) means currency trading brokers will lend traders a multiple of their deposit to amplify the profit or losses from relatively small currency fluctuations. View our what is guide.

2) Can you manage risk when trading currency?

Choosing the right Australian forex broker is critical when it comes to risk management. There are tools only some brokers offer through their platform software such as ‘guaranteed stops’ which allows you to determine the most your willing to lose on any trade. There are also brokers like Pepperstone that guarantee no negative deposit which means once your deposit is exhausted your positions are closed automatically. Without these features, currency trading can expose traders to high-risk levels and you can lose more than your deposit so pick the broker and strategies to suit you. Also, look into completing a Australia Forex trading course to enhance your skills and ability to trade in any environment understanding the key signals in the market.

One critical way to reduce your risk and avoid frauds is to ensure the provider has an Australian Financial Services Licence (AFSL). All Brokers on this site have an AFSL regulated which means that funds are segregated in a bank account to protect traders.

3) What skills do you need for currency trading?

Generally, good currency traders will understand forex, market conditions of individual countries and factors that will impact value such as rate announcements. Like any skill, doing your research and learning from past trades are some critical tips. Finally, the ability to learn trading forex in Australia and understand the forex platform you use include making fast trades and understanding charting can also provide you with an edge over other traders.

Overall, having time, skills and the ability to accept risk are critical components for any currency or even stock trader. Select a provider that fits your trading style such as those found in the table above. It is also recommended to commence with some free forex trading in the form of a demo account to test your strategies and confidence. Some other reputable brokers that just missed out on being featured above due to slightly inferior features include IC Markets, City Index, Oanda, Forex Capital Trading (ForexCT), FxPro and IG Markets. Some of these brokers also offer commodities trading and tools and features such as online trading courses.

4) How to Trade Forex

Trading foreign exchange markets requires a forex trading platform offered through retail forex brokers. These forex brokers differ by the platform, fees and features they offer as identified in the table at the top of the page. Once a forex broker is selected, the platform they offer usually included a trade forex demo account. This simulates the market and while not all features are present, it gives forex traders an understanding of:

  • How leverage increases exposure to the market
  • How to utilise features such a stop-loss orders
  • Forex strategies effectiveness in a simulated environment
  • The platforms suitability for your trading style

Most demo accounts don’t have fees associated with them, so it’s an ideal risk-free way to ‘try before you buy’.

5) How Much Can I Make Trading Forex?

Currency pairings have very small movements most days compared to other financial products such as shares. The big difference is leverage (which can be up to 500:1). This amplifies these movements. For example, a currency movement of just 0.1% when trading at 500:1 will lead to a profit or loss of 50% the amount traded. Obviously, with high leverage, a trader can make a multiple of their initial deposit or lose it within a short period. Again, it’s critical to understand the risks prior to trading forex in Australia.

6) Is Forex Trading Safe?

With all investment and trades, there are no guarantees of profits and risks exist. Key risks when trading forex including:

  • Forex brokers scams
  • Excessive slippage
  • Losses multiplied by the leverage

To control these risk it’s advisable to find a forex broker that suits your trading requirements. Firstly, make sure the forex broker is Australian regulated with a strong track record. Secondly, make sure the leverage offers (or accepted) matches your risk appetite. For new traders, the higher levels of 400:1 or above are not recommended. Finally, look for the tools that can manage your risks such as guaranteed stop-loss orders and minimum balance protection. EasyMarkets provides these features which is why it’s recommended to new forex traders that have a lower risk appetite.

What Is The Difference Between Forex And CFDs

CFD trading comprises of contracts across a wide range of markets from commodities, indices to energy, unlike forex which is solely currency trading. Trading CFDs allows varying incremental contract values across a variety of currency types, unlike forex which is set at currency pairing. This means having a base currency to another currency is set forex lot sizes.

Another variance is that forex is often driven by macro events including politics, employment changes and world events. CFD trading is more micro factors such as a business sector trend or the supply and demand of a commodity.

Published by Justin Grossbard

Monday, April 06th, 2020

Admiral Markets Group consists of the following firms:

Admiral Markets Cyprus Ltd

Admiral Markets Pty Ltd

Admiral Markets UK Ltd

Reading time: 53 minutes

Forex trading for beginners can be especially tough. This is mostly due to unrealistic expectations that are common among newcomers. What you need to know is that currency trading is by no means a get-rich-quick scheme. On this page, you will receive an introduction to the Forex market, how it works, and key terminology, along with the benefits of trading different currencies.

We will cover how you can start trading (including choosing the best broker and trading software), the fundamentals of risk management, the different ways you can analyse the Forex market, and an overview of the most popular trading strategies. By the end of this guide, you will have the knowledge you need to start testing your trading skills with a free Demo account, before you move onto a live account.

What is Forex?

Forex, or the foreign exchange market (also called FX for short) is the marketplace where currencies are traded. At its simplest, a foreign exchange transaction might be, for example, when you transfer your local currency to a new one for an upcoming holiday. Across the market as a whole, an estimated 5.3 billion USD is traded every day between governments, banks, corporations, and speculators.

Knowing how the industry is mapped out is important, because the collective combination of all participants creates the market you trade in. The relative weight of the trading party to the market is measured by how much money that party manages – from billion dollar hedge funds and investment banks, to private traders with a few thousand dollars in action.

Currencies are traded as pairs, and the movement of currency pairs measure the value of one currency against another. For instance, the EURUSD currency pair measures the value of the Euro against the US dollar. When the value of the pair increases, this means the value of the Euro has increased against the value of the US dollar. When the value of the pair decreases, this means the value of the US dollar has increased (or the value of the Euro has fallen).

By trading Forex and CFDs, traders can make a profit off of these currency movements.

Which Forex Pairs Can You Trade?

Forex currency pairs are known as majors, minors, and exotics.

Major currency pairs are made up of the most frequently traded currencies, which are:

  • USD – The US Dollar
  • EUR – The Euro
  • JPY – The Japanese Yen
  • GBP – The British Pound
  • CHF – The Swiss Franc
  • CAD – The Canadian Dollar
  • AUD – The Australian Dollar
  • NZD – The New Zealand Dollar

A major currency pair is one that contains any one of these currencies paired against the US dollar, such as the EUR/USD, USDJPY or the GBPUSD. Forex minors pairs made up of these major currencies that don’t include the US dollar. These pairs include EURGBP, EURCHF, AUDNZD and so on.

