How To Trade On The Forex Market

By Alan Newton

How to make money without ever leaving your desk

 

It's the largest financial market in the world, with over $6.6 trillion traded daily worldwide.

 

You don't need a lot of money to start trading, and you can trade it 24 hours a day, 5 days a week, anywhere in the world.

 

And because of its global nature, there are always lucrative trading opportunities to be found.

 

No wonder so many people are getting into forex trading!

 

But while it can be financially rewarding, it can also be extremely risky as well, especially if you don't know what you're doing.

 

Because foreign currencies are affected by so much that's out of our control, there are many ways that a trade can go wrong for you.

 

In fact, even the most successful traders inevitably have their fair share of losses.

 

The key to success is not winning all the time, but increasing your chances and putting yourself in a position to win at all times.

 

In order to do this, you first need to know how the forex market works, how currencies move, and how to identify great opportunities.

 

You'll find all these in this beginner's guide to forex trading, where you can build your foundation as a forex trader.

 

In How to Trade on the Forex Market, you will discover:

 

• A simple introduction to the foreign exchange market, how it operates, and how you can make money from it
• Basic trading terms every beginner should know, all explained in plain English
• A foolproof way to protect your profits without having to take your money out of a trade
• The #1 thing that should always be included in every trade you make
• Why too many analysis techniques can be too much of a good thing, and how you can simplify your decision-making
• The mindset of successful forex traders and how to cultivate it for yourself
• How to develop a successful trading strategy that suits your trading style and risk tolerance
• The most dangerous aspect of forex trading and why you should think twice before using it

 

And much more.

 

Even if you've never traded in any type of financial market in your life, you can still make good money from forex trading.

 

Everyone has to start as a beginner, learning and working their way up to become experts in the field.

 

As a newbie, you should use this time to learn and practice as much as you can, and while you'll inevitably make mistakes, these will be further opportunities to learn.

 

Take the plunge now and start this exciting and profitable journey armed with the essential knowledge, sound advice, and helpful tips from this guide.

• Language: English
• Publisher: Alan Newton
• Release date: Apr 10, 2023
• ISBN: 9798215358665

Book preview

Alan Newton

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Please note the information contained within this document is for educational and entertainment purposes only. All effort has been executed to present accurate, up to date, reliable, complete information. No warranties of any kind are declared or implied. Readers acknowledge that the author is not engaged in the rendering of legal, financial, medical or professional advice. The content within this book has been derived from various sources. Please consult a licensed professional before attempting any techniques outlined in this book.

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Table of Contents

Introduction.......................................

Why Forex?......................................

Chapter 1: The Forex Market..........................

Centralized and Decentralized

Institutions.....................................

Market Hours...................................

Leverage......................................

Which Types of Trading Work in the Market?..............

Scalping......................................

Day Trading....................................

Swing Trading..................................

Position Trading.................................

Chapter 2: The Basics of Trading Forex Instruments........

Base and Quote Currencies..........................

Long and Short.................................

Major and Minor Pairs...............................

Major Pairs....................................

Minor Pairs....................................

Exotic Pairs....................................

Price Spreads....................................

Pips and Points.................................

Lots..........................................

Calculating Profits...............................

Chapter 3: Brokers..................................

Booking.........................................

Zero Commissions...............................

Bonuses......................................

Loss Compensation or Guarantees...................

Prior Record...................................

How to Choose a Broker.............................

Customer Service................................

Chapter 4: Technical Analysis Basics...................

Market Conditions.................................

Types of Price Action.............................

Looking at Trends................................

Support and Resistance.............................

Strong Prior Reactions............................

Swing Points...................................

Zones Repeatedly Tested..........................

Higher Timeframe Levels..........................

Putting it all Together...............................

Chapter 5: Candlestick Charting.......................

The Basics.......................................

Patterns.........................................

The First Pattern................................

The Second Pattern..............................

The Third Signal.................................

Chapter 6: The Best Indicators You Can Use..............

The First Indicator.................................

Pitfalls........................................

The Second Indicator...............................

Tips..........................................

The Third Indicator.................................

Things to Avoid.................................

The Fourth Indicator................................

Chapter 7: Risk Management..........................

Risk Math.......................................

Examining the Market.............................

Two Factors of Success...........................

Understanding R................................

Drawdowns....................................

Qualitative Risk...................................

Mindset.......................................

Training Framework..............................

Journal.......................................

Making Progress................................

Conclusion........................................

References........................................

