The start of the forex market dates back to 1971. With the development of the Internet, this market has become available to almost everyone. Financial market participants enter the market to make money. They earn by speculating on exchange rate fluctuations.
Before you plunge into Forex trading, take some time to educate yourself on the Forex market.
In this article
Market analysis
To become a trader, you need to open an account, make a deposit and start trading. But before that, it is necessary to learn the basics of technical and fundamental analysis.
In order to make a fundamental analysis, you need to follow the news closely. Changes in the interest rates, speeches by the heads of central banks, publication of the meeting minutes, statistics on economic activity and other macroeconomic events affect the currency.
Traders monitor the news schedule on the economic calendar. The economic calendar displays the events, the time of their release, the degree of impact. Typically, the news is published at a scheduled time, except for unforeseen events. The economic news calendar is available for free on thematic resources, and websites of forex brokers, including the official JustForex website.
The technical analysis is based on forecasting with the help of charts and technical indicators. The object of technical analysis is the price chart.
What is the trend?
Prices don’t move chaotically in the forex market. Forex has its own laws. If there is a demand for a certain currency, it becomes more expensive. If demand falls, it becomes cheaper. Forex prices constantly fluctuate. The trend is formed when the price movement direction is stable for some time.
A trend is a one-way price movement in a certain direction. It can be upward and downward. There is also a sideways trend. It is often observed after a strong trend. A sideways trend or flat is a price movement in a narrow corridor.
A good trend is easy to see visually. You just need to look at the chart and determine in which direction the price is moving. There are also a large number of trend indicators: Moving Averages, Bollinger Bands, ADX etc.
At the initial stage, the most important thing is to learn how to identify trends, understand where the market is moving, be able to analyze the processes occurring in the market.
How Forex technical indicators work
You can use technical analysis and enter the market focusing on the MACD histogram or Stochastic Oscillator, etc. But anyway open positions when you are sure that the signal is accurate.
Indicators are special programs designed to forecast the future direction of price movement. Their calculations are based on past prices and volumes. Indicators are displayed graphically: they can be imposed upon the charts or drawn in a separate window.
Such basic indicators as Moving Average, Stochastic Oscillator, MACD are already built into the MT4 terminal.
Stop loss and take profit
To simplify the work in the forex market, there are special orders that trigger under certain conditions. They include stop losses, orders that limit losses and take profits, orders for profit taking.
In order to avoid the possibility of losing everything, use Stop Loss. If the market goes against the position, it limits the possible losses. The size of stop loss is the amount a trader is willing to risk. Adhere to the rule of 2% – do not invest more than 2% of your capital per one trade.
If you need to fix profit, use Take Profit. The standard loss/profit ratio is 1:3. The potential profit should exceed the risk several times.
Before start trading on real accounts, we highly recommend practising with virtual money. You can open a demo account at JustForex and learn the basics of Forex trading, improve your skills, as well as try out various trading strategies.