Finally, exotic currencies are any currencies that we haven’t already mentioned, such as the Hong Kong Dollar (HKD), the Norwegian Krone (NOK), the South African Rand (ZAR) and the Thai Baht (THB). Exotic pairs include one exotic currency and one major currency.

When learning about Forex trading, many beginners tend to focus on major currency pairs because of their daily volatility and tight spreads. But there are numerous other opportunities – from exotic FX pairs, to CFD trading opportunities on stocks, commodities, energy futures, to indices. There are even indices that track groups of indices, and you can trade them as well.

How many markets you scan for opportunities is up to you, but do not limit yourself to just one instrument or one market. Market limitation can lead to overtrading, so make sure to diversify your investment.

How Do Forex Quotes Work?

When trading Forex, you’ll see that both ‘Bid’ and ‘Ask’ prices are quoted. The bid price is the price at which you can buy the currency, while the ask price is the price at which you can sell it. If you are purchasing a currency in a trade, this is known as a long trade, and the hope is that the currency pair will increase in value, so that you can sell it at a higher price and make a profit on the difference.

If you are selling a currency in a trade, the opposite is true – the hope is that the currency pair will fall in value, so that you can buy it back at a lower price, which means you will profit on the difference.

The number quoted for these prices is based on the current exchange rate of the currencies in the pair, or how much of the second currency you would get in exchange for one unit of the first currency (for instance, if 1 EUR could be exchanged for 1.68 USD, the bid and ask price would be on either side of this number). Learn more about Forex quotes in this article: Understanding and Reading Forex Quotes.

Forex 101 – Free Online Trading Course

If you’re a rookie trader looking for a place to learn the ins and outs of Forex trading, our Forex 101 Online Trading Course is the perfect place for you! Learn how to trade in just 9 lessons, guided by a professional trading expert. Click the banner below to register for FREE!

How Much Do Currency Values Change (Or, How Liquid Are Different Forex Pairs)?

If the way traders make a profit is by cashing in on the difference between the bid and ask prices of currency pairs, the next logical question is, how much can you expect any given currency to move?

This depends on how liquid the currency is, or how much of it is being bought and sold at any one time. The most liquid currency pairs are the ones with the most supply and demand in the Forex market, and this supply and demand is generated by banks, businesses, importers and exporters, and traders. Major currency pairs tend to be the most liquid, with the EUR/USD currency pair moving by 90-120 pips on an average day.

By contrast, the AUD/NZD moves by 50-60 pips a day, and the USDHKD currency pair only moves by an average of 32 pips a day (when looking at the value of currency pairs, most will be listed with five decimal points. A ‘Pip’ is 0.0001. So, if the EUR/USD moved from 1.16667 to 1.16677, that would represent a 1 pip change). The major Forex pairs tend to be the most liquid, and therefore provide the most opportunities for short-term trading.

However, there are many opportunities among minor and exotic currencies as well, particularly if you have some specialised knowledge about a certain currency.

What is the Forex Spread?

The spread, in Forex, is the difference between the bid and ask price of a currency pair. For example, if the Bid price of the EUR/USD is 1.16668, and the sell price is 1.16669, the spread will be 0.0001, or 1 pip. In any Forex trade, the value of a currency pair will need to cross the spread before it becomes profitable. To continue with the previous example, if a trader entered a long EUR/USD trade at 1.16668, the trade wouldn’t become profitable until the value of the pair was higher than 1.16669.

In a currency pair with a wider spread, such as the EURCZK, the currency will need to make a larger movement in order for the trade to become profitable. At the time of writing, the bid price for this pair is 25.4373, while the ask price is 25.4124, so the spread is 0.0200, or 20 pips. It’s also not uncommon for this currency pair to have movements of less than 20 pips a day, meaning traders will likely need to perform a multi-day trade to make a profit.

This means that low-spread trading is often a priority for Forex traders, as their trades can become profitable quicker, meaning that they can make a high volume of smaller trades, rather than relying on larger trades to make money.

What are Forex CFDs?

If you’ve been researching Forex trading, you might have seen the term ‘Forex CFDs’ at some point. There are two ways to trade Forex: using CFDs or spot Forex (also known as margin). Spot Forex involves buying and selling the actual currency. For example, you might purchase a certain amount of Pound Sterling for Euros, and then, once the value of the Pound increases, you may then exchange your Euros for Pounds again, receiving more money back compared with what you originally spent on the purchase.

The term CFD stands for ‘Contract For Difference’, and it is a contract used to represent the movement in the prices of financial instruments. In terms of Forex, this means that rather than purchasing and selling large amounts of currency, you can profit on price movements without owning the asset itself. Along with Forex, CFDs are also available on shares, indices, bonds, commodities and cryptocurrencies. In every case, they allow you to trade on the price movements of these instruments without having to purchase them.

Trade With Admiral Markets

If you’re feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that Admiral Markets provides the ability to trade with Forex and CFDs on up to 80+ currencies, with the latest market updates and technical analysis provided for FREE! Click the banner below to open your live account today!

How Does Leverage Work in Forex Trading?

Along with being able to access a wide range of financial markets, another benefit of trading CFDs is that a trader can access a much larger portion of those markets, and increase their potential profits as a result. CFD contracts provide leveraged access to the market, meaning a trader can access a much larger portion of the market than what they would be able to purchase outright.

To use Gold CFD as an example, at the time of writing, to purchase an ounce of Gold you would need to spend 1,200 USD. However, with a leverage rate of up to 1:20 (which means a trader could trade up to 20 times the value of what they deposit), a trader could trade on the full value of an ounce of gold (equivalent to 1,200 USD), for a deposit of just 60 USD.

Similarly, if you wanted to purchase 3,000 USD with Euros, that would cost 2,570 EUR. With a leverage rate of 1:30, however, you could access 3,000 USD worth of the EUR/USD currency pair as a CFD with just 100 USD. The best part, however, is that the size of the potential profit a trader could make is the same as if they had invested in the asset outright. The risk here is that potential losses are magnified to the same extent as potential profits.

