Welcome to Forex Trading Tutorial For Beginners basics guide. If you are new to Forex trading and willing to start learning, you have landed at the right page.
This is a step by step Forex trading tutorial. This tutorial aims to provide all the necessary information to newcomers in one place.
This tutorial is created by a Forex trading expert; AKA Technician. Technician has been in the markets for over a decade . He is specialized in technical analysis and running for the Chartered Market Technician(level 2) certification. In addition to a Master’s degree in finance .
In this guide, we will explain the most basic definitions and concepts. The concepts you must know before you start learning how to analyze the markets, and make trades.
We will explain things like, what Forex trading is, and how trading works. Also, what is a Forex broker and how to choose one. How to read the prices and much more .
After completing this tutorial, you will be ready to start the intermediate level tutorial. The intermediate tutorial covers analysis and forecasting: Technical Analysis Basics Tutorial.
We ask you to be patient while reading, especially in the beginning. If you feel that a topic is not cleast keep going, it will be clearer by the end of the tutorial.
If you have any questions after completing, please drop it in the comments section. It is at the end of this page.
You can move between chapters through the drop down menu below.
As a Forex retail trader, you don’t have direct access to the inter-bank market. And here comes the role of a Forex brokerage firm.
Step 1: Broker Types
To be able to start trading, you must open a Forex account with a Forex broker. We will give a quick introduction about forex brokers, and at the last section of the tutorial “How to Choose a Forex broker” we will revisit this topic with greater details.
Forex Market Makers
The Forex market maker is a company that is always ready to buy or sell a financial instruments, and sets both the sell and the buy prices for their clients. They make transactions at these prices with their customers. That’s why it is called a “liquidity provider” for its clients.
If you want to sell, the Forex market maker will be the buyer and if you want to buy it will be the seller. Market makers must take the opposite side of your trade.
In Forex, we simultaneously buy and sell currencies. Simply if you want to travel from the U.S. to Japan, you will go to the bank to exchange your dollars to the Japanese Yen.
So if you buy EUR/USD, it basically means that you are buying euro and selling U.S. dollars at the same time.
Now, let’s have a look on how the exchange rate of the Euro against the U.S. dollar will look like, it’s called a price quote:
The first price is the selling price(called Bid as well) and the second one is the buying price. The selling price is the price that you will get if you want to sell the EUR/USD, while the Ask is the price you will get if you want to buy it.
The difference between the bid and ask prices is called the spread, and it goes to the Forex broker as sort of commission on the trade.(We will discuss price quotes later in this tutorial).
ECN Forex Brokers
ECN Forex brokers provide access to the inter-bank market by using an electronic system that passes prices from multiple liquidity providers to clients. Such as banks and market makers connected to this electronic communication network (ECN). The broker then displays the best bid/ask quotes on their trading platforms for traders.
ECN brokers provide the tightest spreads in the industry. An ECN broker usually charges a commission (in addition to the spread) on each trade made by clients.
Step 2: Open a Demo Trading Account
To trade Forex, you need to open an account with a broker. Then using their trading platform, you can start making trades. But, before opening a real account, a common and necessary practice among new Forex traders is to start trading using a demo account.
To open a demo account start by downloading the trading software. A widely used software to trade Forex is the MetaTrader platform. It is used by most Forex brokers. We will use MetaTrader software as our default trading platform for this tutorial. You can download it here.
The Basics of Metatrader 5 Platform
Let’s first introduce you to the Metatrader 5 terminal. Go ahead and open the MT5 terminal if it is not already open. The default window should be like this:
- Market Watch Panel: On the left-hand side is the market watch panel, where all the pairs that you can trade are shown, along with their prices. The initial list is far from complete. To show the rest of the pairs, right-click on any of the pair and click “Show All”.
- Navigator: Just below the market watch, the navigator panel. Here you can access your accounts and many other tools that we don’t need at this moment.
- Toolbox(called Terminal in MT4): At the bottom is the Toolbox panel. This is where you can see your capital and your trades along with many metrics that we will explain shortly.
You can move along the tabs, one important tab is history, which show you closed positions.
- Connection Status: In the right down corner of the platform you will find if the connection with the broker is on or off.
- Charts: Here you can see all the charts you open.
- Make an order: You can place new orders through this button.
Those are the main elements that you need to know at this stage. Go ahead and explore the terminal and just try, its demo money we do not have to worry :).