FOREX TRADING FOR BEGINNERS - Comparic

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FOREX TRADING FORBEGINNERSTutorial from Comparic.com2017For more strategies and information visit: http://comparic.com

INDEXPart 1. . 4How can I start Forex trading? . 7Practice forex trading – demo accounts . 9How to learn to trade forex . 12Forex trading questions – our Forex tips . 18Trading plan in Forex Trading . 26Part 2. Forex trading tools and strategies . 28Which trading tool is best for you? . 28Which strategy is right for you?. 29Pivot Points . 30Strategy based on Pivots. 32Pivot Points trade examples . 33Fibonacci trading tools . 37Popular Fibonacci tools . 37Setup in Metatrader . 40Fibonacci trading in Forex . 45How to trade with Fibonacci? . 48Fibonacci trade examples . 49Trailing stop . 52How to use trailing stop loss . 52Best settings for trailing stop loss . 53Time frame for trailing stop loss . 54Strategy for trailing stop loss . 54Trade examples. 56Moving averages in forex trading (and not only FX). 58Moving average as a trend detector . 60Moving average as a support or resistance . 62How many averages should you use? . 63Rainbow chart . 64GMMA . 72Part 3. Money and position management . 77How to set stop loss in forex trading . 77Trade partial close in Metatrader . 85When to take profit . 90Trading journal . 97Forex trading for beginners – tutorial by Comparic.com 2

This is a forex trading guide for beginners. I try to answer all questions about Forextrading. If you are new to trading or you traded stocks and want to learn more aboutForex trading, then this guide is for you.The goal of this guide is to give you practice knowledge so you can understand Forextrading basics and trade by yourself. If you don’t understand some terms, go to siteslike Investopedia, they covered all terms like margin, pip and many others.Forex trading for beginners – tutorial by Comparic.com 3

PART 1.How to understand forex tradingWhen you trade stocks, you can select how many stocks you want to buy or sell (if youplan to go short). With Forex you are trading a currency. You can’t select that you wantto sell 7523 euros. Starting point is 1 lot which is 100,000 units of base currency.1 lot for EUR/USD 100,000 euros2 lots for EUR/USD 200,000 euros0.1 lot for EUR/USD 10,000 eurosThat way you can decide how much base currency you want to invest.Of course, you do not have to have all that money in your account. Thanks to leverageyou have only split of that amount.In Forex, minimal movement is one pip. For standard basic 1 lot (100,000 units) moveof 1 pip is equal to 10 change.Why people are losing money in ForexIt is because they do not understand leverage. It is very powerful, yet very dangerousperk that you get when you decide to trade Forex.With only few hundred dollars you can open positions which are as big as 100,000dollars or euros and larger. When you are right in your trade, then you make goodmoney. When you are wrong well, you can be out of funds very soon.That is why new traders should start from lower sizes – micro lots or even nano lots.This is similar to stock market. It is a bad idea to start investing in stock market andlearn how to invest with real 100,000 or 500,000 . The risk is too big. It is easier tolearn on smaller capital. Same is with Forex.Forex trading for beginners – tutorial by Comparic.com 4

Start small – Nano, micro lotsYou won’t get rich fast by trading micro and nano lots, but thanks to them you will stayin the game and you will have opportunity to learn from live trading. The reason whyso many traders lose all their money in the Forex is because: their trading capital is too smallthey open too big positions, because they do not understand leverageSo yeah, it is like in many ads you could see in the past – “you can open account withjust 100 . Leverage even 1:500”. In the end, you need one or few positions of 1 lot sizeto blow up your account.You should remember that 1 lot is a base for calculating size of your position.1 lot 100,000 units of a currencyIn MetaTrader4 it will be on select list like:Forex trading for beginners – tutorial by Comparic.com 5

If you open short on EUR/USD of size 2 lots you will be shorting 200,000 euros. One pipwill be around 20 . Magic of leverage (and the curse same time ).There are also smaller base sizes like:1 mini lot (0.1) 10,000 units of base currencyIf you open long position on EUR/USD of size 0.1 then you will be long with 10.000euro.In MetaTrader4 it will be as Volume list like: 0.1 (one mini lot)0.2 (two mini lots)0.3 One pip will be here around 1 euro.1 micro lot (0.01) 1000 units of base currencyIn MetaTrader4 it will be as Volume list like: 0.01 (one micro lot)0.02 (two micro lots)0.03 (three micro lots) Going long with 0.01 lot on EUR/USD means that you are long 1000 euros. One pip ishere around 0.1 euro.1 nano lot (0.001) 100 units of base currencyIn MetaTrader4 it will be on select list like: 0.001 (one nano lot)0.002 (two nano lots) Forex trading for beginners – tutorial by Comparic.com 6