Forex CFD trade (1:20 leverage)

Traditional trade

US $500

EUR/USD trade opens at 1.16766, closes at 1.16926, a difference of 0.00200

You make US $200, or 40%

You make US $200, or 2%

EUR/USD trade opens at 1.16766, closes at 1.16532, a difference of 0.00234

You lose US $234, or 46.8%

You lose US $234, or 2.34%

To see how different levels of leverage can affect your trading, take a look at our Forex leverage infographic below:

(The leverage shown in Trades 2 and 3 is available for Professional clients only. A Professional client is a client who possesses the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that these incur. In order to be considered to be Professional client, the client must comply with MiFID ll 2020/65/EU Annex ll requirements.)

Calculate Your Potential Profits with our Free Forex Calculator

Now that you know the basics of how Forex trading works, including currency pairs, CFDs and leverage, why not see how a trade might look in action? Admiral Markets has a free Forex calculator for traders, so you can calculate your potential earnings online, for free. Calculate your potential Forex earnings now.

A Summary of Essential Forex Terms

Before we move on, let’s recap some of the key concepts covered so far with this list of key Forex terms:

  • Pip: A pip is the base unit in the price of currency pairs, or 0.0001 of the quoted price. So when the bid price for the EUR/USD pair goes from 1.16667 to 1.16677, that represents a pip change of one.
  • Spread: The spread is the difference between a currency pair’s bid and ask price. For the most popular currency pairs, the spread is often low – sometimes even less than a pip! For pairs that aren’t traded as frequently, the spread tends to be much higher. Before a Forex trade becomes profitable, the value of the currency pair must cross the spread.
  • Margin: Margin is the money in a trader’s account. However, because the average ‘Retail Forex trader’ lacks the margin required to trade a high enough volume to make a good profit, many Forex and CFD brokers offer their clients access to leverage.
  • Leverage: Leverage is capital provided by a Forex broker to bolster their client’s trading volume. For example, if you use a 1:10 rate of leverage and have $1,000 in your trading account, you can trade $10,000 worth of a currency pair. If the trade is successful, leverage will maximise your profits by a factor of 10. However, please note that leverage also multiplies your losses to the same degree, so it should be used with caution. If your account balance falls below $0, you may trigger a broker’s negative balance protection settings (if trading with an ESMA regulated broker), which will result in the trade being closed. Fortunately, this means that your balance cannot move below $0, so you will not be in debt to the broker.

What Are the Benefits of Forex Trading?

Now that we’ve shared an overview of the Forex market, why might you want to trade Forex?

There are a number of reasons why people choose to start day trading. Some of these reasons might include the potential to earn extra money on the side from the comfort of their own home, the opportunity to learn a new skill in their own time, or even the dream of achieving financial freedom, and having more control over their financial future. When it comes to Forex specifically though, there are a number of benefits that make this financial instrument a very enticing one to trade.

If you would like to learn more about the differences between the Forex market and the Stocks market, why not check out our comparison article on the topic? And find out which market is right for you! Forex Vs. Stocks: Should You Trade Forex or Stocks?

Forex: The World’s Largest Financial Market

Forex is the world’s largest financial market, with over 5.09 trillion USD traded every single day (April 2020). To put it in other words, in a single day, more money will be traded in the Forex markets than Japan’s entire GDP! (Gross Domestic Product). Of these transactions, 254 billion USD is traded through CFDs and other derivative instruments.

Being the largest, most active financial market on the globe, it is also the world’s most liquid market, meaning it is easy for traders to enter into, as well as exit trades, and for the most liquid pairs, they can do so at a very low cost (even less than a single pip!). This also means that the Forex market is very volatile, creating many opportunities for traders to make a profit on both the positive and negative movements of currency pairs.

Trade Around the Clock

Forex is the one financial market that never sleeps, meaning you can trade at all hours of the day (or night). Unlike the world’s stock exchanges, which are located in physical trading rooms like the New York Stock Exchange or the London Stock Exchange, the Forex market is known as an ‘Over-the-counter market’ (or OTC). This means that the trades take place directly between the parties holding the currencies, rather than being managed via an exchange.

Consequently, the Forex market has never been restricted to the business hours of any one exchange.

However, since the Forex market is a global market, it means there is always a part of the world that is awake and conducting business, and during these hours their currencies tend to experience the most movement. For example, currency pairs involving the US dollar experience the most movement during US business hours (16:00 to 24:00 GMT), while the Euro, Pound, Swiss Franc and other European currencies experience the most movement during European business hours, (8:00 and 16:00 GMT).

By contrast, the Australian Dollar, the New Zealand Dollar and the Japanese Yen tend to be more active between 00:00 and 08:00 GMT. As a trader, this means you can trade whenever it suits you – if you work during the day, there will be currencies available to trade before or after work. If you have children but are at home during the day, you can simply choose a different currency. In the Forex market, you can trade 24 hours a day, 5 days a week.

Speculate on Rising or Falling Prices

One of the most common trading and investment philosophies is to ‘buy low and sell high’ – this is particularly the case with long-term investments, such as investing in stocks or bonds, which rely on the asset increasing in value. In the Forex market, you can also sell high and buy low. This way, you can potentially make profits on both downward and upward trends.

As mentioned earlier, in a long trade (also known as a buy trade), a trader will open a trade at the bid price, and will aim to close the trade at a higher price, making a profit on the difference between the opening and closing value of the currency pair. So if the EUR/USD bid price is 1.16667, and the trade closes at the price of 1.17568, the difference is 0.00901, or 90.1 pips. (When trading a single lot, that would make a 901 USD profit).

Traders can also make short trades (also known as sell trades), where they sell a Forex CFD at the ask price and, once the price drops, buy it at a lower bid price, and profit on the difference. In this case, if the GBP/USD ask price was 1.32265, and the trade closed at the price of 1.31203, the difference would be 0.01062, or 106.2 pips (which would amount to 1,062 USD in profit).

Low Costs of Forex Trading

Due to Forex CFDs being leveraged, traders can access large portions of the currency market at a very low margin – sometimes as low as 1/500th of the size of the market they want to access (based on a leverage rate of 1:500). There are few additional costs as well – most Forex trading accounts have little (or no) commissions, order fees, and account management fees. If there are any trading fees, these are usually a markup the broker has added to the spread.

