Category: Forex Trading

Introduction

There are multiple markets that professional traders use to make a profit. If you’re looking for the benefit of forex trading, this is a question that we will dissect. What specifically about the forex market do traders consider as a benefit? 

Today we will examine the benefit of forex trading for both retail investors and institutional investors. The latter means large investors with access to billions in capital. It includes pension funds, investment banks and hedge funds. Retail investors use their wealth to try and turn a profit and usually operate on the much lower end of the scale. So first off, let’s start with the basics.

What Is Forex Trading?

Forex trading is the buying and selling of currencies on the foreign exchange market. A key benefit of forex trading is that it is a global marketplace where traders can exchange currency pairs. If you are wondering when you can trade forex, the market doesn’t close during the week; it is open 24 hours a day. As a result, it is one of the most liquid markets in the world, with an estimated daily turnover of over $7 trillion.

Main Currency Pairings

While dozens of currencies are paired, the main trading pairs that see the most volume revolve around the US Dollar. Due to the liquidity involved, there is more guarantee for traders looking to buy and sell significant positions. As the optimum world currency, the US Dollar trades in major pairings of the Euro (EURO), GBP (Great British Pound), and Canadian and New Zealand Dollars (CAD/NZD). Other pairings include the Swiss Franc (CHF) and the Japanese YEN (JPY).

As well as forex trading benefits allowing access to high liquidity, low transaction costs, and the ability to use leverage to maximise your profits. Additionally, traders can take advantage of scalping, hedging, and arbitrage strategies. 

Scalping for beginners might not be the easiest way to begin your trading journey. However, money is still to be made in this industry so long as you understand it correctly and conduct thorough market research. One of the benefits of trading forex is that you can build your knowledge yourself. 

However, you can still lose all your money even with the best knowledge of the market and the utmost due diligence. This is because your capital is always at risk, and even though the market may have behaved in one way historically, this doesn’t mean it will do the same again.

Medium To Long-Term Investment Strategies

One option for those looking to implement an investment strategy over a more extended period is swing trading. If you’re entering the forex trading market in 2023, there are many things to consider. First, irrespective of your trading strategy, you must perform a lot of research. If you do not understand the currency pairings you are trading, this is very risky, and you could lose a lot of money.

Whether you are trading short, medium or long-term, there are several chart patterns you can attempt to use to your advantage. This includes several different candlestick patterns, which you can also learn about.

With these features combined, forex trading can be an attractive investment opportunity for those looking to diversify their portfolio or increase their earning potential. Trading with a full-time job is more difficult as you do not have as much time as professional traders. However, a lot of experienced traders will mix their forex portfolio with other tradable assets, including

• Commodities – such as gold and silver
• Cryptocurrencies
• Stocks

Now that we have established the sort of portfolio spread you can find on the books of many professional traders and identified why forex trading is so propitious for many, let us find out the specific benefits of forex trading. Instead of focussing on a singular benefit of forex trading, we have highlighted ten for you today.

#1 – Leverage & Margin

Leverage and margin are two of the most critical concepts traders need to understand when trading in the forex market. However, this technique is not advised for beginner traders. The benefit of forex trading is that you can use these tools due to the high levels of liquidity in the market. 

You can leverage a currency pair anywhere between multiples of 1 to 100. One of the critical differences that you must be aware of is that you can be liquidated when using leverage. A standard spot trade can be rough if there is a serious market correction. However, not as bad as a leveraged trade. 

If you do not employ effective measures such as a stop loss or take profit level, your entire position could be liquidated if it reaches a certain point. So this definitely wouldn’t be a benefit of forex trading if you poorly executed it.

A trailing stop loss is one of the most common tools to mitigate risk effectively. Another benefit of forex trading is that you can use automatic levels to buy and sell your asset and remove the negative emotions of trading.

Leverage allows traders to control a more significant amount of capital than they would be able to with their funds. At the same time, the margin is the level of capital to authorise the position. For example, George Soros used leverage to short the GBP on Black Wednesday in 1992 and netted millions of dollars.

Traders can use leverage to increase returns on investments, while margin accounts can help traders manage risk by allowing them to maintain a smaller balance in their accounts. Understanding these concepts is an essential part of successful forex trading.

#2 – Low Transaction Cost

Low transaction cost is a benefit of forex trading that most traders will highlight as the main selling point. Of course, this can vary depending on what country of the world you operate in. However, generally speaking, the transaction cost is one of the key benefits of forex trading. With the help of low transaction costs, traders can save a lot on their trading expenses. This is because the spread cost is generally lower than in other forms of trading.

The spread cost is a fee brokers charge for executing orders in the market. Depending on the currency pair and broker, it usually ranges from 0 to 2 pips. Low transaction costs make it easier for traders to enter and exit trades quickly without incurring significant losses due to high spreads. Therefore, shorter-term trading methods such as scalping are preferred to more extended periods such as day trading.

Overall, low transaction costs are essential for successful forex trading as it allows traders to keep their trading expenses down while still capitalising on potential profits from their trades.

#3 – High Liquidity

With quotes such as “fortune favours the bold” and “if you don’t risk anything, you risk everything”, – beginner traders might be enticed by the profits on offer courtesy of some big traders and investment banks. However, with big banks slashing banker bonuses, it is crucial to get a balanced view. 

Much like anything in life, the truth is somewhere in the middle. There is no get-rich-quick scheme, and trading forex is a tough market to navigate, especially as a retail trader or investor. That doesn’t mean that you won’t be able to  

Some traders make large amounts of money due to the high liquidity on offer. High liquidity is generally regarded as a crucial benefit of forex trading. Essentially, this means that in the event of a serious price retrace or boom, the money is available for you to buy or sell your chosen forex pair.

#4 – Volatility

Volatility, however, is the degree to which an asset’s price fluctuates over time. High liquidity and volatility in forex trading can offer traders a range of advantages, such as reduced transaction costs, faster execution times and greater flexibility when entering and exiting positions. It’s not all fun and games, though. 

As ever, markets are so dangerous because what goes up must come down. A severe correction can result in a heavy loss, and as we touched on earlier, if you are trading with leverage, you could lose all of your money. However, if you time your trade at the bottom and the market rebounds, the volatility can be seen as a benefit of forex trading. 

#5 – The Internet

Despite naysayers and eternal pessimists besmirching the impact of the internet on society, there are many positives. Many would argue that it has also facilitated a tremendous amount of good. The rise of the internet is one of the biggest forex benefits. 

Knowing what news will move the market is vital if you implement effective trading psychology. Economic news, world news and global economic indicators are just three crucial components. Another benefit of forex trading is that if you can observe these correctly, you could begin to have a strategy that works. 

Due to the substantial institutional investment, many multinational and multi-billion dollar corporations have skin in the game. This is why trading forex is considered a better market for some traders, as you can’t as quickly move it up or down compared to markets such as cryptocurrency.

#6 – 24/7 Market Accessibility

Forex trading offers investors the opportunity to access the global market 24/7. Some may argue that this isn’t necessarily a benefit as the market could move in the middle of the night when you aren’t at your trading desk. However, the risk management strategies discussed earlier are one way to turn a potential negative into a serious benefit of forex trading.

This benefit is significant for those who want to take advantage of international market movements without worrying about time constraints. This type of trading benefits people on all levels of the financial spectrum, irrespective of the time zone. 

For instance, if you are trading outside your full-time job, this may be a positive for you. But, on the other hand, stock trading can be more difficult, as the markets are only open between New York business hours.

Why trade forex when you can trade during business hours and rest easier in the evening? Well, that is one market often made, which entirely depends on your trading psychology.

With 24/7 market accessibility, traders can make decisions and execute trades at any time of day or night, allowing them to capitalise on profitable opportunities no matter when they arise. 

This benefit also allows traders to monitor their positions and adjust as needed, ensuring they are always in control of their investments.

#7 – Variety of Trading Instruments

Trading instruments are the tools that traders use to speculate on financial markets. They come in many forms, such as futures and buying or selling options. A variety of trading instruments is essential for traders to diversify their portfolios and manage risk more effectively. Moreover, insulating yourself from a serious market downturn is critical to turn forex trading into a prosperous venture.

With various trading instruments at their disposal, traders can also reduce the risk associated with investing in one asset class or instrument by diversifying their investments. It may not be a benefit of forex trading, but it makes up part of a more extensive portfolio which contains forex.

#8 – Available Literature

Unlike other markets, forex has a set rule of criteria that some incredibly successful traders have used in the past. Although cryptocurrency has proved an extremely lucrative avenue for some, as it is such a new market, you won’t find a wealth of literature on the topic from experienced and reputable traders.

This doesn’t mean you will be able to become an overnight success story; far from it. However, the internet isn’t always reliable, and the trading advice isn’t verified. Nevertheless, there are plenty of forex trading books, which is a benefit of forex trading, leading to it becoming a popular income stream.

