The purpose of forex trading itself is none other than estimating the direction of price changes, so you can profit from the difference between buying and selling values. However, learning forex trading is not as easy as imagined. This is evident from most people who are just learning forex in MyFxbook. They will quickly go bankrupt. Therefore, how to start forex trading for beginners? There are several tips to learn forex trading that can be mastered in a short time.
1. Understand Common Terms Used for Forex Trading
Before making any investment, you need to understand the various terms used in the trading process. Some general terms to know are:
A pip is the change in value between two currencies, referring to 4 decimal places behind the comma in the exchange rate. If EUR/USD is at 1.1205 and then moves to 1.1206, the difference of 0.0001 is 1 pip.
- Base currency is the value of the base currency or the first currency in a currency pair.
- Pair currency is the exchange rate of a currency pair in forex, for example Euro/USD.
- Buy is a position to buy.
You sell at a high price, then buy back when the price is low. The difference will be to your advantage.
2. Understand How Forex Trading Works
For example EUR/USD = 1.1215. The notation above shows 1 euro = 1.1215 USD. The following is an example of its application in trading.
- Buy: 1.1215
- Sell: 1.1212
The ‘buy’ price shows the price to buy 1 Euro is 1.1215 USD, while the ‘Sell’ price shows the price to sell 1 Euro is 1.1212 USD.
When trading, your benchmark is the base currency or the first position of the pair against the opposing currency. So when buying EUR/USD, we expect the base currency Euro to increase in value, and vice versa. If your prediction is that the USD will strengthen against the Euro, then the best position to take is to sell.
3. Choose the Right Forex Trading Broker
Forex trading occurs between two parties, namely you as a trader and a broker, without a central exchange authority. The role of the broker is very important. Brokers are liaisons between market participants and the international forex market. Brokers also provide facilities so that people can transact online.
Make sure that the broker has clear permits and regulations. The most famous example is FCA UK of England.
4. Use Leverage If Trading with Small Capital
With leverage, you can make large amounts of transactions with minimal capital. To be able to carry out this transaction, of course, the funds owned must exceed the guarantee fund. The types of leverage are:
- 1:1 = Guarantee equal to the contract value or 100%
- 1:50 = Guarantee of 2% of the contract value
- 1:100 = Guarantee of 1% of the contract value
- 1:200 = The guarantee is 0.5% of the contract value
- 1:400 = The guarantee is 0.25% of the contract value
- 1:500 = The guarantee is 0.20% of the contract value
5. Understand Forex Trading Risk Management
In order to survive long in the world of Forex contests trading, you also need to learn risk management. Furthermore, never use money for daily needs. In addition you also have to set a Stop Loss. In contrast to Stop Loss, there is Take Profit.
With Take Profit, if the position is profitable, the platform will automatically close the position.
6. Beware of Forex under the guise of a Trading Robot
For forex traders, one way to find profit in buying and selling foreign exchange transactions (foreign exchange/forex) is automatically using a robot (forex trading robot). The reason is, the existence of an unlicensed website domain tends to be dangerous. Moreover, in 2021, the Ministry of Trade through the Commodity Futures Trading Supervisory Agency and the Ministry of Communication and Information have blocked 249 website domains in the field of commodity futures trading that do not have permits.