Ease of Access

One of the greatest advantages of Forex trading is that it is one of the most developed financial markets in terms of technology. While many markets are accessible via old-fashioned trading platforms, there is constant competition in terms of the software available for trading the FX market.

The platforms offered by Admiral Markets include MetaTrader 4 (MT4) and MetaTrader 5 (MT5) and MetaTrader WebTrader. MT4 and MT5 are both available for Windows, Mac, Android and iOS devices (for iPhone and iPad). In addition, Admiral Markets also provides traders with an enhanced version of MetaTrader, known as MetaTrader Supreme Edition. With access to all this software, Forex can be traded from anywhere in the world – and all you need is an internet connection.

Trading With A Demo Account

Trader’s also have the ability to trade risk-free with a demo trading account. This means that traders can avoid putting their capital at risk, and they can choose when they wish to move to the live markets. For instance, Admiral Markets’ demo trading account enables traders to gain access to the latest real-time market data, the ability to trade with virtual currency, and access to the latest trading insights from expert traders.

To open your FREE demo trading account, click the banner below!

How Can You Start Trading Forex?

If you’re still reading, your next question is probably, “How can I become a successful Forex trader?”

This is the main focus of the rest of this article – we’ll outline not only how you can start trading, but also some of the most popular trading strategies for making a profit on the Forex market, which exercise risk management. The first step, of course, is getting set up to trade, which starts with finding the right Forex broker.

7 Questions to Ask to Find the Right Forex Broker

When it comes to choosing a Forex broker, it can often feel like an overwhelming choice, with countless options available. Here are the top criteria you should consider when making your choice:

1. Is the broker regulated?

It might surprise you to learn that the Forex market doesn’t have a central regulator. However, that doesn’t mean you should choose a broker without considering the question of regulation. Instead, we recommend choosing a broker that is regulated by the financial regulator in your area.

This would be the FCA (Financial Conduct Authority) in the UK, CySEC (Cyprus Securities and Exchange Commission) in Cyprus, ASIC (Australian Securities and Investments Commission) in Australia or SEC (Securities and Exchange Commission) in the US. A good broker will usually be proud of their licensing and will use this as a selling point.

The benefit of choosing a regulated broker is that this will ensure that you, as a trader, are protected to the full extent of the law in your country. For instance, in 2020 the European Securities and Markets Authority (ESMA) introduced a range of legislation protecting retail trading clients, which all European Forex brokers must abide by. This legislation includes limits on available leverage, volatility protection, negative balance protection and more.

If you would like to learn more about the ESMA legislation, we have several special webinars on the topic that you can access via the following links:

It’s also important to consider the security of your funds. With this in mind, we recommend choosing a broker that segregates their clients’ funds from their own, which ensures that the broker cannot use your deposits for any of their own financial activities.

It also ensures that your funds will be available for withdrawal upon your request. Finally, check whether the broker offers a financial services compensation scheme. This defines the amounts of funds that will be compensated to you in the extreme case that your broker or its bank is going bankrupt.

2. What is the quality of the broker’s trading service?

The service of the broker you choose, and the platform they offer, is essential in ensuring that you achieve the best trading results. If you were trading on a system that was slow and regularly crashed, for example, you might not be able to enter or exit a trade at the price you want. Instead, it’s important to look for a broker that offers high levels of liquidity, low spreads and the ability to execute orders at the price you want (or as close to this as possible).

Another element of the service provided is the margin requirements and level of leverage available. While there is no need to choose the highest level of available leverage when you start trading Forex, simply knowing that a broker offers the highest level of leverage approved by their regulator means that, as your experience grows, you can start to increase your leverage according to your preferences.

3. What is the cost of trading?

As Forex trading can be an income-generating activity, it’s important to treat your trading as a business activity – one where you consider both how to maximise your income, how to minimise your costs, and how to minimise the risks. With this in mind, make sure to consider the costs of trading with any Forex broker, before you ultimately select one.

Areas to think about include:

  • The size of their spreads: We’ve already discussed how the size of the spread influences your potential trading profits, as any currency pair needs to cross the spread before a trade will become profitable. With this in mind, look for a broker that offers low spreads.
  • Commissions: Ideally you should choose a Forex broker that doesn’t charge commissions, as commissions will cut into your potential profits.
  • The minimum deposit: Many Forex brokers will ask traders to make a minimum deposit when opening a live trading account, so it is best to find one with the lowest amount of requirements. Admiral Markets offers a minimum deposit of €200.

While searching for the cheapest Forex broker, it really comes down to a combination of spreads, execution quality, commission, and the minimum deposit. These should be the last points you consider when opening a long-term trading account. The best Forex broker for beginners depends on elements like the trading system, the quote feed, instrument portfolios, execution models, and the leverage offered.

4. What products and markets do they offer?

When choosing a Forex broker, obviously you will want to make sure they have access to a wide range of currency pairs, including majors, minors and exotics. But what about other financial instruments? If you are considering trading with a Forex and CFD broker, it’s a good idea to look into the other instruments they offer as well.

This will ensure that if you decide to trade stocks, indices, ETFs, commodities, cryptocurrencies and other instruments in the future, you won’t need to find a new broker to do so. Admiral Markets, for example, provides traders with access to over 7,500 financial instruments, allowing you to create a diversified trading and investment strategy from a single platform.

5. Which trading tools do they have available?

The quality of the trading tools a Forex broker offers can make a big difference to your trading experience. In most cases, the available tools will depend on the trading platform (or platforms) being used. For instance, Admiral Markets offers trading through the state of the art MetaTrader 4 & 5 Supreme Edition plugin, which include a range of custom tools and add-ons to improve your trading experience.

6. Does the broker’s offering suit your trading style?

It’s important to consider whether a Forex broker and their trading platform will suit your trading style. For example, you might be interested in following a Forex scalping strategy, which involves making a high volume of small profits on small currency movements. In this case, you would need to ensure that any potential broker has minimum distance between the market price and your stop-loss and take-profit.

Or, if you are new to Forex trading, you might not be comfortable using the maximum leverage the broker offers. With this in mind, check whether the broker allows nominal leverage – where you can choose the amount of leverage you use in your trading, anywhere up to the maximum limit.

