Forex for Dummies

Forex Basics

If you have already read the What is Forex? page, then you should know what Forex market is and what it is all about. If not, please read it now. There are five essential aspects of foreign currency market everyone should be aware of:

Understanding and mastering these aspects of trading is crucial to get a proper start in Forex.

Fundamental Analysis

Forex fundamental analysis is a type of market analysis that is performed based only on actual events and macroeconomic data related to the traded currencies. Fundamental analysis is used not only in Forex but can be a part of any financial planning or forecasting. The concepts that are part of fundamental analysis of currencies: overnight interest rates, central bank meetings and decisions, any macroeconomic news, global industrial, economic, political, and weather news. Fundamental analysis is the most natural way of making FX market forecasts. In theory, it alone should work perfectly but in practice, it is often used in pair with technical analysis. Recommended e-books on Forex fundamental analysis:

Technical Analysis

Forex technical analysis is a type of market analysis that relies only on market data numbers - quotes, charts, simple and complex indicators, volume of supply and demand, past market data, etc. The main idea behind technical analysis of currencies is the postulate of functional dependence of the future market technical data on the past market technical data. Same as with fundamental analysis, technical analysis is believed to be self-sufficient and you can use it alone to trade Forex successfully. In practice, both analysis methods are used. Recommended e-books on Forex technical analysis are:

Money Management

Even if you master every possible method of market analysis and will make very accurate predictions for future Forex market behavior, you will not make any money without a proper money management strategy. Money management in Forex (as well as in other financial markets) is a complex set of rules that you develop to fit your own trading style and amount of capital you have for trading. Money management plays very important role in getting profits out of Forex; do not underestimate it. To get more information on money management, you can read these books:

Trading Psychology

While learning a lot about market analysis and money management is an obvious and necessary step to become a successful FX trader, you also need to master your emotions to keep your trading performance under strict control of mind and intuition. Controlling your emotions in Forex trading is often balancing between greed and fear. Almost any known psychological practices and techniques can help currency traders to follow their trading strategies rather than their spontaneous emotions. The problems you will have to deal with while being a professional Forex trader include:

  • Greed
  • Overtrading
  • Lack of discipline
  • Lack of confidence
  • Blind following others' forecasts

These are very professional books on psychology written specifically for financial traders:

Forex Brokerage

Every Forex trader, like any other professional, needs tools to trade. One of these tools, which is vital to be in the market, is a Forex broker and specifically for the Internet - an online Forex broker - a company which will provide real-time market information to traders and bring their orders to the Forex market. These are the questions to answer when choosing the right Forex broker:

  • Is it a professional company, which you can trust?
  • Does it provide you with stable and adequate data feed of rate quotes?
  • Does it execute your orders fast and accurately?
  • Are its spreads, commission, fees, swaps, and slippage reasonable?
  • Does it support the withdrawal/deposit methods that you use?

For the beginning Forex traders, I recommend these four brokerage companies — I believe that they are among the best brokers to start with:

  • RoboForex — one of the most popular and innovative brokers with MetaTrader platform and comfortable trading conditions for all kind of traders.
  • InstaForex — a reputable MetaTrader 4 broker; allows Islamic (swap-free) accounts and zero-spread accounts.
  • EXNESS — a good company because you can start trading Forex with as little as 1$, use both MetaTrader 4 and MetaTrader 5 platforms. It accepts multiple deposit and withdrawal methods, including WebMoney, Skrill, and Neteller.
  • AGEA — another broker with very low minimum account size — just $1. It offers two trading platforms: MetaTrader 4 — a current standard in online Forex, and Streamster — a custom newbie-friendly platform with standalone application, web interface, and mobile app.

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Forex trading bears intrinsic risks of loss. You must understand that Forex trading, while potentially profitable, can make you lose your money. Never trade with the money that you cannot afford to lose! Trading with leverage can wipe your account even faster.

CFDs are leveraged products and as such loses may be more than the initial invested capital. Trading in CFDs carry a high level of risk thus may not be appropriate for all investors.