This is what beginners should consider when developing a forex strategy!
It is an open secret that no master has fallen from heaven when it comes to Forex trading. Before you take the plunge into the deep end, you should take a little time.
Trading for beginners: With a forex demo account, for example, investors can learn to trade forex — right from the start. This prevents errors from creeping in that may be difficult to correct later. In addition, the trader can already playfullyfamiliarize himselfwith the day trading software and develop a forex strategy.
Because if you have lost money, the losses have only been realized once. Especially at the beginning of trading endeavors, traders should invest more time than money to find the right forex day trading strategy forTo find beginners with whom one can gain the first important experience and make profits.
Forex day trading strategies are not just the basis for success at the beginning
Word has got around that forex trading has long since become an exciting and definitely lucrative environment for private investors. The fact that traders can become active with very little capital is a positive factor thanks to the increasing selection of brokers.
So you don’t need to invest too much to learn Forex trading. In general, the beginning should be the development of a good foundation for the start of trading. This, in turn, can basically be done in a few short steps. And learning a suitable forex strategy (e.g. the Fibonacci strategy) or day trading strategy for trading can also be interesting for traders with some experience. After all, it is never wrong to broaden your horizons.
First of all, investors should be familiar with the definitions used in trading forex. Because without a certain background knowledge, trading would be nothing more than pure gambling, and given the often very volatile market situations that is not necessarily the right approach. Also due to the sometimes complex structures and the enormous trading volume, experience and the right forex day trading strategy are essential.
Forex trading largely independent of the stock exchange
Before learning how to do forex trading, learn what. In short: What do I actually invest my savings in as an investor in the Forex sector? Most people know the term as an abbreviation, but many traders do not know exactly how to define the exact background.
What can be said is that the foreign exchange market is the largest financial market in the world. The terms “foreign exchange market” or “currency market” are also used internationally. Over four trillion US dollars are currently being turned over every day. In the real sense, foreign exchange trading is what is known as “over-the-counter” transactions (“OTC” for short), in which market participants exchange foreign exchange, that is, currencies. Currencies are bought and sold — one currency is exchanged for another.
Hardly any industry is currently experiencing such a boom, which also explains why so many private investors are interested in the topic of «Forex trading for beginners» and «day trading strategy» as a profitable model. The role of the stock exchange as a platform for foreign exchange trading, on the other hand, is rather minor, whereas the so-called interbank market in electronic form is of major importance. And this is exactly what makes the system so appealing. In addition to private investors, banks and companies in industry and commerce are also involved. Also and especially important decisions of the central banks, how traders who want to learn Forex trading are experienced, have an influence on price developments.
Pips and lots as a starting point for fees
Foreign currencies are usually traded with up to four decimal places. The smallest traded size is referred to as the so-called “pips”. Traders who bet on the euro and the US dollar currency pair and other currency pairs need to know this unit. Likewise the so-called plumb bob. The same denotes the standard size in forex trading — at a level of 100,000 units of the respective base value. For the euro / US dollar pair, the unit is therefore 100,000 euros. In the case of a quotationat a value of 1.2550 and a decline in the value to 1.2500, the price declines at 50 pips. Traders who are learning to trade forex can often encounter less requirements with regard to the lots, so-called micro lots. That makes it a lot easier, especially at the beginning.
Forex trading even with low stakes
Another relevant unit is the “security deposit” known as margin. Instead of the actual lots, traders only have to meet a minimum bet. As a rule, this lower limit is a maximum of 5.00 percent of the actual trading volume.
This ensures that in reality traders can often start trading with micro lots with small sums in the double-digit euro range. This requirement is a key point to be aware of in connection with any forex trading strategy. Another factor is what is known as leverage . This arises from the aforementioned low share of the total lot volume. However, these low requirements can result in financing costs. Because the forex brokers take over the remaining financing, which is passed on to the traders via ancillary costs . Traders need to keep an eye on these fees, especially for longer terms.