7. Do they offer education and support?

Finally, consider whether the Forex broker offers education and support. Ongoing education is essential to a Forex trader’s development and achieving the best results. This is why Admiral Markets offers a range of free articles and tutorials, webinars and online courses, including Forex 101 and Zero to Hero. In addition to educational content and materials, it’s also important to consider the availability of support, so you can get your questions answered, and any potential issues dealt with.

In particular, you should look for a Forex broker that has a major presence in your country or, at a minimum, offers phone and email support in your language. A broker with an efficient customer enquiry and complaints procedure will ensure that if an enquiry is filed by a Forex trader and cannot be resolved within a few hours, it is immediately forwarded to the customer support desk or compliance department.

If you would like to explore this topic in more detail, why not check out our in-depth guide to choosing the right Forex and CFD broker?

Trade With MetaTrader 5

Did you know that Admiral Markets offers traders the number 1 multi-asset trading platform in the world – completely FREE!? MetaTrader 5 enables traders access to superior charting capabilities, free real-time market data & analysis, the best trading widgets available, and much more! To download MetaTrader 5 now, click the banner below and receive it for FREE!

What to Look For in a Forex Trading Platform

Alongside choosing a broker, you will also be researching the Forex trading software and platforms they offer. The trading platform is the central element of your trading, and your main working tool. It is an essential piece of the puzzle, as the best Forex tools can have a significant impact on your trading results. So, what should you be looking for when considering your options?

When assessing a Forex trading platform, ensure it includes the following elements:

  • Reliability: Is the trading platform reliable enough for you to achieve the trading results you want? Being able to rely on the accuracy of prices quoted, the speed of data being transferred, and fast order execution is essential to being able to trade Forex successfully, particularly if you plan to use very short-term strategies like scalping. The information must be available in real time, and the platform must be available at all times when the Forex market is open. This ensures that you can take advantage of any opportunities that may present themselves.
  • Security: Will your funds and personal information be protected? A reputable Forex broker, and a good Forex trading platform will have measures in place to ensure the security of your information, along with the ability to backup all key account information. They will also segregate your funds from their own funds. If a broker cannot demonstrate the measures they will take to protect you and your account balance, it would be best to find another broker.
  • Independent account management: Any Forex trading platform should allow you to manage your trades and your account independently, without having to ask your broker to take action on your behalf. This ensures that you can take action as soon as the market moves, capitalise on opportunities as they arise, and monitor any open positions.
  • Analysis: Does the platform provide in-built analysis?, or offer the tools for you to conduct technical and fundamental analysis independently? Many Forex traders make trades based on technical indicators, and can trade far more effectively if they can access this information within the trading platform, rather than having to leave the platform to find it. This should include charts that are updated in real time, and access to up-to-date market data and news.
  • Automated trading functionality: One of the benefits of Forex trading is the ability to open a position and set automatic stop loss and take profit levels, at which the trade will close. More sophisticated platforms should have the functionality to carry out trading strategies on your behalf, once you have defined the parameters for these strategies. A good trading platform will allow this level of flexibility, rather than requiring a trader to constantly be monitoring any trades.

At Admiral Markets, our platforms of choice are MetaTrader 4 and MetaTrader 5, which are the world’s most user-friendly multi-asset trading platforms. Both platforms are accessible across a range of devices including – PCs, Macs, iOS and Android devices and web browsers via the MetaTrader Webtrader platform for MT4 and MT5. These are fast and responsive platforms, providing real time trading data. Additionally, these platforms offer automated trading options and advanced charting capabilities, and are highly secure.

MetaTrader 5, which is the most recent version of the trading suite and has a range of additional features, which include:

  • Access to thousands of financial markets
  • An expanded Mini Terminal, offering complete control of your account with a single click
  • 38 built-in trading indicators
  • The ability to download tick history for a range of instruments
  • Real volume trading data
  • Free market data, news and market education
  • Bonus trading widgets with MetaTrader Supreme Edition

To get started with MT4 and MT5, here are some helpful articles:

Should you buy Forex trading software?

While Forex trading for beginners or professionals will always require software, the level of competition between brokers means that most Forex trading software is available for free. Many Forex trading beginners are also tempted to purchase FX robots, also known as Expert Advisers (EAs). While some EAs can be helpful, it can be hard for them to remain profitable when the market changes.

Unless you understand the code it’s written in, you’re probably not going to be able to adapt your EA to work with those changes. If you are one of the many traders who believe that an EA would outperform the market, then perhaps you should give it a try with the MetaTrader Supreme Edition plugin. And perhaps best of all, we offer EAs free of charge for traders!

MetaTrader Supreme Edition – Admiral Markets

Did you know that Admiral Markets offers an enhanced version of Metatrader that boosts trading capabilities? Now you can trade with MetaTrader 4 and MetaTrader 5 with an advanced version of MetaTrader that offers excellent additional features such as the correlation matrix, which enables you to view and contrast various currency pairs in real-time, or the mini trader widget – which allows you to buy or sell via a small window while you continue with everything else you need to do.

Download it for FREE today by clicking the banner below!

How Can You Start Trading Forex? Open a Free Demo Account!

If you are keen to start trading, a risk-free way to learn the fundamentals and test out new skills is by opening a Forex demo account. A demo trading account gives you the opportunity to trade on Admiral Markets’ 7,500+ trading instruments, including our 40 CFDs on Forex currency pairs, in real market conditions, without spending any of your money. Simply put, you will have access to virtual funds that you can use to make trades in a demo environment, making this the perfect way to put your knowledge to the test.

How to Manage Your Risk When Trading Forex

Before you make your first trade, it’s important to consider how to effectively manage your risk in the Forex market. As we’ve already discussed, trading Forex CFDs gives you the opportunity to trade using leverage, meaning you can use a relatively small deposit to access a larger portion of the market (up to 500 times the value of your account balance, if you’re a Professional client). This then multiplies your potential profits to the same extent. However, it also multiplies your potential losses.

To use an extreme example, imagine holding an account balance of 2,000 EUR and putting all of that on a single trade. If the trade goes badly, you will have lost your entire investment, and because the Forex market can move very quickly, losses can also happen very quickly. This is where risk management is essential – to help you minimise losses and protect any profits you do make. The key areas to consider when managing your Forex trading risk are trading psychology, and money management.

