FOREX FOR BEGINNERS.

Transcription

1 FOREX FOR BEGINNERS

2 CONTENT What is forex market and how it works? Forex market (page 2) Liquidity providers (page 3) Why acquiring knowledge is important in the forex market? Experience matters (page 5) Why you need to keep an eye on fundamentals in the forex market? Trader s perspective (page 8) Why you should trade in the forex market? Liquidity (page 11) No manipulation (page 11) 24 x 5 operation (page 12) Small investment (page12) 05. All About MT4 You Need To Know Why MT4? (page 14) Automated Trading (page 15) 06. Buying and Selling Smartly In The Forex Market Buying Dips and Selling highs (page 17)

3 WHAT IS FOREX MARKET AND HOW IT WORKS?

4 What Is Forex Market And How It Works? FOREX 02 Are you new in the investment world and recently heard a term forex market? are you wondering what exactly it is and how does it work? Well, your search is over as in this article, we will throw some light on the forex market and some of its features. Let us first discuss about the forex market Forex Market The Forex market is also known as the Foreign Exchange market or FX market. It is one of the most popular investment markets, and the largest financial market in all over the world. As per some facts released over $1.8 trillion changing hands on the daily basis in the Forex market. This is a huge sum, and even if we combine two or three markets, then also we will not get close to the amount traded daily in the Forex market. There is one other aspect of the Forex market that it is a decentralized market, which means there is no one exchange for the Forex market. In case of the stock market, we have a centralized exchange, but that is not the case in the Forex market. The Forex market is a global market and operates via thousands of banks worldwide. Even the financial institutions and individual traders get involved in the Forex market. One of the other features of the Forex market is that it operates 24 hours a day, compared to some other markets. There are sessions in the Forex market corresponding to the countries all over the world, starting each day in Sydney, then Tokyo, London and New York.

5 Liquidity Providers In the early not everyone was able to trade in the Forex market, and only large banks and large institutions were allowed to trade. However, a lot of changes were made as the time passed, and with the help of the technology, we can now trade in the Forex market. There are now several liquidity providers all over the world providing access to the FX market to the brokers. So, there is a complete link with the liquidity providers acting as a medium for a Forex broker. At the end, a user can open an account with the Forex broker and gain access to the Forex market. So, if does not matter where you live, you can simply open an account with any Forex broker and start trading immediately. In the Forex market, you can trade any currency pair. You always have a base currency and a counter currency. For example, in the EUR/USD pair the EUR is the base currency and USD is called a quote currency. You can buy and sell any particular currency pair. Suppose, you are buying the EURUSD pair, then it means you are buying Euros by selling dollars. The opposite is for selling the EURUSD pair. There are several pairs, which will discuss in one of the other posts. The Forex market is dependent on a large set of economic activities, and on the other hand the Forex market movements also affect the economies around the world. Partners Liquidity Providers Orders Liquidity & interbanks Rates Mundo Markets Banks Brokers

6 WHY ACQUIRING KNOWLEDGE IS IMPORTANT IN THE FOREX MARKET?

7 Why acquiring knowledge is important in he forex market? Many people think that making money in the Forex market is very easy and they just need to open an account to make profits. However, this is not correct as Forex market without proper knowledge is just like gambling. There are some traders who think that they might lose money in the Forex market, but that is not the case as people lose money in the market when they do not know how to trade and plan trades in a correct way. Let us discuss a few things, which will throw light on why having the right knowledge in the Forex market is very important. Experience Matters There are a few things which are valid for all sectors, including the financial market. If someone does something without proper knowledge of a particular subject, then the chance of a failure is very high. We learn with experience, change plans with the experience and act in a correct way at the right time. Trading activity is not new and it is here for several years, and there are people who possess immense knowledge in trading. Moreover, there are a lot of people find Forex trading as a worthwhile and lucrative venture. The Forex market can sometimes be a very complex market. Let s say we are trading in a stock market and you are planning to buy a stock of a particular company. What you need to do for this is gather a good amount of knowledge about the company and analyze the mood of the market in the basic step. However, in the Forex market you need to analyze a lot of things before getting into a trade. This is because the Forex market involves the buying and/or selling of different foreign currencies in the global market.

8 06 One interesting thing is that you will find a lot of different currencies, as almost every country has its own currency. So, if you are planning for a big venture and for a long term, then you need to monitor a lot of things around the world. This is one of the other reasons why acquiring knowledge is very important in the Forex market. There are many currencies, which one can monitor and gain data in time, including the Euro, British Pound, Canadian Dollar, US Dollar, Australian Dollar, Japanese Yen, and Swiss Franc. There is one advantage of the Forex market that you need not to go any exchange to gain knowledge, acquire data and place trades. You can do everything from your home. So, doing research work is not at all costly, as all you need is a computer and a proper Internet connection. In time, you can devise your own strategy and use it in trading. If you do not have a right path, then you probably won t get success in the medium to long term. You need to make use of right info and resources in order to get success in the Forex market. So, always have the correct knowledge before making a decision.