Leverage and good risk management opportunities
In return, however — and this is also a key point when traders learn forex trading and develop a day trading strategy — the low minimum stakes result in a leverage effect . This is precisely why one speaks technically of a leverage, which can be considerable in individual cases, depending on the broker. However, when it comes to “trading for beginners”, you should pay attention to the following: Traders should always strive for individually sensible risk management. Because at least in theory, excessively high losses on margins and stakes could even result in additional claims on the part of the broker if an excessively high minus is not solely from the capital on the trading accountcan be covered. Losses can occur, but a total loss should be avoided. For example, through appropriate stop functions that can be used with a number of forex brokers. Traders can find tips for getting started and a successful forex strategy in our guide to foreign exchange trading for beginners .
Focus on fees when choosing a broker
Learning forex trading — that also means dealing with fees and costs. In addition to the financing costs already mentioned, which are due especially for longer terms of days, weeks or even months. These can have different names. Terms such as “swap” and “roll-over” are common in the case of so-called “market makers” among brokers. The fee base often forms the interest rate differences between the foreign currencies involved. Without a precise cost comparison of the fees per order, the spreads and the financing costs in general, traders should not be active.
In general, the fees often vary considerably between brokers. The market makers mentioned enable traders to trade directly. The consequence can be a general waiver of order fees. For small investors , this, in conjunction with the right trading strategy, is something of a silver bullet, as long as the conditions are generally consistent. The majority of brokers now work according to the aforementioned system of a «market maker» . Here it is important to consider the spreads at which the brokers earn their money. Spreads are the margin between the buying price and the later selling price. A higher spread increases costs. The rule are values in the range of 1 and 4 spreads.
Now let’s move on to two of the most important forex day trading strategies. On the one hand there is the so-called trend strategy, on the other hand there is the contra-trend strategy.
The trend strategy: sales with constant market situations
The trend strategy is, so to speak, the classic among trading strategies. Not least because of the ease with which it is easy to understand, which makes the model also and especially suitable for beginners who want to learn to trade forex. The motto could be “go with the flow”.
Instead of opposing the crowd of forex traders, the trend strategy or trend following strategy focuses on a trading strategy that — the name already shows — focuses on an upward trend in forex currency pairs and participates in this. This is based on the assumption that a sustained trend is more likely than a timely trend reversal. So-called trend lines and chart toolsgive traders information about when a trend is occurring. Also, average values can be interpreted as information on existing trends.
The contra trend strategy: when does a trend end?
The contra trend strategy is another popular beginner trading approach that allows investors to learn to trade forex early in their engagements without taking on excessive risks. A bit more know-how than with the trend strategy is then required.
Above all, knowledge of the status quo of the markets is urgently required. The basis of the trend following strategy is basically that every trend is over at some point. However , traders must first recognize the indicators for such a trend reversal . A comparably good hit rate as with the trend strategy can be assumed with the contra-trend strategy.
But you can do this through consciously set stopsand smaller traded positions. Opportunities are used and risks are kept within limits. The high return prospects make these Forex day trading strategies interesting not only for beginners. A moment to bet on this strategy can be a long-term trend while the uptrend stops at a certain resistance. If there are breaks in trend lines , this too may be the right time to place contra-trend trades in order to take advantage of a new impending trend. Even with this forex strategy, stakes should be set sensibly.
Learn to assess risks and not rush into anything
Regardless of which of the common forex day trading strategies traders rely on: Traders should not go “all in”, if possible, but rather aim for the path to their goal with conscious and needs-based risk management . It is also worthwhile for advanced and professionals to learn new things about Forex trading over and over again.
In any case, it is an integral part of learning forex trading to align the strategies as closely as possible to the current market conditions and to check proven patterns again and again and, if necessary, to change them. There is a reason why the forex market is very volatile. Every trend ends at some point. Recognizing the right moment is one of the great tricks of forex trading that, as a trader, you first come across the necessary principles must learn in forex trading.
Conclusion: Forex day trading strategies & trading for beginners
As a day trader in Forex trading, an effective strategy is essential. Therefore, beginners should first deal with the various trading strategies before active trading begins. In this way, the risk of making a loss in the event of short-term speculation can be reduced. Traders who go into trading without Forex day trading strategies may have to accept the entire capital investment as a loss after a short period of time . In addition, day traders who are new to trading should be aware that positions that are too high can also lead to high losses. Forex trading can be done with high leveragecan be implemented with low capital investment. In order to be successful in day trading in the long term, traders should always deal with opportunities and risks equally.