Master Your Trading Psychology

While it might sound strange to discuss the topics of mindset and psychology in a guide to Forex trading, the truth is that these are some of the most important factors separating successful traders from unsuccessful traders.

Developing trading discipline and the ability to manage your emotions will help you remain cool under pressure, entre trades at the right time, and to know when to exit those trades – whether you are cutting your losses, or taking your profits before the market turns.

Some key trading psychology tips to keep in mind include:

  • Stay calm: As exciting as trading can be, it is still stressful work. There will be a lot of setbacks on your way to the top. Emotions can force your hand to open a trade too early and/or close it too late. The main cause of stress for beginners in trading is the fact that some Forex trades will end in loss no matter what – it’s just the way the market is. Just remember that war is not won with a single battle. Rather, it is overall performance that counts.
  • Understand your risk tolerance: Every person has a different level of risk tolerance, and this will influence the size of the chances they take, the losses they are willing to experience, and the psychological effect of them. To manage your stress levels while trading, it’s important to consider your level of risk tolerance in advance, and choose trading strategies that support this.

    For instance, someone with a low risk tolerance would be more comfortable making lots of small trades over time and letting the small profits from each trade add up. By contrast, someone with a higher tolerance for risk would be more willing to make larger trades, with the opportunities for larger gains (but larger losses as well).

  • Set realistic trading goals: It’s important to be realistic with your trading expectations, as this will help you assess the best times to open and close trades. Many new Forex traders have very high expectations about their potential profits, and this causes them to trade very aggressively, with large sums of money and fast decisions. Again, start small to test your knowledge and skills, and as you start to reliably achieve the results you want, you can set bigger goals.
  • Set your limits in advance: Before embarking on any Forex trade, you should have defined the price at which you’ll open the trade, the price at which you will close it and take your profits, and the price at which you will close it, should the market turn unexpectedly, thereby cutting your losses. Then, once you have set those limits, it’s important to stick with them!

    Many new traders choose not to close a trade because the market is still moving in the direction they want it to, only to then lose all of their gains when the direction suddenly changes. If your trade hits your predetermined target, close it and enjoy your winnings. If the market moves in the opposite direction, close the trade or set a stop loss so it will close automatically.

  • Prepare for the worst: While this might sound pessimistic, in Forex trading it is better to prepare for the worst than expect the best. There have been many times in history when financial markets and individual trading instruments have experienced sudden spikes or drops in value. By considering the worst possible outcome of a trade, you can take measures to protect yourself, should this happen, such as by setting a stop loss in advance.

Money Management in Forex

Managing your money in Forex trading comes down to the specific measures you use to increase your profits, whilst also minimising potential losses. Successful Forex trading has far more to do with effective money management than having a handful of good trades, and is one of the secrets that separates those who successfully trade FX over the long term, from those who give up after a couple of trades.

For the moment though, here are some money management fundamentals to guide your trading:

  • Decide how you will finance your trading in advance: Only one kind of money is good for investing, and that’s the kind that you are willing to lose, and preferably without damaging your physical and/or mental wellbeing in the process. Every profitable trader is profitable in their own way, while every loser experiences losses exactly the same way. Remember, use every available opportunity to learn. It’s a never-ending process!
  • Define your investment level: One of the most common questions about trading Forex is ‘how much do I need to start trading?’ For beginner traders, it’s a good idea to start small and work your way up. Fortunately, many Forex brokers have reasonable minimum deposit levels for opening an account. At Admiral Markets for example, the minimum deposit amount is $200. Be wary of any brokers offering bonuses for certain deposit levels, as these might be scams, where it is very difficult to withdraw your money in the future.
  • Calculate your risk: Make sure to calculate your risk before you trade. If the potential profits of a trade are smaller than the potential risks, the trade probably isn’t a good decision. You can assess your risk with our free Forex calculator.
  • Determine the profits required to cover any losses: Along with calculating your risks before any trade, it’s also worth calculating how much you would need to make to regain those funds in any future trade. It’s often harder to earn money back than it is to lose it, simply because your remaining investment pool is smaller, which means you have to make a larger profit (percentage wise) to break even.

    For example, if you invested 5,000 EUR and lost 1,000 EUR, you will have lost 20% of your balance, leaving you with a final balance of 4,000 EUR. To bring your balance back to 5,000 EUR, you will need to make a profit of 1,000 EUR. However, with a starting balance of 4,000 EUR (after the previous loss), there is now a 25% gain, rather than a 20% one.

Amount of account balance lost

Necessary return to restore original account balance

Percentage Difference
910%
    Start with small trades: To help you manage your risk and preserve your capital, start by trading small sums of money, rather than taking big risks with a large portion of your account balance. For instance, in the previous example, if you put your entire 2,000 EUR account balance on a single trade, it would be easy to lose it all.

By contrast, if you just traded 20 EUR, a loss would not significantly affect your account balance. It would provide you with the opportunity to learn from your experience and plan your next trade more effectively. With this in mind, limiting the capital you are prepared to risk to 5% of your account balance (or lower) will put you in a better position to continue trading Forex (and improving your technique) over the long term.

Risk Management Tools and Techniques

Once you have mastered your trading psychology and money management, there are a number of trading techniques you can apply to further reduce your risk:

    Diversify your portfolio: We all know the saying, ‘don’t put all your eggs in one basket’, yet many new FX traders do this when it comes to their trading. Just as it isn’t wise to put all of your funds into a single trade, relying on a single currency pair increases your level of risk, because if the pair moves in a different direction to what you expect, you could lose everything. Instead, consider opening a number of small trades across different Forex pairs.

You could even consider trading other CFD instruments as well, such as shares, indices, commodities, cryptocurrencies and more, as these will further diversify your trading portfolio.

    Use leverage wisely: As we’ve already mentioned, Forex CFDs allow you to trade on a margin, or by using leverage. However, just because 1:30 (or 1:500) leverage is available, it doesn’t mean that you need to use it. At Admiral Markets, while there is a maximum amount of leverage available to our clients, they are still able to choose the amount of leverage they use when they are trading, which may be anything up to that amount.