9 WHY YOU NEED TO KEEP AN EYE ON FUNDAMENTALS ON THE FOREX MARKET?

10 03. Why you need to keep an eye on fundamentals in the forex market? FOREX 08 As we discussed in one of the other articles that the Forex market moves mostly in line with the economic activities around the world. So, let s say we are monitoring the EUR/USD pair, then we need to follow fundamentals in the Euro zone and the US. Mostly, this is not all as other market related activities around the globe also affects a particular pair. So, the scope is not at all limited, and in order for a better insight one has to follow all the key fundamentals on day to day basis. Now suppose, there is a slowdown in the China, then it not only affects the Chinese currency, but also affects the currencies of related countries. In this example, the Australian dollar and the New Zealand dollar might also get affected. So, one might say that fundamental analysis is very important in the Forex world. Trader s Perspective Not every trader thinks that we need to follow economic releases in the Forex market. One trader might say that the fundamentals are mostly priced in and the market is always a way ahead of it, and for them what matters is the technical analysis. However, there is one more perspective or we can say that other intelligent trade would say that if you need to hold a position in the long term and understand how the market moves, then keeping a close eye on the fundamentals is very important. One important point to note here is that the technical analysis only keeps track of the past, and not of the future. So, in order to understand the market in a better way following economic activities closely is a key aspect. However, I personally feel that following only fundamentals will also not help. Let me give an example. Let s say there is a technician who wants to repair an electronic product. In order to repair that technician need to know how to repair a product also need tools to repair it. For me knowledge of repair is following fundamentals in the Forex market, and tool is knowing technical analysis.

11 09 Both things go hand in hand, and if you know one and fail to understand other, then there is a high probability that you won t be able to repair it and in our case trade efficiently. The Forex market is very tricky in many ways, so any newbie with insufficient knowledge and impatient attitude might not gain in the long term. So, a good Forex trader needs to follow charts as well as economic releases closely. You need not to follow all economic activities. In order to get a basic and important knowledge you can follow releases related to the labor market, inflation, consumer spending, employment cost index, government spending, producer price index, etc. The Forex market can be very predictable at times when you know what exactly the market is pricing in and how the outcome would affect a particular currency. So, my advice would be to follow both things closely to trade smartly and efficiently.

12 WHY YOU SHOULD TRADE IN THE FOREX MARKET?

13 Why You Should Trade In The Forex Market? Many people wonder why we should trade in the Forex market, and think that they might lose money. However, that is not true for smart investors. People lose money in the Forex market when they do not know how to trade and plan trades in the Forex market. In this article, we will discuss all important points which make the Forex market the most interesting market in the investor s world Liquidity One of the most important reasons why people chose to trade in the Forex market is because of liquidity. One of the recent reports published mentioned that the Forex market could handle trades even if the net volume goes above the 1.8 trillion dollar per day. Now, that is a huge number and speaks volumes of the money flow in the Forex market. This also means that there are investors at both sides of the market at any given point of time. So, there are sellers and buyers available for almost each traction. Every order is filled instantly at the market price. One can buy and sell any currency pairs at any moment cause there will always be a seller for your buy orders and vice versa No Manipulation The second most important point which we need not to forget in the Forex trading is that there can be no insider or manipulator. The value of a currency changes on the economic activities and several other correlated factors for a particular currency or currency pairs. This is not the case in the stock market, where there can be a manipulator who can obtain the information before anyone else gets it. So, they go ahead and buy/sell that particular stock. Such activities are not at all possible in the Forex market. So, one might say that you are safe while placing trades in the Forex market where there will be no manipulator taking advantage of any kind of information.

14 Operation (24 x 5) The Forex market is non-stop trading for five days a week, excluding weekends. It never stops. There are some banks offering trading facility on the weekends, but liquidity is not that good as on the other days. So, you can trade at any time of the day (weekday) in the Forex market and take advantage of the market movements all around the world Small Investment There is one major point allowing every person to invest in the Forex market. You do not need thousands of dollars to start trading in the Forex market. You can invest around $100 and start trading. There are some brokers out there allowing trading in a cent account. So, you can even trade with as low as $10. There is no issue with the investment, as a person with even $10 can start trading in the Forex market. However, there is a theory that if you are planning for a long term, then investing a good amount helps in the Forex market. We will cover this topic in one of the other posts.