#9 – Online Communities

This one can act as a positive and a negative. The internet is a global forum; not all advice will be in good faith. However, there are plenty of professional traders who offer support online. 

Whether via their YouTube channel, paid subscription services or active social media accounts. We aren’t saying you should pay money for their services, but you can find plenty of good advice online. Hence, the online forex community is another critical benefit of forex trading.

#10 – No Overall Ownership

Arguably the most underrated benefit of forex trading is that there is not one sole entity that drives the price of assets. Instead, Forex markets move in line with the economy, and many analysts state this is why trading forex is a better market than other assets such as stocks or cryptocurrency. 

Some have argued that commodities markets such as gold and silver operate similarly. However, forex is so intertwined with the value of several of the world’s biggest economies that there are no questions about ownership, market manipulation or liquidity issues. 

Introduction

Today, we will look at how you can begin to make inroads to start forex trading. Then, we will rewind right back to the basics, explain definitions you may not understand and then give you some tips that professional traders often use to amplify their trading psychology. 

Whether you want to learn forex trading step by step or already have a good knowledge of the industry, we will cover a broad range today that should help you on your trading journey. When you start forex trading, there are some key phrases and definitions to imprint into your mindset and method.

What Is Forex Trading?

Before we discuss how to get started trading forex, we should define forex trading. The foreign currency market is the largest trading marketplace in the world. For those on the outside looking in, there is occasionally a mistaken belief that the stock market or commodity markets, such as oil, are more significant than forex. However, this isn’t the case. On average, the forex market is worth over $6 trillion daily in trading volume.

It’s so enormous, but why? Well, all of the top world currencies are bought and sold in interchangeable pairs. So even though the US Dollar is the strongest and often referred to as the world currency, there’s also a multi-billion-dollar market in other currencies. 

Due to the fact these countries span several time zones, the forex market is a 24-hour market, unlike the stock market, which is open during New York trading hours. It is essential to realise this key distinction if you’re looking at how to start forex trading on your own. 

Due to the 24-hour market often sees spikes in activity at unusual times, such as the opening of the London and Asian markets. It is a good idea to keep an eye on these times if you’re looking to start forex trading regularly. For a beginner, we appreciate that this may sound daunting. However, if you’re wondering how to do forex on your own, you need to be completely aware of the market and how it operates.

What Other Currencies Are Used?

Other than the US Dollar, the other key currency pairings which see the most activity include

• Euro (EUR)
• Canadian Dollar (CAD)
• New Zealand Dollar (NZD)
• Australian Dollar (AUD)
• Japanese Yen (JPY)
• Great British Pound (GBP)

Knowing how to trade forex begins when you understand the activity that drives the value of these currencies in either direction. So, if you want to know how to start with forex trading, start with the basics, such as the more prominent currencies and some indicators to look for when trading.

These aren’t the only available currencies. You can also trade commodities such as gold. The pairing for gold is a US Dollar pairing symbolised as (USD/XAU). In addition, you can find other commodities such as silver which is (USD/XAG). If you’re interested in trading commodities, there are several ways to trade precious metals.

However, if you’re looking for the basics of how to get into forex trading, sticking to the main currencies and steering away from commodities is probably a good idea while you’re learning the ropes. 

How Do I Start Forex Trading?

If the foreign currency market interests you, this will be a question you’re asking yourself.

Due to the availability and accessibility of forex trading platforms online, now is one of the most accessible times to start forex trading. 

With great opportunity comes great responsibility. Therefore, it is essential to note a few vital things before selecting your chosen exchange: currency and how much capital you wish to use. Deciding to start trading forex is a bold, exciting and tense decision. Even if you believe you have what it takes to successfully trade forex and trade it as a full-time job, you need to be aware of the serious risk involved.

Ultimately, just because the market has acted one way historically doesn’t mean it will do the same again. Professional traders often lose money, and risk management must be critical in your strategy. Even if you’re using more straightforward methods, such as swing trading, instead of more complex strategies like Japanese candlesticks, you aren’t guaranteed to make a profit.

Risk Management

Knowing how to start forex trading doesn’t involve breaking down chart analysis and conducting hours of research. While these tools won’t harm you, it covers much more than that. An effective strategy starts even before you have entered any live position. 

The risks remain the same for traders with a long-term plan or those with a much shorter-term approach, such as scalping. However, managing them properly gives you genuine protection against market volatility or crashes.

Controlling Negative Emotions

Unable to control negative emotions is the number one cause of bad trades. It can lead to revenge trading and other types of trading where you are not using rational thought processes or psychology to enter the market at an opportune moment. If you want to understand how to do forex on your own, you need to appreciate that this is the leading reason traders lose money. 

This doesn’t just apply to beginner traders, either. Many professional traders have fallen foul of trading using negative emotions. Learning how to control them is critical.

One of the key ways to control your emotions when growing your understanding of how to trade currency is by using limits. This includes a stop limit or a take profit limit. If you have performed enough quality research before your trade, you will know where the take profit and stop loss levels lie. 

Long-term traders, such as Warren Buffett, do not use stop losses. It’s difficult to disagree with Warren Buffett, but many of his investments are long-term stock investments. Forex trading is a different ball game. Setting up stop loss in a volatile, 24-hour marketplace is essential if you don’t want to be subject to a sharp, damaging loss. 

Dollar Cost Averaging

If you’re trading over a more considerable period, then Dollar cost averaging is an excellent way to insulate your risk. If you want to hold an asset long-term, any fluctuations in the price shouldn’t bother you if you’re looking for a long-term return. Therefore, if the price drops sharply in the short term, you can purchase your asset at a lower price.

Let’s say your original investment cost is $0.40 per unit. If the price drops to $0.35, but you believe the asset will reach $1 in the long term, if you buy the same amount of the asset at $0.35, then your average entry is $0.375.

Ultimately, this is a better way of shielding yourself against risk. If you then have to sell the asset in the future, your overall loss is minimised, too, because of your lower entry. 

Choose Your Broker

With so many brokers and exchanges to choose from online, with many offering introductory deals, it is challenging to settle on a specific provider best suited to your trading needs. However, choosing a provider that suits you is crucial if you’re looking to start trading forex effectively.

Firstly, you want to ensure that the fees, such as commission and spreads, are competitive compared to competitor exchanges. For example, if you start forex trading and want to use day trading methods, you could see these fees ramp up. Therefore, ensuring you select a competitive broker with low fees is a great way to begin. 

Secondly, a broker with a varied selection of currencies is a solid indicator that they’re a reputable provider. A reputable provider usually has plenty of liquidity on their exchange and a sound business model. 

Looking at some online reviews or comments that people leave on social media is essential. This will further indicate how trustworthy the provider is and whether they’re suited to your strategy.

Thirdly, a provider regulated across all the currencies it handles is another sign that you’re dealing with a company that knows what they’re doing. Ensuring a provider has all the currencies you want when you start forex trading is pivotal. 

Finally, a broader point you could apply to all businesses is ensuring that customer service is high-quality. Again, you can quickly check this online, whether it is on social media or via reviews.

Start Forex Trading By Learning About The Markets

There are two main categories for educating yourself about the forex market. First, learning about the subject is crucial when trading forex. For instance, what causes the price of the US Dollar to rise or fall? Often, it will be economic news that moves the price of these assets up and down. 

Economic & World News

If there’s an interest rate hike, this impacts the Dollar. If there’s inflation, this also affects it too. Performing adequate research to understand what moves the market is critical if you’re looking for a strategy that works. Even if the US Dollar is strong, this can harm global economies. 

All of the world’s top currencies interchange with each other and are available in their separate pairings. Therefore, it is a juggling act of various components to ensure you know the underlying causes and triggers of price movements. 

It isn’t just economic news that can drive it. Big world news can also induce a shock in the market. This includes political instability, black swan events like the financial crash in 2008 or other factors such as the outbreak of war or the cost of living crisis.

These types of issues impact market sentiment and consumer confidence. Although the causes can be vast and the solutions can be challenging to find or manage, it ultimately leads to fewer people wanting to trade with their money, which brings the market volume down and the price of assets.

Practical Learning

The second category is to apply knowledge from proven operators in the forex market. You can find plenty of literature online, and although some of it is very useful, it is vital to be cautious. Nevertheless, adequately sourced and highly-rated literature on the topic can prove invaluable.

In addition, the best learning doesn’t have to come from books or live news. You can seek out a mentor who can guide you. It doesn’t need to be a one-on-one tutor, either. You can learn how to join forex communities online.

You must be cautious when it comes to finding a mentor. Unfortunately, although the internet has brought a lot of markets together, and many traders use it to share information for the greater good, there are also people acting in bad faith. 

Luckily, a quick internet search can corroborate the information that rogue traders are selling you. For example, if they claim to have worked for big investment banks and have a proven track record, find them online and see what people who use their service have had to say.

Step by step forex trading is necessary if you’re a novice. You don’t want to miss any key pieces of information. You may start forex trading from scratch or begin forex trading from other markets. However, as long as you have enough practical knowledge to start forex trading with a plan, you’re already starting with the correct mentality.