    For instance, after assessing your risk, you might decide that the potential costs of trading with a 1:30 level of leverage are too great, and you are more comfortable with 1:5. Choosing a lower nominal leverage will help you to manage your risk effectively, especially if you are new to Forex trading.

    Focus on the long term: The initial stages of your trading should be about preserving your capital – not trying to grow it. Minimising risk is the primary objective. One way to possibly achieve this is by utilising a long-term trading stance.

    What casual Forex trading beginners often fail to realise is that the most successful traders try to make a return on their investment based on long-term trends. They often hold their orders open for weeks, months and even years at a time. This way, Forex works as an investment rather than a lottery.

    Use a stop loss: A stop loss is tool that traders use to limit their potential losses. Simply put, it is the price level at which you will close a trade that isn’t moving in your favour, thereby preventing any further losses as the market continues to move in that direction. You can also use a stop loss to conserve any profits you might have already made – the tool to achieve this is known as a ‘trailing’ stop loss, which follows the direction of the market.

    For instance, if you opened a long trade on the GBP/USD currency pair, and the pair increased in value, the price limit at which the trade should close (the stop loss) would climb alongside the price of the currency pair. If the value of the GBP/USD then started to fall, the trade would be closed as soon as it hit your stop loss, preserving any profits you had made beforehand.

  • Continue your Forex education: The markets are constantly changing, with new trading ideas and strategies being published regularly. To ensure you continue to develop your trading skills, it’s important to stay on top of your trading education by regularly reviewing market analysis and by learning new trading strategies. For more trading education, take a look at our Forex and CFD webinars, which are designed to grow your knowledge as you start and continue to trade.

Free Trading Webinars With Admiral Markets

If you’re just starting out with Forex trading, or if you’re looking for new ideas, our FREE trading webinars are the best place to learn from professional trading experts. Receive step-by-step guides on how to use the best strategies and indicators, and receive expert opinion on the latest developments in the live markets. Click the banner below to register for FREE trading webinars!

How to Analyse the Forex Market

While some new Forex traders might experience beginner’s luck, and open a trade on the right currency pair in the right direction, this luck rarely lasts. For long-term trading success, a trader needs to be able to make informed trading decisions, and these decisions are a result of analysing the market.

Analysis is absolutely vital to trading. Charts are helpful for both short and long-term trading. You should be looking at daily, weekly, and monthly charts. Fortunately, there are a number of different approaches to Forex analysis, which means every trader can find the right approach for them. The three broad categories of Forex analysis are fundamental analysis, technical analysis and wave analysis.

Fundamental Analysis

This form of analysis involves look keeping track of real-world events that might influence the values of the financial instruments you want to trade. For instance, the value of the Australian Dollar might fluctuate following a Reserve Bank of Australia interest rate announcement, which will then affect the movements of all currency pairs including the AUD.

The seven economic indicators that have the greatest impact on the Forex market are:

  • Gross domestic product (GDP)
  • The number of jobs outside the agricultural sector (known as Non-Farm Payrolls, or NFP)
  • The rate of unemployment
  • The index of industrial production
  • Retail sales
  • Orders for durable goods
  • The interest rates of national banks (such as the European Central Bank or the US Federal Reserve)

There are then three possible scenarios following an economic publication or announcement:

  1. No reaction, implying that the market had anticipated the announcement
  2. A strong movement in accordance with the economic data that has been made public (so if the announcement shares positive news, the instrument affected by this news will increase in value)
  3. A strong movement against the economic data shared

The challenge is assessing which outcome is the most likely, and then opening a trade accordingly. A good starting point for this trading approach is first being aware of upcoming events that may affect the Forex market (refer to our live Forex calendar for the latest events) and second, looking at the effect similar announcements had on different currency pairs in the past. You can learn more about fundamental analysis in our Introduction to Fundamental Analysis article.

Technical Analysis

While fundamental analysis focuses on what is happening in the real world, including economic, political, and business news and events, technical analysis largely focuses on what is happening in trading charts.

Trading charts simply chronicle the price movements of different trading instruments over time, which allows traders to identify patterns in price movements and make trading decisions based on the assumption that these patterns will repeat in the future. For example, one trading chart format is the Japanese candlestick chart, which is formatted to emphasise high and low price points for certain time increments (these increments can be set by the trader in their trading platform).

The trader can then see:

  • The opening price for the period
  • The highest price point for the period
  • The lowest price point for the period
  • The closing price for the period

This information can then allow traders to make judgements regarding a currency pair’s price movement. For example, if a Japanese candlestick closes near the highest price for the period, that would imply that there is a strong interest on the part of buyers for this currency pair during that time period. A trader might then decide to open a long trade to take advantage of that interest.

Over time, common patterns emerge in the movement of the charts (and the formation of different candlesticks), which can then be used to predict potential future price movements and make the best trades based on these predictions. You can learn more about trading with Japanese candlesticks in these articles:

Once a pattern emerges, this is known as a Forex indicator because it indicates that there is the potential to make a profitable trade. While there are a range of resources available online for learning about the best Forex indicators, your trading software should ideally have a range of built-in indicators that you can use for your trading, as is the case with MetaTrader 5’s indicators. You can learn more about technical analysis in our Introduction to Technical Analysis article.

Wave Analysis

Wave analysis, also known as Elliott Wave analysis, is a well-known method that analyses the price chart for patterns and the direction (trend) of a financial instrument. The method is based on historical movements in market prices, with the belief that history repeats itself. The reason for this is due to market sentiment, meaning that the market as a whole moves as a herd, and reacts in a similar way to similar events and announcements.

In the Forex market, these reactions involve buying and selling currencies, which causes the prices of different currency pairs to fluctuate.

The theory follows sequences of five waves, or five up and down price movements which are then countered by a corrective 3 wave pattern in the opposite direction. The 5 impulsive waves are with the trend, whereas the 3 corrective waves are counter trend. In an ‘up’ move, there will be three up waves (movements 1, 3 and 5) and two down waves (movements 2 and 4).

In a corrective down move, there will be 2 waves down (A and C) and 1 wave up (B). In a down move, the instrument will make 3 waves down which are separated by 2 waves up. The corrective up wave will have 2 waves up and 1 wave down. Following this, the instrument will make a ‘down’ move, with three down waves being separated by two up waves.