Not every broker offer trade sizes as small as nano lots or micro lots. You should checkit first in the offer.Trading sizes are simple. First you may get confused, because it is different than tradesizes in stock trading. Try to do some operations on demo account, try differentposition sizes and you will understand quickly what it is all about with nano, micro, miniand full lots.How can I start Forex trading?Ok, you want to become a currency trader. You’ve read about pips, leverage and allthat Forex trading. It is time to start practice. You are in luck, today it is very easy tostart Forex trading.Select a Forex BrokerTo start trading forex, you need a Forex broker. There are many brokers and for newtrader it may be hard to choose the best one. Remember, most of them offer a demoaccount, where you can test their trading platform. You can start with our Forexbrokers section.Usually, registration is quick, you need only some recent bills to prove your address isvalid. That’s it.If you look at Forex broker offer, make sure that he allows to trade with lower sizessuch as nano or at least micro.Install trading softwareOK, with selected broker you need to install trading software. This will be MetaTrader4platform or other custom platform from broker.Forex trading for beginners – tutorial by Comparic.com 7

Some brokers use their own trading platform like eTorro. Of course every customplatform is best in the world ;). There are brokers who only have their own platformand they do not offer Metatrader platform. I don’t know why, but some very wellknown brans miss MT4 in offer.The big advantage of Metatrader is that you have many custom indicators, expertadvisors. It is a good platform overall and I recommend brokers who offer MT4.Trading from MacMetaTrader is a Windows application. If you have a Mac computer with Mac OS Xsystem, then you must use software like Wine to run MetaTrader 4. Some brokers likeXM or HotForex offer Metatrader for Mac Os X and they work very good. You don’tneed wine, setup is very quick. I tested Metatrader platforms from XM and HotForexon my Mac and they worked fine.Below screen of demo MT4 platform from XM, running on MAC OS X:It's all the same as on Windows machine.Forex trading for beginners – tutorial by Comparic.com 8

Fund your Forex accountWhen you have registered an account, you can add funds. It is very easy. You can startwith few hundred dollars on mini account. Minimum amount is different for eachbroker.Test platform on demoBefore you decide to open real account, test a platform on demo (especially if you arenew to Forex trading). You will have some virtual 10k or 100k to play with on demo.Test how order placing works, how to place stop loss etc. You do not want to learnthese things with your real cash.Practice forex trading – demo accountsIt is hard to make profit in Forex that is why practice is so important. You have nowmany options to practice your trading skills and learn to trade.OK, but what is best? Do you need trading simulator? Paper trading is a good way tostart – not real paper but with help of demo account of course.We talk about paper trading when you are trading with virtual money. Years beforesimulators you simply put trades on a piece of paper. When you felt ready to trade onreal account, you made a switch. In 1930’s it wasn’t that easy to open brokerageaccount, besides fees for opening and closing trades were also high. Paper trades weregood solution – you could learn how to trade without losing real money.Forex trading for beginners – tutorial by Comparic.com 9

Demo trading in ForexNow when we are talking about paper trading, we mean trading on simulators. Ofcourse, you can use pencil and paper, but trading on simulator is much better way togo. You can easily open a demo account and get access to trading platform so you cantest it. Your demo account is funded with virtual money and you can place orders.The main advantages of Forex demo trading you do not put at risk real money – yours loses and gains are virtual, so there isno risk that you will lose all you trading capitalyou can test your trading system and different trading strategiesyou can see how to use leverageif you are using mechanical system, you can test it in practiceThe main disadvantages of demo trading you do not put at risk real money – you react different when it is real moneyyou are losingyou make trades that you normally wouldn’t make with real moneyIs paper trading a good way to learn how to trade?Generally, yes. If trading Forex is something new for you or you want to test totallynew strategy then yes, it is ok.I would say that demo trading is very important when you want to start trade on Forex.As you know, on currency market we use leverage. There are different position sizes.The basic one is 1 lot. You can open position as big as couple lots (for example 5 lots),or position smaller then 1 lot – this will be micro lot or nano lot. If it sounds not familiar,then you have to test it on demo account. Thing is, with leverage it is very easy to blewwhole account in matters of few minutes. It is crucial to master how to manage positionsize and understand well how it works. Leverage can be your best friend or the worstenemy.Forex trading for beginners – tutorial by Comparic.com 10