Conclusion

Although starting forex trading may seem intimidating and a jungle, it is far from it. Like most things, the fear of the unknown usually ultimately outweighs the practicalities of reality. The internet has been the most groundbreaking tool to start forex trading as a retail trader.

As long as you pick up the main nuggets of knowledge we have given you today, you’ll start on a better footing. Risk management, developing your knowledge and seeking out a reputable broker or mentor is essential. By implementing this into your mentality, you will start forex trading with all the necessary tools. 

Once you have these tools, you learn when you start forex trading with your own money. Unfortunately, many retail traders lose money in the first 12 months. Some estimates have put this number as high as 80%. Unfortunately, sometimes this is the best lesson. Nobody wants to lose money, but the experience can often be the best teacher. 

If you want to make easy money or life-changing wealth that somebody on social media advertised, you should think again. To start forex trading, you need to have the right mindset and realise that there are no such things as a get-rich-quick scheme. It takes effort, time, resources and money. Once you understand this clearly, you can start forex trading with clear expectations and grounded psychology.

Introduction

Trading platforms for forex trading allow the average person to speculate in the markets from the comfort of their home. Without them, this wouldn’t be possible. Just as there are many pairs to analyze, there are tons of trading platforms.

As a novice, the variety of selections can be daunting. Fortunately, we’ll look at the top 5 forex trading platforms for beginners here. 

What are forex trading platforms?

Forex platforms are computer programs or charting software allowing you to trade currencies and other instruments (it’s sometimes confused with a broker, but more info about that here). 

The platform contains a range of charts for the different markets connected to the broker. While you can use some software without a broker (through a demo or practice account), they are necessary for live trading.

Platforms to trade forex work on desktop, mobile and web versions and need constant internet for users to view live prices, execute positions, etc. Some charting software is free, while others use a freemium model and charge for certain pricing features.

Let’s look at the things you can do on FX platforms in more detail:

• Viewing live prices/analysing: When you’re not trading, you’ll spend a lot of time browsing charts like candlesticks and Heikin Ashi on various instruments. 

All forex trading platforms for beginners will have a user-friendly interface where you can easily switch between different markets. Here, you can analyze the charts using tools like indicators and graphical objects that draw support/resistance, chart patterns, etc.

Trading software allows you to create a watchlist, a set of different markets you monitor for potential opportunities in the near future. Additionally, you can make many profiles or templates for each.

• Executing positions: The primary role of top forex platforms is for you to place orders or trades through your broker. After all, we are here to grab those pips and increase our equity curve. 

Most charting software allows traders to open a market order (instant execution) and a pending order (an order to be triggered at a future date and price). 

There is usually a terminal for these positions where you can see the time of the trade, the lot size, symbol, entry, stop loss/take profit prices, swap and floating P&L. You can also close your orders manually. All of this activity shows up on your account history.

• Account management: Forex trading platforms for beginners allow you to have multiple accounts on one interface. You can easily switch between them when necessary. Most platforms are connected to your broker’s wallet, where you make transfers and withdrawals.

• Extra trading services: These include news from your broker, economic releases, articles, copy trading, access to various stores, and so on. 

• Create automated trading systems: Top forex platforms are hubs for developers to build, test and deploy robots to trade the markets without human involvement.

Which are the best forex trading platforms for beginners? (top 5)

With the formalities out of the way, let’s look at the top forex trading platforms for beginners. We will provide an overview of the service and summarise it with a list of pros and cons.

5. NinjaTrader

NinjaTrader is a software developer corporation that offers a charting platform and brokerage service. It is an American company (based in Chicago and Denver) that was established in 2003.

NinjaTrader is among the most advanced FX platforms for charting and data provision. With a broker of the same name, you can trade forex, futures and stocks. For other symbols, you can use NinjaTrader with FOREX.com, FXCM, Interactive Brokers, TD Ameritrade, and OANDA, among other selected brokers.

The software supports algo or automated trading with NinjaScript, its proprietary programming similar to C#. 

NinjaTrader is free to use for its standard features. Yet, there are set leasing fees for advanced features like volume profile indicators, ‘Enhanced SuperDOM,’ and market depth. Expect to pay between $225 and $720 for a subscription (or $1099 for a one-time license).

Overall, these are not things you need as a newbie. NinjaTrader’s standard qualities make it among the forex trading platforms for beginners.

Pros:

• Supports numerous markets aside from forex
• Advanced charting features
• Well-established brand
• Hotline available for customer support

Cons:

• Less beginner-friendly than other FX platforms
• Only compatible with a handful of brokers
• No native mobile app available

4. TradingView

In the past decade, TradingView has steadily risen to the ranks of the go-to forex trading platforms for beginners. Yet, at the same time, it has charting sophistication and aesthetics matched only by a few.

TradingView began in September 2011 and is a US-based financial technology company (TradingView Inc.) The platform is a supercharged charting service and a social network for traders to share trading ideas in countless groups.

As one of the supreme FX trading platforms, TradingView is highly optimised for fast browser usage. Alternatively, you can use the software as a desktop or mobile app on Windows, Mac and Linux.

TradingView also boasts some of the broadest support of non-forex instruments. Over 90 stock/futures exchanges and +40 crypto exchanges are connected on the platform (over 10 forex brokers are also supported).

It is a much better platform to follow other markets on one interface more easily than MT4 or MT5. 

TradingView comes in a free (with ads) and paid platform. The subscription ranges from $12.95 (roughly $130 a year) to $59.95 monthly (or approximately $479 yearly). These plans offer extra indicators, more historical data, multi time-frame analysis, bar replay, etc.

You can get 30-40% yearly discounts from TradingView and affiliated websites.

Pros:

• Has the most aesthetically-pleasing charting
• Works on your browser, desktop and mobile phone
• Allows trading of multiple markets with tens of brokers
• Social media functionality
• Most accessible advanced features

Cons:

• Doesn’t support automated trading
• Free version has many limitations (and ads)

3. cTrader

cTrader is a charting platform launched in 2011 by Spotware Systems, a Cyprus-based software developer) available on various operating systems. It is MT4’s closest competitor and certainly among the leading forex trading platforms for beginners.

One advantage over MT4 is that you access level 2 or market depth data with cTrader. Here, you can see real-time orders from the platform’s connected brokers (around 10). 

This feature is beneficial for short-term speculators like scalpers and day traders. Unlike NinjaTrader or TradingView, you can access all of cTrader’s features free with a supported broker.

You can create robots on cTrader (cBots) using c# and your own trading applications (with cTrader Open API). Finally, cTrader has integrated copy trading with cTrader Copy.

Pros:

• Provides easier access to level 2 data with certain brokers
• Free to use
• Sleeker than MT4
• Supports the creation of robots and copy trading
• Mobile app available

Cons:

• Limited number of brokers supported

2. MetaTrader 5 (MT5)

MetaTrader 5, or MT5, is the successor to MT4, a charting platform released by MetaQuotes in 2010. It is similar in many ways to MT4, making the two the most user-friendly forex trading platforms for beginners.

The main reason for the release of MT5 was to have more instruments like bonds, options, stocks and futures. MT5 also beefed up the speed, number of order types, number of order types and a few other bells and whistles.

It also introduced a new programming language (MQL5) for creating robots or expert advisors. MT5 is available on MT5 on the Windows, Linux, Huawei and Android operating systems. It also runs on Mac through third-party software like PlayOnMac.

Although MT5 is an improvement, MT5 is still more widely known.

Pros:

• Popular charting software in forex and other markets
• Available on multiple operating systems
• Well-known software for creating robots
• Highly user-friendly
• Supports market depth with certain brokers
• Copy and automated trading available
• Free to use

Cons:

• Not as many supported brokers compared to MT4
• Less advanced features compared to other platforms

1. MetaTrader 4

It comes as no surprise that MT4 is #1 on our list of forex trading platforms. MetaTrader 4 is usually the first trading software beginners use when learning about forex. The platform first made its way into the public space in 2005.

It came just before the boom of online FX trading from the mid-2000s. MT4 remains MetaQuotes’ most successful software and the most well-known in the industry. There is nothing special about MT4, aside from first-mover advantage.

However, it’s definitely up there among the most user-friendly forex trading platforms for beginners. The software doesn’t have the bells and whistles of cTrader and TradingView but is enough to get the job done.

MT4 is available with nine out of ten brokers in forex, another reason for its widespread use. It’s also a popular platform for robot developers and sellers. Like MT5, you can use MT4 on multiple operating systems.

Pros:

• Very user-friendly and popular
• Used by over 90% of forex brokers
• Runs well on old computers
• Copy and automated trading available
• Free to use

Cons:

• Less responsive and advanced than the other platforms

Conclusion

One simple tip for newbies is you shouldn’t worry too much about the software. What’s more crucial is having a proven strategy that manages risks and makes money in the long run. Of course, the charting platform you use influences how you make your decisions.