While this pattern does not take place every time prices move, traders can use this method as a guideline for whether or not to enter into or exit a trade by taking the following steps:

  1. Determine how you will generate the Elliott Wave count, keeping in mind that the approach must be consistent for all ‘up’ and ‘down’ movements.
  2. Wait for a wave to begin. In many cases it is wise to wait until the end of the third or the beginning of the fourth movement in the wave, to ensure that the instrument is following the Elliott Wave price pattern.
  3. Use a secondary indicator (or indicators) to confirm the trend.

Once you have taken these steps, you can enter into a trade with more confidence. If you would like to learn more about wave analysis, please read our Introduction to Forex Elliott Wave Analysis article.

Now you know the what, the why, and the how of Forex trading. The next step to to create a trading strategy. For beginner traders, the ideal scenario is to follow a simple and effective strategy, which will allow you to confirm what works and what doesn’t work, without too many variables confusing things. Fortunately, banks, corporations, investors, and speculators have all been trading the markets for decades, which means there is already a wide range of Forex trading strategies to choose from. These include:

  • Forex scalping: Scalping is a trading strategy that involves buying and selling currency pairs in very short increments – usually anywhere between a few seconds and a few hours. This is a very hands-on strategy that involves making a large number of small profits until those profits add up.
  • Intraday trading: Forex intraday trading is a more conservative approach than scalping, with trades focusing on daily price trends. Trades may be open anywhere between one to four days, but usually focus on the major sessions for each Forex market.
  • Swing trading: Swing trading is a medium-term trading approach that focuses on larger price movements than scalping or intraday trading. This means that traders can set up a trade and check in on it within a few hours, or a few days, rather than having to constantly sit in front of their trading platform, making it a good option for people trading alongside a day job.
  • Forex hedging: Hedging is a risk management technique where a trader can offset potential losses by taking opposite positions in the market. In Forex, this can be done by taking two opposite positions on the same currency pair (e.g. by opening a long trade and a short trade on the GBP/USD currency pair), or by taking opposite positions on two correlated currencies.
  • The Forex martingale strategy: The martingale strategy is a trading strategy whereby, for every losing trade, you double the investment made in future trades in order to recover your losses, as soon as you make a successful trade. For instance, if you invest 1 EUR on your first trade and lose, on the next trade you would invest 2 EUR, then 4 EUR , then 8 EUR and so on. Please note that this strategy is extremely risky by nature and not suitable for beginners!
  • The Forex grid strategy: The grid strategy is one that uses buy stop orders and sell stop orders to profit on natural market movements. These orders are usually placed at 10 pip intervals and, by having these stop orders put in place, a trader can then automate this trading strategy.

To Conclude: Our Top Forex Trading Tips For Beginners

We have covered a lot of information in this article so, we’d like to conclude with an overview of our top Forex trading tips for beginners. If you take anything from this article, it should be these following tips:

Do Your Research

Generally speaking, the less you know, the more at risk you are, and there is no limit to how much you can know or risk. An endless amount of information is available on the internet free of charge, like:

  • Educational videos on Forex exchange trading for beginners
  • Educational articles and tutorials
  • Forex trading seminars for beginners and professionals
  • Forex trading webinars

If you want to know how to learn Forex trading as a beginner, simply read as much as you possibly can, and always analyse what you read – don’t just take information in good faith.

Test on a Demo Account or With Simulation Software

Every broker offers a demo account – whether you are a beginner or not, test every new strategy there first. Keep going until the results are conclusive and you are confident in what you are testing. Only then should you open a live account and use your strategy in the smallest volume trades available. Be sure to treat your demo account trades as if they were real trades. You may also use Forex simulation software to simulate market conditions, and create an impression of a live trading session.

Don’t Overcomplicate Things

Don’t overload your charts with indicators, or your strategy with handles or switches. The more complicated your trading strategy is, the harder it will be to follow, and the less likely it is to be effective. To find out how well a strategy performs on average in different markets, you need to carry out the necessary backtesting and research.

Keeping it simple can be a real challenge, especially considering the multitude of supporting tools you can apply to your charts. Just remember – it’s not about the amount of tools at your disposal, but it is about being able to use a few tools in an effective way.

Be Careful in Volatile Markets

Volatility is what keeps your trading activity moving. However, if you’re not careful it can also completely destroy it. When volatile, the market moves sideways, which makes spreads grow and your orders slip. As a beginner Forex trader, you need to accept that once you are in the market, anything can potentially happen, and it can completely negate your strategy.

For example, the crisis with the Swiss Franc in January 2020 ended business for many traders and brokers within hours of its occurrence. Admiral Markets have helped to minimise volatility risk for you by offering a package of advanced volatility trading settings to help you avoid the reefs of the financial markets.

The Trend Is Your Friend

Whether you are a beginner trader or a pro, it is best to trade with what you see and not what you think. For example, you might think that the US dollar is overvalued and has been overvalued for too long. Naturally, you will want to short and you might be right eventually. But if the price is moving up, it does not matter what you think. In fact, it doesn’t matter what anybody thinks – the price is moving up and you should be trading with the trend.

The Trade Is Open Until It’s Closed

A regular Forex trading beginner concentrates on opening a trade, but the exit point is equally important. If your trading strategy does not consider the mechanism of closing a deal, it’s not going to end well, and you’re much more likely to suffer heavy losses.

Write Everything Down

A novice Forex trader must develop the mindset of a business owner. Every business requires a business plan, constant monitoring, and regular auditing. Jumping ahead without plans and processes is a sure-fire way to fail. Starting a trading journal is an absolute must.

Everyday, be sure to write the following:

  • Points for further research
  • Reasons to open or close a trade
  • Your achievements and mistakes

Keep your journal handy as a point of reference when analysing your activity. A journal ensures none of your actions are in vain. Analysis of good trades will boost your trading confidence and motivate you to push harder and go further. On the other hand, analysis of bad trades will help you to extract value and improve.

Forex Trading With Admiral Markets

If you’re aiming to take your trading to the next level, the Admiral Markets live account is the perfect place for you to do that! Trade Forex & CFDs on 80+ currencies, choosing from a range of Forex majors, Forex minors, and exotic currency pairs, with access to the latest technical analysis and trading information. Trade the right way, open your live account now by clicking the banner below!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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