How to Make Your First Profits on Forex
There are tons of guides to Forex online. Most of them are trash — either they don’t tell anything useful or you fall asleep around the half-point mark. With this guide, however, you’ll understand everything you need in a matter of minutes.
You will learn:
- What is Forex and how it works;
- Who are the Forex brokers;
- What are the currency pairs, quotes and points;
- Which types of Forex orders you should use for day trading;
- How to read the Forex charts and markets.
Forex is an international network of banks, brokers and international companies. It exists to trade worldwide currencies as digital assets or in a form of CFDs.
Currency Pairs, Quotes And Points
A currency pair represents the two currencies that are traded on Forex and can be used to purchase each other. A quote is a relation of value between those currencies. For example, EUR/USD = 1.25000 means that for 1 EUR you can buy 1.25000 USD.
Most currency pairs have an established order — for example, you won’t often see a USD/EUR quote but an EUR/USD instead. The only reason for this is a tradition.
The values are written with pips. A pip, in Forex, is a 1/10000 or 1% out of 1%. This allows traders to track even minuscule price changes and profit off them.
Price changes in a single day average around 100 pips. During economic crises and important news, the price can change in a more significant manner.
Different Types of Forex Orders
An order on Forex is a command to purchase or sell some currency pair. For example, if you order to buy 100 EUR/USD at market value 1.25000, you will sell 100 EUR to buy 125 USD.
There are several types of Forex Orders. You should remember two:
- Market orders. Market orders get executed immediately at the market price. If the market price changes while the order is processing, it doesn’t get executed.
- Limit orders. Limit orders execute only when the market reaches the price listed in the order. Until the prices in the order and on the market correspond, the market ignores the order.
Most traders use the limit orders because they allow for more flexibility and better planning. There are four types of Limit Orders:
- Buy Limit. Buy Limit purchases currency when the market descends to a certain point.
- Buy Stop. Buy Stop purchases currency when the market rises to a certain point.
- Sell Limit. Sell Limit sells currency when the market rises to a certain point.
- Sell Stop. Sell Stop sells currency when the market descends to a certain point.
The limit orders can be modified with the StopLoss and TakeProfit values which will automatically close the orders if they become unprofitable or achieve the profit goals.
Almost every trader is using a broker — an intermediary company that consolidates orders from different traders and significantly lowers the entry cost. To compensate for the paid fees, brokers slightly offset the prices in their favor but at lower trading volumes they remain a cheaper option.
You need to choose a brokerage company you can trust your money. JustForex has been working on the market since 2012 and has millions of clients from 197 countries and protects the funds of its clients. Also, this broker offers profitable trading conditions as leverage up to 1:3000, spreads from 0 pips, 90+ trading instruments, and daily analytics.
Besides, you can take advantage of the best offer by JustForex and double your deposit to get more opportunities for a successful trading.
If you were to trade independently, you would need an inter-banking terminal for 6000 USD. Also, each operation will require paying a fee, which averages around 300 USD. Unless your average order is more than 1000 USD — independent trading won’t be profitable.
Each candle on the chart represents the values the currency pair had during some timeframe. The body of the candle represents the opening and closing price. The shadow of the candle represents the maximum and minimum values.
There are other ways to represent the state of the market — bar charts, line charts, Renko charts etc. Most of them do not provide as much information as the candlestick chart.
Forex Market Levels
The support and resistance levels represent the minimum and maximum value of a currency pair at a given time. The traders buy the assets when the price is at the support level, sell when it reaches the resistance level, and vice versa.
To find the support and resistance levels on the chart, look for the points where the price regularly changes the direction. For example, if the price has been bouncing off 1.25000 for the last two days — this is a resistance level.
The levels are defined by the traders themselves when they place the StopLoss and TakeProfit values in their orders. Due to this, several support and resistance levels of different strengths can co-exist on the market.
The Best Forex Trading Strategy
In order to make profits on Forex, you need to understand what is going on the market and how it affects the listed quotes. There are many ways to read the Forex market — fundamental analysis, technical analysis, Price Action etc. Most of them are hard to grasp and even harder to explain in a single article.
If you are only starting out, the best way to read the market is by following someone else. JustForex publishes daily market overviews and market forecasts which are easy to understand and contain useful trading tips.