But when starting out, MT4 or MT5 are good options that aren’t too daunting. Then, once you have more experience, you can consider software like TradingView and NinjaTrader.

This list of 5 best forex trading platforms for beginners should be enough to get you going.

Introduction

What time does the forex market open? Or have you ever asked what time does the forex market close?

If you’re used to the limited business hours of the stock market, FX does better by operating around the clock. This means there are opportunities all day and all night with just an internet connection to a trading platform.

The continuous 24/5 nature of forex market times is one of its greatest strengths. Aside from the number of opportunities to explore, it allows for substantial liquidity and volume.

Here, we’ll look at the primary forex trading session times, along with the best and worst forex market hours. 

How forex market hours are 24/5

So, how does forex function like a well-oiled machine 24 hours a day, five days a week? It boils down to decentralization. Unlike instruments that operate through a centralized exchange, FX is decentralized.

For forex market hours, it means that trading doesn’t take place through a central spot but is distributed globally among different buyers and sellers. The beauty is that even if one session is closed, you will find a massive market in another. Forex spans multiple zones.

For instance, even when the Sydney session is not operating, you can trade Australian dollars at any other period with massive volume. There will always be a significant supply and demand of international currencies wherever you are in the world.

Therefore, opening the market beyond standard business hours is only natural. This contrasts securities like bonds and stocks that are domestic and don’t have international demand.

The major brokering platforms in forex are Electronic Broking Services (EBS) and Thomson Reuters Dealing (TRD), located in many different parts globally. These institutions are second in the hierarchy of forex market sessions. 

The main source is the interbank market, a network of large commercial banks like Barclays, Citi, Bank of America, HSBC, Barclays, and JPMorgan, among others. At the third level, we have retail brokers who derive their prices from the likes of EBS and TRD. Then they pass these onto us, with a spread on top. 

Ultimately, the expansive forex market hours are due to the sheer number of international participants. These include banks, hedge funds, central banks, governments, bureau de changes, brokers, commercial businesses, and, of course, the average Joe. 

The four main forex session times

Now, let’s take a look at the forex trading hours. Despite the variety of forex time zones, we have four primary forex sessions:

• Sydney (21h00 to 06h00 GMT)
• Tokyo (23h00 GMT to 08h00 GMT)
• London (07h00 to 16h00 GMT)
• New York (12h00 to 21h00 GMT)

(Tip: You should use a forex time zone converter if you need clarification on the current times based on your location. It’s also easy to check what forex market is open now.)

So, officially, when is the forex market open? Trading begins at 21h00 GMT on Sunday and ends on Friday at 21h00 GMT. Aside from the weekend, there are other exceptions (if the days don’t fall on a weekend):

• Christmas Eve and Christmas Day
• New Year’s Eve and New Year’s Day

Some brokers may halt trading during other holidays like Thanksgiving, Good Friday, and Easter Monday.

It’s worth noting that the main forex session times change due to daylight savings time (DST). This will vary slightly depending on your country, but it is generally from October to March/April. Here are the forex trading sessions during DST (note that only Sydney and Tokyo times change).

• Sydney (23h00 to 08h00 GMT)
• Tokyo (01h00 GMT to 09h00 GMT)
• London (07h00 to 16h00 GMT)
• New York (12h00 to 21h00 GMT)

The four main forex hours mentioned specify the standard banking times of the respective financial hubs in Australasia, Europe, and North America. They also represent the most traded currencies (AUD, CAD, CHF, EUR, GBP, JPY, NZD, USD), resulting in the major pairs.

Despite the around-the-clock nature, some emerging currency markets, mainly exotic pairs, are not available for 24-hour trading.

London and New York are the busiest time zones of the four sessions, accounting for most of the total daily trading volume. Session overlaps (when two sessions are open concurrently) are also highly active forex market hours.

Let’s go over each session in more detail and discuss what to expect regarding the activity.

Sydney session

The Sydney session starts the entire forex market open at 21h00 GMT, ending nine hours later at 06h00 GMT. So, what is notable about this time? Being that the Sydney session is the ‘opening bell,’ it is relatively mild.

It starts to pick up steam as the Tokyo session nears. On Mondays, the Sydney session may present some rare, unusual gaps caused by weekend economic occurrences.

For other days, you should expect greater activity when any significant AUD and NZD-related news are released. This period is understandably preferable for Australian traders, even though it’s the least busy overall.

Tokyo session

The Tokyo session is, of course, the second element of forex market hours. While it is sometimes referred to as the Asian session (due to the influence of China, Singapore, etc.), Japan is the center responsible for the volume bulk.

Trading during this period begins at 23h00 GMT and concludes at 08h00 GMT. The Tokyo forex trading times represent two of the three market overlaps. The Tokyo session begins as the Sydney session is about to end AND right at the start of the London forex open.

Overlaps are some of the busiest periods in FX because of the increased number of participants from multiple financial centers. Many traders regard them as the best forex market hours. 

Besides this, the Tokyo session is quite vibrant for JPY-pairs, along with any economic announcements affecting the Yen.

London session

The forex London open is at 07h00 GMT, with the session ending at 16h00 GMT. It is the precursor to the much anticipated New York session. Still, London certainly holds its own when it comes to favorable trading-times. 

Firstly, you see greater movement in the British pound (along with other GBP pairs), one of the most traded currencies globally. Also, London forex market hours overlap with the New York session. This leads to a frenzy among Euro, pound, and dollar pairs, almost the entirety of FX. 

New York session

We are now at a forex session that is always long-waited. This period typically generates the most volume and volatility across the board. The New York session is the juggernaut in currency trading, given the influence of the United States and the US dollar.

Any non-USD pairs that were quiet will see a volume increase during these forex hours. The New York session is where trends often begin and reach a peak or climax. This period is also when major economic announcements like the Fed interest rate and Non-Farm Payrolls are released. 

Any non-USD pairs that were quiet will see a volume increase during these forex hours.

Forex closing times: why the market is closed on weekends

Many traders dread when the forex clock nears 21h00 GMT on Friday because it is when trading will eventually cease. But why is the forex market closed on weekends? The initial assumption would be that it should operate 24 hours during this time if it does on weekdays.

Well, the reason is straightforward. Everyone deserves a weekend breather, including the interbank market. Even in modern times, most commercial banks globally adhere to traditional business hours.

So, if they take a break, other organisations underneath them, like retail brokers, follow suit. It’s also a good time to perform any system maintenance. Some time ago, some brokers provided trading out of standard 24/5 forex market hours.

Yet, this creates the problem of too few participants, and with fewer traders comes a lack of liquidity. Forex sessions during the week carry massive volumes. But when this is low, two things happen.

Prices will behave erratically, resulting in massive gaps (although some people can take advantage of this). Secondly, the broker will have to charge much higher spreads to compensate for the reduced number of traders.

Weekend forex market hours offer the highest business risk because there is no operating counterparty.

However, foreign exchange isn’t technically closed but paused during the weekend. You can still trade international currencies with other forex dealers like online payment processors and bureau de changes.

The only difference is that the prices would be relatively the same as they were on Friday. This is actually a good thing because you don’t experience volatility as you would with a 24/7 market like crypto.

Your weekend forex schedule is to relax, review your past week and look for opportunities to capitalise on in the next week.

Best forex market hours to trade

Even though FX is open 24/5, that doesn’t mean you can trade at any random time. A successful and skilled trader always operates in the most favorable forex market hours for their strategy and availability.

The periods with the greatest activity are:

• Sydney-Tokyo overlap
• Tokyo-Sydney overlap
• London-New York overlap
• London session
• New York session

The chart below demonstrates the amount of pip volatility (using the Average True Range indicator) across the four main forex sessions on EUR/USD. We are using the euro as an example because it’s the most traded currency pair. 

Note the frequent spike ATR when observing the London and New York periods. Higher volatility is a sign of the most increased pip range.

While we have highlighted the general best forex market hours, you don’t have to adhere to these due to numerous factors. Firstly, a clash in time zones naturally means traders miss opportunities.

For instance, it might be a period of sleep for one trader when the forex London session time is active. However, this doesn’t mean you should try to be awake at all sessions. 

This is one advantage of adopting a long-term trading style like swing trading or position trading. Your entries are not affected by a certain forex session. Needless to say, a strategy is still necessary. It’s just that long-term traders plan to hold their positions for several days or weeks at a time.

On the other hand, the mentality with approaches like scalping and day trading scalping is different. These individuals are more meticulous about finding the perfect forex market hours, given the shorter time horizon of their orders.

Worst forex market hours to trade

So, which are the no-go forex sessions, the absolute worst times to have a position? Generally, you’ll want to avoid: the ‘rollover’ periods, late Friday, and specific news events.

• Rollover period (or a few hours before it): This is the first hour of the Sydney session. Here, pricing systems are reset across all financial centers, leading to an abnormal spread increase.

If you spot an opportunity towards the end of the New York session, it’s usually better to wait until after the first hour of the Sydney session. 

• Late Friday: Here, we refer to most of the New York session leading to the weekend. The main fear is potential gaps. This may be an issue for short-term traders but not a big deal for long-term traders.

• Certain high-impact news announcements: These forex hours can (not always) be quite volatile because of the speculation in the forecasted outcomes. It may be too much of a brokerage risk to offer trading during these periods, leading to a jump in the spread.

There is some consensus that certain weekdays like Monday are not good for trading. Similar to selecting the top forex market hours, it depends on the trader. Sometimes these so-called worst days are personal preference instead of objectively bad times.

Many traders see Monday as the least volatile because the market is recovering from the weekend. Yet, it doesn’t stop a swing trader from spotting a decent opportunity and holding it. 

Aside from the three listed forex market hours, most other times are relatively fine as long as you are in the right physical and mental state. It’s all systems go once a set-up appears that meets all your criteria.

Conclusion

FX is the largest financial market by a mile because of the variety and dispersion of forex market hours. Thanks to decentralization and the internet, currency trading continues to function like clockwork.

Even though the market is open for vast amounts of time, you shouldn’t be trading all the time. We don’t all have to engage in the same forex market hours because each person is unique in strategy and when they can participate.

Introduction

Stochastics is one of the most popular and simple-to-use forex oscillators, whether you’re using MT4 or another platform. 

This tool is based on many trading concepts like overbought/oversold, divergence and crossovers. Here, we’ll study this indicator in more detail by looking at its construction and uses.

What is the stochastic oscillator?

The stochastic oscillator is a momentum indicator credited to George Lane, who created it in the late 50s. In his words, he believed “momentum changes direction before price,” hence the inspiration for the tool.

Before going further, it’s good to explore what momentum is in forex. Any stochastic trading strategy is based on this concept, meaning it’s helpful to understand it.

The definition of momentum in the trading context is similar to what you might have studied in physics. It describes the quantity of force or rate of acceleration in price movements. The market can move in any direction, but momentum dictates how many pips it travels.

Strong momentum leads to sustained price movements, while weaker momentum results in slower motion.

A central component of the stochastic oscillator is the moving average (MA), which measures momentum over X number of days. This indicator consists of two MAs named the %K line and %D line (or trigger/signal line).

The %K line is the ‘fast’ MA (default setting of 3-period), while the %D line is the ‘slow’ MA (default setting of 5-period). Both of these moving averages are calculated over the past 14 periods. Of course, you can alter stochastic settings for forex to suit your preferences.

This information is plotted on a line graph that oscillates or moves between 0 and 100. 20 and 80 are the stochastic oscillator settings of extreme values. 

20 represents ‘oversold’, suggesting powerful downward movements. On the other hand, 80 reflects ‘overbought,’ meaning that the price is moving forcefully in an uptrend.

Below is an image of the forex stochastic oscillator on a candlestick chart for visual comprehension. The %K line is in blue, while the %D line is in orange.

Stochastic trading strategies help identify divergence, overbought/oversold conditions and crossovers. Let’s explore these in more detail next.

Common stochastic strategies

Regardless of the stochastic indicator strategy, this tool has three primary uses:

Observing overbought/oversold conditions

In currencies, a pair is overbought when it has forcefully moved upward, while oversold means that the price has moved aggressively downwards. Traders interpret these scenarios in two ways when using a stochastic forex strategy. 

The first suggestion is that the price will retrace since it has gone too far. Although this does happen often, overbought/oversold is an excellent signal for trend continuation. This quality can serve you well when you’re in an existing position with the stochastic oscillator.

The idea is to keep holding the trade in anticipation that the price will continue moving rather than correcting itself.

On the GBP/CHF daily chart below, notice how long the market stayed overbought on the indicator. When the price first entered the 80 zone, some traders may have exited. Yet, with some patience, the pair continued moving tens of pips.

Here, you could have trailed your stop as the price moved in your favour, finally exiting when the indicator closed below 80.

Divergence

Divergence is a classic feature of the oscillator indicator family, found in several momentum tools like the CCI, MACD and RSI. It goes back to the concept of momentum changing before the price. 

Divergence in the stochastic oscillator shows a mismatch between the highs/lows of the market and the indicator.

Although we have several types of divergence, the idea is the same. With regular bullish divergence, the price shows two consecutive highs, while stochastics reflects a higher high and lower high.

The opposite is true for bearish divergence: two successive lower lows on price, and a lower low + higher low on the indicator.

Divergence is a tried-and-tested method for detecting reversals, making it a component of the average stochastic oscillator strategy. However, it is something to combine with other elements rather than using it on its own.

You can achieve confluence with price action, chart patterns, support/resistance, Fibonacci, or another indicator. Let’s look at an example on the 4HR chart of EUR/AUD.

Here, we see a nice rising wedge, a classic reversal pattern. This was in addition to the bearish divergence, which would have offered more confirmation of the eventual reversal.

Trading crossovers

Any forex stochastic strategy relies on information from moving averages. So, using crossovers is a given. The main purpose of this feature is to spot trend changes. A crossover happens when one stochastic oscillator line intersects with another.

When the 3-period %K line crosses below the 5-period %D line, it is regarded as a selling trigger. Conversely, it is a buy signal when the 5-period %D line crosses above the 3-period % line.

Generally, traders use crossovers as entry or exit triggers. So it should only form a small part of your strategy combined with other factors as previously discussed. You can use crossovers with the stochastic oscillator for trends and reversals.

The 4HR chart below of EUR/USD shows an uptrend, and the various entry crossover triggers you could have identified.

Pros and cons of using stochastic oscillator

So, what are the good and bad things about using the stochastic oscillator?

Pros

• Simple to understand: This indicator is universally accepted due to its ease of use. All types of traders, ranging from scalpers, day traders, and swing traders, position traders to automated traders can benefit from it.

• Universal availability: The stochastic oscillator is not a custom indicator. So, you should find it on all standard charting packages.

• Identifies trend changes and reversals: Although most chartists consider stochastics a reversal tool, it can be useful for spotting trend changes too.

Cons

• Inherent lagging: Like all technical tools, the stochastic oscillator lags. This means that the indicator produces a trigger after the fact. Therefore, you can expect many false signals. This is why using confluence or combining the tool with other elements is crucial for making the best decisions. 

• Choppiness: Here, we mean that the indicator is more sensitive to the slightest price changes. This is because the default periods are shorter (3 and 5). Such a quality works best on lower time frames where scalpers and day traders thrive. 

Yet, it is a problem when you are looking at higher charts. You can derive ‘smoother’ results by using higher periods. On the plus side, the lower periods may offer an edge during range-bound conditions (but not in trending ones).

Conclusion

Forex stochastics are generally the least used momentum indicators since the RSI indicator is more preferred. It produces smoother results and has less components to it. However, you can combine the two with the Stochastic RSI custom indicator.

Otherwise, the stochastic oscillator is also brilliant on its own but, again, should be used in conjunction with something else. This not only applies to forex but other markets like crypto, options and metals.

One crucial tip is to apply solid risk and money management when things go wrong. In this way, you’ll have more chances of success.

Introduction

If you blink, you might miss it!! Human civilization has been obsessed with speed since the beginning of time. Technological advancements are continuously making daily operations better and, of course, faster.

We know that the FX market is a trillion-dollar industry. So some speed goes a long way to handle all this money, which is where forex high frequency trading (HFT) comes in. HFT has been around for a long time and is not exclusive to currencies. 

Any traded market, whether it is crypto, options, or precious metals, benefits from high frequency execution. But here, we’ll look at HFT in forex, how it works, and whether it has a massive impact on retail traders.

What is high frequency forex trading?

Forex high frequency trading is the practice of using computer programs or algorithms to transact a massive amount of positions in microseconds.

Here, companies and investors can achieve a lot with a high frequency forex trading strategy that wouldn’t be possible ordinarily. HFT has its roots in the 90s through stock exchanges where companies saw incentives to add liquidity. 

Any market needs liquidity to function seamlessly, which is a market maker’s job. High frequency trading allows forex market makers or liquidity providers to process far more orders in seconds. Among other things, these companies profit more from spreads and transaction costs.

However, high frequency trading forex can achieve more:

• Easier arbitrage opportunities
• Faster news or short-term trading
• Manipulative strategies like layering and spoofing

High frequency forex trading is generally reserved for large financial companies like hedge funds and investment banks, or firms specialising in HFT. 

The main reason is that high frequency trading software and infrastructure costs too much of an arm and a leg for the average trader.

Common high frequency forex trading strategies

Here, we’ll look at the simplest avenues where HFT is used in forex.

Arbitrage 

This is the easiest to understand of all the high-frequency forex trading strategy types. Arbitrage in forex is when you capitalise on tiny price differences from identical markets offered by two separate brokers. 

The most basic form of arbitrage is buying a forex pair at a lower value from one broker and quickly selling it for a higher value at another. We refer to this as two-currency arbitrage. However, we have other complex types like triangular, interest rate, spot future and statistical arbitrage.

Forex high frequency trading is capable of all kinds. Opportunities for arbitrage are limited and short-lived, lasting for a few seconds. Yet, advanced software can scan multiple markets and patterns from different trading venues connected simultaneously. When a set-up arises, it can execute for a quick profit. 

Let’s demonstrate an example of two-currency arbitrage.

Assume that the exchange for GBP/USD was 1.11400 with one broker and 1.11450 with another. Let’s also imagine you had $1 million. Here, high frequency forex algorithms can buy the pair, receiving  £897 666.

Afterwards, they can sell the same pounds with the other broker at 1.11450, resulting in $1 000 448, a $448 profit from the initial investment.

News trading 

Trading the news is an attractive way to increase your equity in the markets. Scalpers and day traders have to be very quick to react to high-impact economic announcements. However, forex high frequency trading can trade even faster.

Speed is one of several crucial factors when trading the news. Algorithms are better at predicting the likely outcome of a news event by looking at past historical trends and scanning multiple sources like Bloomberg and Twitter.

News trading is about speed and processing information as quickly as possible without delays. High frequency trading software is well adept at performing these operations better than a human could.

The price movements usually last for a few minutes. However, combined with the large volume HFT produces, it’s no wonder why HFT firms trade the news. 

Spoofing and layering 

High frequency forex strategies have been criticised for manipulative and illegal tactics like spoofing and layering. While the two are slightly different, they aim to deceive the market with ‘fake’ orders to push the price in a particular direction.

Spoofing is canceling before execution. It involves placing massive pending orders to attract one side of the market. Then, when the market reaches near the price, the ‘spoofer’ will cancel the execution.

This action would drive the market in the direction of the order. So, for buy orders, the price would go up; for sell orders, it would go down. At this point, high frequency trading software can enter the market at a favorable top or bottom, resulting in higher profits.

Layering is a type of spoofing with the same goal of gaining favorable entries. Here, the trader ‘layers’ or places massive orders at multiple close-by price tiers. This causes the spread’s midpoint to move away, allowing the trader to execute positions in the opposite direction.

Fortunately, there are rarely publicised cases of spoofing and layering in FX. But these are things that high frequency trading software is capable of producing.

Market making 

The image above describes how market-making works. High frequency currency trading makes FX run more efficiently than ever before.

A market maker or liquidity provider should always have an ‘inventory’ of currency pairs they can trade instantly. Adding an element of high frequency improves the speed and volume. By enhancing liquidity, traders receive cheaper spreads, better pricing and reduced slippage.

The impact of high frequency currency trading

Truthfully, HFT-based trading is less documented in forex compared to other instruments, most notably stocks from the United States. One reason is that forex high frequency trading is reserved only for a few due to the expensive tools required.

Also, despite how it offers the big players an edge, it’s not without risks. These factors decrease the profitability or worthwhileness of a high frequency forex trading strategy. Finally, let’s remember the competition.

Another problem is detection. It is nearly impossible to conclude whether HFT caused a large pip movement or not because of the decentralized nature of FX. 

Flash crashes are rare events in any traded market. And even then, there is never a conclusive report with evidence of HFT, only speculation.

For instance, let’s look at the flash crash of October 2016 on GBP/USD. This was a highly volatile period for the pair, as it was during Brexit. The price fell by almost 8% in two minutes on this chart below.

To this day, no research has provided a definite answer on why this happened. Yet, many theories revolved around forex high frequency trading reacting to negative news at the time. 

We can assume that only an advanced computer would have been capable of such an unexpected drop. However, such events are few and far between. 

Therefore, retail traders shouldn’t yet worry about HFT because we rarely experience its negative effects.

Can retail traders use high frequency trading software?

Of course, anyone can technically invest in such software. But the long answer is no because it’s expensive!! Although we couldn’t find actual figures, our research suggests starting prices from $200 000 (or $10 000 monthly), but this isn’t all.

Forex high frequency trading needs a data provider, for which you pay at least $5000 monthly. Additionally, a dedicated server can set you back a further $2000 monthly at best.

Oh, let’s not forget that you’d probably need a trading account with a couple of million dollars to make any high frequency trading strategy worthwhile. Unless you’re Bill Gates, HFT is reserved for elite financial institutions for a reason.

Conclusion

Forex high frequency trading is only a subset of automation or robots in FX. We have only scratched the surface, considering that AI will also become influential in the near future.

But what about right now? 
As we mentioned previously, HFT isn’t a threat in the current trading climate. For now, we can only implement strong risk or money management, along with an edge-defining strategy, to find success in the markets.

Introduction

The late Bob Proctor once said, “A mentor is someone who sees more talent and ability within you than you see in yourself and helps bring it out of you.”

It keeps getting repeated that most high-profile celebrities or well-known people have mentors. Trading is quite a solo career. Although you can interact with other traders, you usually have yourself to rely on when it comes to pressing that buy/sell button.

Rarely will you have someone that can hold your hand during these times. It can become quite emotional, an intense psychological battle that sees traders dealing with margin calls or blowing their accounts. 

Still, many self-taught and successful traders made it without forex mentors. However, most will probably admit having someone to shorten their learning curve would have saved tons of time and money.

This is where a decent mentor for forex trading can be precious. Yet, finding this person is like finding a needle in a haystack for various reasons. But it doesn’t hurt to try if you want some pips!

What is a forex trading mentor?

The Cambridge Dictionary defines a mentor as a “person who gives a less experienced person help or advice over some time.” In simple terms, a mentor is supposed to be a trusted adviser. It is an individual already successful in your field and whose success you’d like to replicate.

Therefore, the best forex mentors are existing profitable traders. They may also have other interests in the FX world, like influencing, education, affiliate marketing, working for an FX-related company, writing, vlogging, or any combination of these.

Some mentors may have coaching services they offer publicly, while others are more private and may not qualify as official coaches. Regardless, a mentor for forex trading should be a trader with a verifiable and profitable track record.

Are forex trading mentors necessary?

Here comes the ‘golden question;’ is a mentor for forex trading crucial? Like many things in life, it depends. As previously mentioned, most traders are self-taught and learn the inner workings of FX through years of trial and error.

The main reason is how informal forex trading is. There is technically no proper school or educational institution to teach you how to trade. Also, there are many ways to trade, like scalping, day trading, swing trading, position trading, etc. 

Some traders go the automated route by using robots. You can observe and implement countless chart patterns, indicators, and other structures.

While this variety is good, it also means there is no right way to invest because it depends on the individual. The internet has been a key enabler in the massive retail industry and dissemination of information at scale.

However, not all information is safe to use. With no regulated forex trading mentoring programs, traders often have to experiment by themselves. The lack of formality in the industry makes it challenging to spot traders qualified to teach and guide others.

Yet, if you can find a mentor with your best interests at heart, they can help with a lot of things. Firstly, they can save you a lot of time you would have spent learning from scratch. Getting to a pro or mastery level in any traded market can take at least two years. A proper mentor for forex trading can cut this time down in half.

Another wonderful benefit is, of course, the money-saving aspect. Virtually all profitable traders have lost their capital a few times in their careers. These mistakes are primarily a result of a lack of education.

Yet, a mentor for forex trading should be able to prevent you from making these errors by teaching you proper risk or money management.

The final reason why forex mentors are necessary is that they can offer specialised knowledge not found online. Being successful in trading FX pairs is about having a proven edge, which can take several years to find.

However, a mentor with profitable long-term performance can give you ‘top secrets for forex‘ and tools you won’t find online or in a book sooner. Learning the basics is easy, but experience can only be earned over an extended period. This is what a mentor can offer.

What to look for in a mentor for forex trading

The best forex mentors can back up their claims of success with results. A proven track record is the foundation. The best way to verify a trader’s performance is by looking at their live account connected to an analytics platform like FX Blue and Myfxbook.

Most so-called experienced traders do not share their trading results in this manner. Instead, they show screenshots of positions. Yet, there needs to be an indication of their long-term consistency and profitability.

A brilliant mentor for forex trading should be happy to share their performance on analytics platforms, as in the image below.

Here, the two things you’ll want to observe are the age of the account and, most importantly, whether it shows a profit.

Two years worth of data is a decent indication of proficiency –  however, the more years, the better. Regardless, live results are one of the main elements that provide a trader with strong transparency.

Other things also include reviews or testimonials, but verifiable results are the most important.

Something that offers a mentor for forex trading credibility is their general reputation online and offline. A mentor may have other interests in FX (as discussed previously) or have a normal day job. You’ll want to research what they do outside the candlestick charts and ensure their name is clean.

Should you pay for forex mentoring?

There remains an ongoing debate on whether anyone should pay for mentorship generally. We believe that the best forex mentors should have a vested long-term relationship with their mentees.