15 ALL ABOUT MT4 YOU NEED TO KNOW

16 05. All About MT4 You Need To Know FOREX 14 If get into the Forex world, then you must know one important platform i.e. Metatrader 4, which is also known as MT4. It is one of the most popular Forex trading platforms, which is also the most used trading platform. According to me there is no better trading platform or station in the financial world for trading, including the Forex market. All most all Forex broker provides MT4 platform as a free software to download which can be installed to use in both Live and Demo accounts. So, once you open an account with a Forex broker you will be provided with a link to download MT4. We at Mundo Markets also offer MT4 platform, which can be downloaded and used in both demo as well as live accounts. Let us discuss some of the important features of the MT4 platform and try to get an insight why it is the most widely used station Why MT4? The main purpose of using the MT4 platform is for analyzing charts, utilize technical analysis tools, and place and manage trades. So, you can not only analyze price action, but also use it in an effective way to study technical tools. It is a platform where one can easily manage and place trades. In the image shown below you can easily see there are different tabs, including trade, Account history and mailbox. Account history is the one which can be used to see the past trading history. Trade section as can be seen used to manage trades. There is a market watch section where you can watch live trading feed where you can watch live rate of all instruments or Forex pairs. The main screen which can be see is the one used for analyzing charts.

17 05.2 Automated Trading FOREX 15 Probably one of the most important advantages of the MT4 platform is automated trading. The MT4 platform includes a built-in editor and compiler where one can access a free li library and a proprietary scripting language, MQL4. The mentioned language is used to develop automated trading programs which is also known as Expert Advisors. There is a market as well where you will find thousands of expert advisors and indicators which can be used in the MT4 platform for trading. There is an Editor as well which can be used for writing your own custom indicators and expert advisors. Once you get an EA or indicator, then you can easily attach them in the MT4 platform to perform a variety of functions.you can do a lot of things in the MT4 like drawing trend lines, horizontal lines for support and resistance, attach indicators, view different timeframes (one min, five minutes, fifteen minutes, thirty minutes, one hour, four hour, daily, weekly and monthly), insert different shapes in charts, insert patterns and Fibonacci retracement. There are many other features as well which can be used in MT4. There even mobile version of the MT4 which can used on mobile apps. So, what are you waiting for download MT4 now and start using this amazing app.

18 BUYING AND SELLING SMARTLY IN THE FOREX MARKET

19 06. Buying and Selling Smartly In The Forex Market FOREX 17 As discussed in other articles you need to be smart while trading in the Forex market. In this article we will discuss some basic tricks which you can use while buying and selling in the Forex market. If you follow some of the tricks mentioned in this post, then the chances of not getting stuck in a bad trade would decrease significantly. And, you would surely end up on the winning side in the medium term. There is one basic rule in the Forex market i.e. nothing goes in the straight line, so what goes down must go up at some point of time. Similarly, what goes up must go down at some point of time. All matters is the average. If you consider 5-8 years average, then any particular instrument might have traded in a cycle of ups and downs and mostly formed an average price. Buying Dips and Selling highs So, if we consider this fact, then one can consider buying a Forex pair or an instrument when price is trading at lower levels. This is considered as a wise option. If you buy on the high side of the prices, then you might get stuck in a trade and might even suffer a loss. So, buying dips strategy works for most of the time. There is one more side of the coin i.e. following a trend. I discussed this in one of the other articles that you can consider going with the trend as well. So, if a Forex pair or an instrument is in an uptrend, then you can follow the trend and enter a buy position. In that case you need to be smart and just not enter at any price. There is always a major role of support and resistance. So, you need to keep an eye on the important levels, and trade accordingly. Similarly, we can consider selling highs in a Forex pair or an instrument.

20 18 The chances of winning will always be more compared with selling lows. Let s say 6 year low in the AUDUSD pair is And you entered a sell trade around the mentioned level. Do you think it is a wise option? It s better to buy around the mentioned level, then selling. Trend rule applies for selling as well. If a Forex pair or an instrument is in a downtrend, then you can follow the trend and enter a sell position. Entering into a position can be combined with price action. You need to make sure you are not ignoring important levels. Buying dips and selling highs trick is nice as long as you implement it in a nice way. It does not mean that you are simply entering a buy position if the price of an instrument is at lower levels. It can still continue trading lower, so you need to monitor other signs as well. This is only one of the tricks which keeps you away from a really bad trade.

21 ABOUT MUNDO MARKETS Mundo markets is a fast growing global provider of foreign exchange trading and related services. We believe in honesty and transparency and provide a medium to our clients for the greatest chance of success in the forex markets. Clients are our priority and we are always available to work hand in hand with them. IN THIS E-BOOK! Find out what you need to know as beginner in forex markets What is Forex Market and How it Works? Why Acquiring Knowledge Is Important In The Forex Market? Why You Need To Keep An Eye On Fundamentals In The Forex Market? Why You Should Trade In The Forex Market? FOREX FOR BEGINNERS Share This E-book: