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What Is The Best Way To Learn How To Trade The Forex Market?

What Is The Best Way To Learn How To Trade The Forex Market?

Trillions of dollars are exchanged each day on the forex market, and with the right skillset, it is possible to make substantial profits from trading. The process works by buying one currency while selling another, with the goal of profiting from the difference in values. The skill lies in being able to identify the peak time to buy and sell.

The advantages of using a prop firm

Thanks to the rise of online prop firms such as FTUK, there are exciting opportunities for non-professional traders to enter the world of forex without risking any personal capital. These prop firms can give you access to a fully funded account with generous leverage potential in exchange for a share in any profits that you generate. 

However, in order to be given access to a funded account, you’ll have to prove that you’ve got the necessary skills. This is because the business model of prop firms relies on working with traders who are able to generate consistent profits without taking unnecessary risks. 

You don’t need to have years of experience and a degree in economics to be a good forex trader, but it is necessary to understand how the market works and have a solid trading strategy in place. 

What is the best way to learn forex trading?

Even with plenty of research and learning, the thought of jumping right into the fast-paced and volatile forex markets without any prior experience of live trading can be rather daunting. Making objective decisions when under pressure is not a skill most people are born with, but acquire with practice. 

But how do you learn on the job without taking risks with your own money or the prop firm’s funds? One of the best ways to do so is by taking advantage of a free trial with a prop firm such as FTUK. This will give you access to a 14-day test account to trade in simulated market conditions. 

With a free demo account, you can get a taste of live trading without the pressure of risking your own money. You’ll be able to choose between two platforms such as Match Trader or DX Trade, giving you the opportunity to familiarize yourself with industry-leading tools. 

How does the free trial work?

You’ll be working with a 10 per cent static drawdown and 10 per cent profit target, with a leverage of 30:1. You won’t be able to request a payout on any profits that you make or scale up to higher funds or leverage, and the account will automatically close after 14 days.

However, it’s a golden opportunity to roadtest your trading strategy and skills, and also help you develop your ‘trading mindset.’ This means the confidence and psychological resilience that is necessary for successfully navigating the sometimes volatile markets. It’s a stepping stone to becoming a funded trader, where you can keep a share of your profits. 

How to make the most of your free trial

You may just want to jump into the free trial straight away, because you’ve got nothing to lose and everything to gain. If you are successful, you can choose to take FTUK’s two-step evaluation program. 

This involves paying a fee for access to similar trading conditions, but this time you’ll also take two tests during the 14 days. If you pass both tests, you will be eligible for a fully funded trading account with a profit share and a scaling plan. 

To get the most out of your free trial or the two-step program, make sure that you understand the basics of forex trading. Here’s a guide to what you need to know.

The basic principles

Forex is a portmanteau of foreign exchange, and on the global forex markets you can trade currencies. The exchange rate is the relative price of two currencies from two different countries, and prices are constantly in a state of flux. 

You’ve probably experienced this first hand if you’ve travelled abroad and needed to exchange the currency of your country to that of your destination country. In all likelihood, there wasn’t an exact match in the value of the two currencies: for example, the Great British pound (GBP) is currently worth around 1.2 or 1.3 US dollars (USD). 

However, international travel and trade are only small players in the global forex market: the real action is generated by banks, financial institutions, hedge funds, and individual traders. The currencies are bought and sold in pairs purely with the intention of making a profit on the difference in price. 

For example, if indicators are showing that the GBP is strengthening against the USD, you might buy GBP/USD. When you anticipate the value of the GBP against the USD has peaked, you can sell the GBP at a profit. 

There are about 180 world currencies, but as a new trader it’s best to stick to the ‘majors.’ This means the currencies of major economies such as the USA, Great Britain, the European Union, and Japan. These currencies have high ‘liquidity’, meaning that there are always plenty of  buyers and sellers to be found. 

Key forex terminology

Familiarise yourself with the forex terminology so that you can gain a better understanding of how the process works, and will be quicker and more confident in your decision making. Here’s a guide to some of the most common terms you will encounter.

Pip: Pip (short for price in point) is the base unit (or smallest price) in the price of a currency pair. It represents 0.0001 of the quoted price in the vast majority of currencies. 

Spread: Spread is the difference between the purchase (or bid) price and the sale (or ask) price of a currency pair. In order for a forex trade to be possible, the value of the currency pair must be higher than the spread. 

Lot: Lot is a standardised trading size, which will typically be 100,000 units of the base currency. It’s also possible to trade with mini or micro lots. 

Leverage: Leverage is the capital provided to traders by a prop firm to enable them to trade larger positions. This increases the potential for making larger profits, but also the potential for losses, so it should be used with caution. 

Learn market analysis techniques

Forex market strategies broadly have two approaches: fundamental analysis and technical analysis. Both methods are used to predict future price movements and identify good opportunities to enter the market, but they have different approaches. 

Most of the time, you will probably use a combination of both to inform your trading decisions, but it is important to be aware of the differences.

The fundamental model

Fundamental analysis involves evaluating economic data such as inflation and interest rates, and geopolitical events such as elections and trade agreements to assess the health of a country’s economy. This can be indicative of whether the currency of that country will be likely to increase or fall in value.

The technical model

Technical analysis centres around identifying historic patterns and trends to predict future price movements. The tools most used in technical analysis include mathematical models, chart patterns, and candlestick patterns. These methods can help traders to identify the best times to enter and exit the market, and to manage risk effectively.

Develop a trading strategy

It is important to have a trading strategy in place to help you make the most of your free trial or be successful during the evaluation process. However, this doesn’t need to be complicated: in fact simple strategies are often the most effective, so don’t be daunted by the prospect. 

The prop firm you choose to work with may have rules or guidelines about which trading strategies are permitted, so check this out before working on your plan. The prop firm is also likely to have risk management rules that you will need to operate within, otherwise your account may be closed. 

Common trading strategies

Some common trading strategies include scalping, day trading, and swing trading. The approach that suits you may depend on the time you have available for trading; your level of skill and experience; and your temperament.

Scalping involves buying and selling currency pairs within a very short period of time, sometimes just 30 seconds. The aim is to make a high volume of trades with small profits that will accumulate throughout the day. Intraday trading focuses on making trades within one or four hour windows during the peak market hours.  

Swing trading involves keeping trades open for a few days or even weeks, and is less time-intensive than scalping or intraday trading. It’s often the path taken by beginners, because it can be more easily combined with a full-time job. 

So, there you have it: forex trading is much more accessible and low-risk than you might think. By taking advantage of a free 14-day trial, you will have access to professional trading tools and experience of managing an account with no financial risk to yourself.

If you take some time to learn the basics and explore trading strategies, you can soon learn to navigate the forex markets with confidence and progress to a fully funded trading account.