Introduction

Trading doesn't just reveal your character, it also builds it if you stay in the game long enough. -by Yvan Byeajee

At some point in their lives, everyone’s attention turns to either the stock or forex market. This happens because they hear about the immense earning potential in these markets and want to get a piece of that action. The problem is that making money in these financial markets is far from straightforward.

What intimidates most people is that there are so many different ways of making money in the markets. You can make money investing for the long term, you can speculate over the short term, you can invest based on economic factors, you can invest based on company fundamentals, you can use sentiment factors, and on and on it goes.

Most beginners enter the market looking for the best strategies as a result. However, the truth is that there is no single best strategy out there with which you can make money. There’s the best strategy for you, that might not work for someone else. Success in the markets aren’t about finding a great strategy. Instead, it’s about figuring out what works best for you and aligning yourself with it.

In this book, you’re going to learn all about trading the forex market. Choosing your market is an important part of trading successfully. Strategies that might work in the stock market may not be as effective in FX. This is because the nature of the market you’re operating in might be very different from the market in which the strategy was originally created.

What’s more, due to the participants in the market being very different from one another, the nature of price action and the ways in which instruments move also change. All of these factors come together to create a market experience that can vary significantly from one another.

Why Forex?

The stock market tends to hog a lot of the limelight when it comes to discussion of the financial markets. It’s the most widely dissected and discussed market. Whenever someone talks about trading, the first thought is to assume that they’re talking about stocks.

However, the financial markets are extremely varied. As it turns out, the stock market is the smallest and most insignificant of financial markets. Sure, the financial media focuses on it breathlessly, but this hardly means it’s important. In the real world, the FX market is far larger in size than the stock market and is, in fact, the biggest financial market in the world.

Why is this important? Simply put, a larger pond means more opportunities. However, the larger size of the market brings unique risks with it. For instance, you’ll find more sophisticated traders in FX than in the stock market. The market’s dynamics are also different from what you might see in stocks.

Therefore, it’s essential to educate yourself before diving into FX trading. I’d also like to point out that I’ll be giving you trading strategies and methods in this book. I won’t be talking about investment strategies. In fact, it’s impossible to invest in FX since investing implies a long-term focus.

Trading is an endeavor where you’re trying to capture maximum gain in an instrument as quickly as possible. It places a premium on your ability to jump in and out of the market as quickly as possible, as opposed to an investment focus that seeks to remain in the market for as long as possible.

Do not confuse the two methods since this will make your life a lot harder. You’ll also notice that, in this book, I’ll be focusing a lot on the fundamentals of trading. Instead of giving you tailor-made strategies, I’ll be giving you the equivalent of a menu of choices. You can pick and choose which ones appeal to you the most and combine the various elements to create your very own trading strategy.

It’s important that you do this because copy-pasting a trading strategy doesn’t work in FX or any financial market. If everyone followed the same strategy, then there wouldn’t be an edge inherent in it. You might think that you don’t know anything about FX and want a simple strategy that anyone can follow.

The problem with this sort of strategy is that if anyone can follow it, everyone will. You’ll end up doing what the average person does and receive average results. When it comes to trading, the average result isn’t pretty. Research conducted by the broker FXCM found that over 95% of people who opened an account with them ended up closing their account within a year because they lost their money (What’s the Day Trading Success Rate?, 2018).

If you do average things, you’ll receive these kinds of results. Instead, you need to do the work to make sure you’re designing a strategy that works for you. As you’ll learn in this book, your mindset is far more important than the strategy you choose to follow.

Some traders make money following a ludicrously simple strategy while others make extremely complex ones work. There is no single right way of doing things. You need to learn the basics, and then figure out how you’re going to apply them to make money. It takes some work but I’ll walk you through this process every step of the way in this book.

Most importantly, I’ll also give you a risk management framework you can use to ensure you’ll make money no matter what. Most beginners to trading focus intensely on the strategies and neglect to take money management into account. In this book, you’re going to learn how trading really works and you’ll see that technical strategies are important, but not as important as you think.

Lastly, I’d like to state that your choice to read this book is an extremely good one. However, it’s just a first step. You need to follow up everything you learn in this book with action. Many people simply read books like these and put them down to never think of them again.

You won’t be able to realize the immense potential of the FX market by doing this. FX trading has the power to give you everything you ever dreamed of. Whether it’s financial freedom, the ability to give your family the life they deserve, or whatever it is you desire, FX trading can do this for you.

All you need to do is decide to work hard and do what’s necessary. So, having said all that, let’s move forward and dive into the FX market!

Chapter 1:

The Forex Market

When speaking of financial markets, most beginners don’t think of forex or FX. Their minds wander over to the stock market. A select few