They should genuinely desire to help and see you succeed as they did. Their role is different from a coach or educator/tutor, where they provide a short-lived service that you can quantify in monetary terms. Also, it boils down to affordability. Some traders, whether they are new or have some experience, have no problem paying. 

Yet, not everyone has the funds, especially if they’re new. This is why getting forex mentors from family or friend recommendations is an excellent route. 

You are likely to get someone that can offer the highest personal interaction, someone you can contact at any time to answer your questions. Also, a relative or recommended friend is less likely to ask for money due to the mutual connection. 

It is more challenging to get this relationship or arrangement from an outsider. Still, you can compensate your mentor or ‘thank them’ in other methods without money exchange. For instance, it may be offering a service or skill they need for free; think of it like bartering.

Where to find a mentor for forex trading

We’ve already mentioned that friends and family are a superb route for forex trading mentoring. However, the primary alternative is online if this option doesn’t work. The platform isn’t so important as the research behind your potential mentor.

Earlier, we spoke about mentors already involved in FX outside of the charts. Therefore, in your search, you’ll get to know that person through their existing work. For instance, if you’re a fan of YouTube, your potential mentor may be a YouTuber. It becomes easier to contact them, given the established familiarity.

The next option is simply asking for a mentor on niche social media networks or forums. We advise avoiding the more prominent sites like Instagram, Twitter and Facebook. This is because these platforms are filled with spam, materialism and course-selling.

Reddit is one the most well-moderated online social communities where you are less likely to get scammed or deal with bogus individuals. You are likely to receive good recommendations from other niche forums for getting forex trading mentorship. 

Conclusion

The journey to consistent profitability for most traders is long and lonely, involving a lot of system-hopping and expensive mistakes. A caring and skilled mentor for forex trading can solve all these problems to increase your equity curve.

Still, finding such a person in this industry can be challenging. The tips we have offered should make your search easier.

Introduction

With so much money at stake in such a liquid market, there are some serious risks you need to be aware of in the world of forex trading. Today we will look at some of those risks and see how you can mitigate and protect yourself from the most common risks in the foreign currency market.

As a beginner, you have probably heard of the risks of forex trading and other associated risks within this market and other markets, such as stocks and commodities. It is a risky and volatile business. There are several vital factors you must be aware of, including specific, common risks of forex trading, such as

• Currency risk
• Liquidity risk
• Leverage risk
• Market volatility risk

We will examine these in more detail today and suggest tips for preventing yourself from being caught up in volatility. This includes short-term and long-term strategies.

Currency Risk

With so many foreign currencies trading over 24 hours, it can be easy to lose track of the movements of each currency. Currency risk encompasses this type of risk. A currency risk loss stems from severe fluctuations in the exchange rate you use.

A variety of different components can cause currency risk. Political risk is one of the main driving forces behind currency risk. If there is political instability within a country, this can cause the price of a currency to crash. In addition, economic risk is also something to factor in. 

However, these two components can often go hand in hand. Political instability is usually fueled by a dire economic performance, outlook or underlying economic problems such as mass unemployment. Economic and political risks are serious risks of forex trading and tend to go hand in hand. 

Although some central bank policies can cause the price of a currency to fluctuate on its own, rarely, these factors won’t combine to create a volatile currency risk situation. Risk in forex trading can be mitigated more efficiently when you know the indicators to look out for too.

Liquidity Risk

Liquidity risk occurs when traders cannot easily convert their position into cash. For example, the forex market sees the most volume compared to other markets like stocks and cryptocurrency. Therefore, you likely see more issues with liquidity in these markets, cryptocurrency especially.

If you are privy to how futures trading works, you will know that the risks are gigantic. In standard investing, your money will go up or down, but futures trading can result in your investment disappearing completely. Futures trading accelerates your investment, in theory, it can explode in value, but it can also depreciate rapidly.

In forex, there are a few examples of enormous successful trades. For example, George Soros made hundreds of millions of dollars when he shorted the GBP during Black Wednesday in 1992. 

The most traded forex pairings revolve around the US Dollar and other major world economies. Therefore, liquidity is rarely an issue in forex. If you are trading lesser-known currencies in emerging economies, this is one of many risks of forex trading. With lesser-known economies, it has the risk of becoming far more prevalent. However, it is scarce you would witness liquidity issues when trading forex, on the whole.

Leverage Risk

As discussed in today’s article, leverage risk (futures trading) is the most volatile way to trade any asset. In markets such as cryptocurrency, futures trading involves trading the most volatile asset with the most volatile instrument. The results can be disastrous. 

You must ensure that you invest with capital you can afford to lose. Of course, nobody wants to lose money, but if you find yourself in a worst-case scenario where your trade has gone badly, you want to ensure it doesn’t put you into financial difficulty.

Trading with leverage and overleveraging can accelerate these losses, so you need to be extremely careful and try to avoid this method if you can. As a beginner, avoiding this type of trade is highly recommended. In forex, you can use a leverage of up to 25:1. This means you can get liquidated quickly. In some currency pairs, you can use even higher leverage, so the risks of forex trading are amplified if you don’t know what you’re doing.

One way to mitigate this risk is by employing practical risk management tools and advice. This can range from dollar cost averaging (where you buy your asset on the way down to lower your average entry price) to implementing stop loss and take profit measures. 

Too often, traders, especially beginner traders, will need to set effective places to make a profit. But conversely, they will not have a reasonable limit to exit their trade if it doesn’t hit their chosen price and begins to drop dramatically. Having plans to help you manage this leveraged risk could be the difference between a steep learning curve and liquidating all your money.

Market Volatility

As we segue from the point made in the final paragraph of the previous section, market volatility can often be the risk that catches a lot of traders out. However, even experienced traders with multiple years of experience operating in the market intimately know the dangers of forex trading. 

Volatility can catch any trader out. Professionals will have a better strategy to protect themselves in a tough market retrace. However, there’s no way of predicting when an event on the cards will cause significant volatility.

How Risky Is Forex Trading?

All markets are risky; depending on how much due diligence you perform and how well you understand the market, you can minimise the trading risks you encounter. For example, with trillion dollars worth of currency traded over 24 hours, forex trading risks are considerable.

However, as far as it squares up against its counterparts, forex is not considered as risky as cryptocurrency trading. Cryptocurrency is the most volatile market as it hasn’t got the same specific regulations you can find in stocks, commodities and forex. You can use bots to help you trade forex, which enables you to establish good buy and sell points. However, this doesn’t mean you will turn a profit. 

Forex trading risks can vary in severity. One of the critical risks of forex trading that you need to be aware of is needing to understand the news and how it moves the market. Although all calls are affected by the information, due to the 24/7 interconnected nature of forex, it can be more susceptible to specific economic and international news.

As we touched on earlier, political instability currency risk is what to look for when it comes to foreign currency trading. This is one of several risks to be wary of.

How To Manage The Risks Of Forex Trading

While you can learn dozens of techniques to assist you in trading forex, managing any trading risks is a universal set of criteria. Even legendary traders such as Warren Buffett implement effective risk management strategies to shield themselves from serious market volatility.

As we have already discussed, risk management is critical in any market. For example, you can choose to dollar cost average or set up take profit and stop loss limits to ensure that you aren’t holding your chosen asset for too long. 

You can learn how chart patterns form and which ones to look out for, which can help complement your trading. There are a variety of different chart formations that professional traders use, such as

• Reversal patterns
• Head and shoulders patterns
• Triangle patterns
• Diamond chart patterns
• Doji star patterns
• Heikin Ashi candlestick patterns
• Fibonacci patterns

Diversify Your Assets

Many traders will have their favourite market or a market where they hold most of their assets. However, professional traders will often have a wide range of diverse assets, which can help protect you in the event of a market downturn in one specific asset class. 

In the event of a stock market crash, if you hold other assets, you are in a position where you are better equipped to insulate yourself from financial loss. One example of a proven hedge against economic turbulence is when investors purchase gold to counteract inflation. 

Only Use Instruments You Are Familiar With

When you’re first finding your feet in the forex market, it can be intimidating. However, using methods such as swing trading, novice traders will learn how the market works without exposing themselves to too much risk. 

However, as we discussed earlier, specialist trading tools such as futures trading and other tools many professional traders implement, such as options trading, are also risky for a beginner.

Risks of forex trading don’t just mean specific tools once you have entered your trade. There are just as many risks when preparing to enter the market. These include timing your entry and the devices you use. Professional traders also use spreads to hedge their forex trades.

Don’t just have your focus on one specific area of knowledge either. You can find guides from people on social media, YouTube or online courses, but it is always best to supplement your understanding with proven literature on the topic as well. Even though you can find a lot of good information and resources online, finding books written by proven professionals with decades of experience will help bolster your knowledge. 

Conclusion

The critical thing to remember when discussing the risks of forex trading is to remember that it is nowhere near as complicated as some of the methods used to understand how charts move. You can spend months or years studying charts, but it doesn’t mean you are guaranteed to make a profit. If it were as easy as studying charts, everybody would be doing it, surely?

Effective risk management is constructed of two things

1. Understand the risks of forex trading
2. Learn how to manage those risks properly

Today we have provided you with a practical guide to navigate these markets. Still, each trader or investor will have their own strategy, and you must settle on one you are comfortable with before you put your capital at risk. 

Introduction

Winston Churchill once said, “Give us the tools, and we will finish the job.” And what’s the job of a forex trader? Finding opportunities to net some pips and increase the equity curve! The better your forex tools are, the higher the chances of achieving consistent success.

Fortunately, most forex trading tools are freely available online and easy to use. Most tools don’t provide buy or sell signals, but this doesn’t mean they are not worth using. The point is to offer insights and data not available on your chart.

Some tools help with managing your risk, knowing when the most anticipated news will be released, and observing your long-term performance.

Let’s also remember that a trader is also an instrument. This means that your mind and skills must always be sharp every time you engage with the markets.

So, let’s look at the must-have forex tools for trading and why they are necessary for traders. 

List of useful tools for forex trading (and how they work)

Without further ado, let’s get straight into it.

Charting software

It makes sense to begin this list by speaking about charting software. This is usually the first trading tool traders learn about when starting. One of the main jobs of charting software is to allow traders to place orders through their connected broker. 

The second crucial aspect is analysis. The best trading platforms will have a suite of indicators like moving averages and stochastics, along with graphical additions like Fibonacci and ways to draw numerous chart patterns.

The more forex trading tools the software has, the better. It’s all about enhancing the experience and ensuring you can complete the best analysis possible.

Also, charting software helps traders stream live prices across numerous non-FX markets like crypto and metals. 

Most people start using MT4 or MT5 as these are the most popular in forex (check out our guide comparing the two).

However, once you get more experienced, you’ll realise there are more advanced platforms like cTrader, NinjaTrader and TradingView. While a monthly subscription may be required, it is worth considering once you start making profits. 

Trading calculators

We know that forex is a math-based game of risk and money management. So, we have to use a range of calculators when making charting decisions. Fortunately, these forex trading tools are freely available online from countless broker and other third-party sites.

Let’s look at them in more detail.

• Position size calculator

This is the most crucial calculator when it comes to trader tools. Proper position sizing is the make or break of ensuring comfortable monetary risk. Unfortunately, many traders use any lot size without realising that the wrong one can quickly lead them to a margin call.

When trading any forex pair, you buy or sell particular units of the base currency. For instance, the base currency in USD/JPY is USD. So a buy order here would represent purchasing a certain amount of US dollars for Japanese Yen, while a sell order would mean selling a specific amount of the Yen for the US dollar.

We measure these units according to contract or lot sizes, for which we have four:

– Standard (1 lot, 100 000 units)

– Mini (0.10 lots, 10 000 units)

– Micro (0.01 lots, 1000 units)

– Nano (0.001 lots, 100 units)

Each unit for every pair has a quantifiable monetary value (for more info, check out our guide on pips). For most calculators, the only information you need is the pair, account size, percentage of account risked, and stop loss distance. 

You should use a position size calculator before EVERY position you take.

• Margin calculator

We know that forex is trading on high margin, which can lead to substantial losses. Therefore, a margin calculator determines the precise margin you need to open a trade on a particular market. Why is this necessary?

Using too much leverage can increase the chances of blowing your account. Also, it is possible to use a larger lot size than what is available in your balance.

The margin calculator does a similar job to a position size calculator. The main differences are that it considers your leverage ratio in relation to the traded pair.

This results in the dollar (or currency equivalent) value of how much money you need to open a specific lot size.

• Pip calculator

A pip calculator is also quite helpful when looking at forex trading tools. In forex, we measure price distances in pips. Only a few pairs have standard pip values. It takes some time to work out the others through pen and paper. 

This is why a pip calculator can speed up the process. There are several reasons for using this trading tool. 

Firstly, it is necessary to track price changes. Traders need to measure these with the highest accuracy. So, a calculator helps us express pips in the quickest way possible.

The second benefit is that you can calculate the dollar value of spreads. Although spreads in forex are quite low, some traders like to compare them across brokers for pricier markets like exotic pairs.

The final benefit of pip calculators as forex trading tools is quantifying profits and losses. For instance, when we look at risk-to-reward ratios, we need to know the value of our stop loss and profit target in pips to gain a true reflection.

Although trading platforms provide pip values for these things, a pip calculator is useful in planning.

• Profit calculator

The profit calculator has a similar function to a pip calculator. The main difference is that you can add the open and close prices for a particular trade. Hence, it is more effective in helping traders work out their exact loss and profit amounts before entering a position.

Using the pair, lot size and base currency, this calculator computes the difference between the entry and exit prices and multiplies it by the pip value.

• Swap calculator

This forex tool primarily applies to swing traders and position traders rather than scalpers and day traders. A swap (or rollover) is interest that traders pay or are credited with for holding a trade overnight. 

The amount of rollover depends on the interest rate differential between two currencies. This is where a swap calculator excels as a forex trading tool. You can use it before any trade you plan to hold for several days.

This is where you can see how much interest you’ll pay or receive depending on the traded pair. Swap calculators are available with individual brokers because the long/short swap rates will differ depending on the service provider.

Another useful addition for swap forex trading tools is the swap comparison tables you can find with sites like Myfxbook and Forex Church.

Here, you can compare swaps across multiple brokers. This is helpful for carry trading, where traders look to gain the most interest by holding their positions for the longest time.

Journal

Journals are some of the under-utilized forex trading tools. However, it is a professional method of logging your activity in the markets. 

A journal is a way of record-keeping all your positions to help monitor your performance, fix errors and maintain consistency.

Think of it like a database of your orders to keep you on track. Trading journals are not only about numbers. They make traders accountable for emotional discipline based on their trading plan.

Your average journal will contain the following information (but not limited to):

~ The date and time when a new position has been opened

~ The traded pair of the executed order

~ The direction of the trade, either buy or sell

~ The position size in lots

~ The entry price, stop loss, and the exit price

~ The outcome of the trade, including whether it was a loss or profit and how much

~ Reasons for taking a trade

There are two ways of journaling: through spreadsheets or dedicated journaling software. While the manual is free, it is time-consuming. Also, it is more challenging to input other valuable data without mathematical or complex knowledge.

So, the best way to journal as a trader tool is by using software like Edgewonk, TraderSync, and Tradervue.

Here, you can export the data from your trading platform or input it manually. However, this software can provide other powerful insights or metrics like:

• Drawdown
• Average wins/loss
• Expectancy
• R-multiple
• Profit factor

The only downside is you need to purchase this software for a yearly subscription. Yet, if you can afford it, a journal is one of the best forex trading tools to have.

Trade result analyzers

These analytics platforms share some functionality with journals when presenting advanced P&L statistics. However, the main job of a result analyzer is to show your results in real-time.

If you’re profitable, you can present this data to other investors or companies that may be interested in providing funding. Some traders can use these services to run trading competitions where it is simple to view the true top performers. 

Also, like a journal, result analyzers offer a snapshot of your performance and areas of potential.

Using these forex trading tools is straightforward. You simply connect your account with a read-only password. 

The software will present your performance and update it in real time as you execute new positions. The best part is that you cannot fake the data from your account, offering much-needed transparency.

Popular analyzers include Myfxbook, FX Blue and Tradervue, among others.

Economic calendar

This free online trading tool shows daily scheduled economic releases across different countries. You can find economic calendars on various finance, trading or investing-related websites like Investing.com, Myfxbook, Dailyfx and FXStreet.

They work on a simple scale of low, medium or high-impact events, with traders paying the most attention to the latter. Low and medium-impact releases rarely make a difference to the price. Yet, high-impact news, like interest rates and job figures, usually generates volatility and powerful movements.

Economic calendars are non-negotiables when it comes to trading the news. But even if you are not doing so, they are helpful in anticipating potentially volatile movements. 

For instance, interest rates can cause the markets to go haywire. As a result, it’s not always the best time to trade. So, some traders use the economic calendar as a warning to avoid such conditions.

Short-term traders use this forex tool to time their positions based on the anticipated effect. A negative result is expected to drive the price of a pair down, while we hope a positive result will have the opposite effect.

Currency strength meter

Currency strength meters are forex trading tools that provide a visual overview of weak and strong currencies across various time frames. They use the real-time exchange rates of different currencies and aggregate them against each other using a specific weighting.

Conclusion

Of course, there are many other forex trading tools you can use. But the ones we have provided here should be sufficient for all traders. Also, this isn’t to say that you should use all these tools for trading. 

One of the secrets to trading success is keeping things simple. So, add a tool only if it provides a valuable edge.

Finally, we mentioned traders themselves are their own tools. This means that you must be pretty skilled and know your way around a chart. Your mentality and experience ultimately determine the quality of your trading decisions.

So, use yourself, along with these forex trading tools, to get the job done!