When you are building mechanical trading system, then it is also great possibility totest it on demo account. So again, demo trading in that case is not that bad.In a long term, demo trading is not the way to learn how to trade. You should switchto real account with small funds. Why? Because of Trading and psychologyWhen you are on demo and you switch to real money trading, you will noticedifference. Now you care. When you are losing money, you feel fear. You hesitate toclose losing position “because it may turn around” (yeah, it always does ;) ). When yourtrade is in profit, you are greedy. You hesitate to close position, because it may go evenhigher. Hell, this may be a trade of your life.This kind of emotions occurs only when you are trading with real money. You will learnover time that most of your loses come from not following trading plan and allowingemotions to play too big role in your decision making process.You are not able to switch off your emotions. On the other hand, you must be awareof them and not allow to take control. That is why you need to have your trading planon paper. Write down as many things you can in your trading plan – that way you willminimize impact of emotions in your trading.Ok, so let’s see where demo trading is in trader education process.Demo trading in trader learning process1. Open demo account2. Build strategy and trading plan3. Test different position sizes – add to trading plan size of positions. Test differentcurrency pairs, different time frames.4. Test your trading plan – set goals such as do not lose money in next 3 months etc.When you are profitable on demo Forex trading for beginners – tutorial by Comparic.com 11

5. Open real account6. Fund account with money you can afford to lose7. Set realistic goals and trade according to your trading plan8. Trade smaller positions!When you are profitable 9. Increase position sizeHow to learn to trade forexWe've learned about forex trading basics, about demo trading. Question still stands –how to learn to trade forex? There are few steps you can take to learn it. Below Imentioned most important ones.Find a mentorIt is not an easy task to find mentor. In most cases, there are no ads or otherinformation about mentoring possibility. Initiative should be on your side. If you followtrader you like, then you can ask him about mentoring. Some will say no because oflack of time. Others do not like to mentor because not everyone has teaching skills.Still, finding a mentor is the fastest way to learn to trade Forex. With mentor, you willavoid many mistakes and sometimes save many years of trial and errors.Two important things to remember. Do not approach mentor if you don't have basicknowledge about trading. It is not a role for mentor to guide you through the basicstuff. You want mentor to teach you how to trade successfully, not to teach basics.Another thing to remember. Check different styles of trading. Decide which one suitsyou best. Do you like technical analysis more? Then look for mentors who trade mainlyForex trading for beginners – tutorial by Comparic.com 12

with TA. You have a job and you want to learn about long term trading? Then do notlook for help from day traders, just go and look for other long-term investors.Learn to trade on demoBefore you move to trading with money start with demo. Play with different currencies,instruments. Understand what leverage is all about. See how spread is different fordifferent forex pairs. Test different trading strategies.Read trading books (not only about forex)Of course, practice is most important but books will give you new ideas how you cantrade forex.There are so many books about trading, that it is hard to recommend only few.One important things about books. Reading more trading books does not make you abetter trader. It can give you some ideas, you can learn something new but you mustpractice this in live market. Just a quick reminder, because I met many aspiring traderswho were reading too much and trading too little ;).Candlestick patternsNo revolution here. Japanese Candlestick Charting Techniques by Steve Nison is still agood choice.Chart patternsI recommend books from Thomas Bulkowski like Getting Started in Chart Patterns. Hedid a solid study about chart patterns and included how often you can profit with them.Multiple time framesForex trading for beginners – tutorial by Comparic.com 13

http://www.technicalanalysisbook.com/ I recommend Technical Analysis Book byBrian Shannon (from alphatrends.net). He is a stock trader but knowledge from thisbook is universal. It will give you ideas how to use and trade multiple time frames andI can say from my experience – this is crucial.Trading psychologyGood trading system is not enough to stay profitable. Trader psychology and disciplineis a key factor to success. There are many books about that topic, but you can startwith Trading Zone by Mark Douglas.Pivot PointsI use pivot points on daily basis and I wrote some articles about them. If you want tolearn more, I can recommend two books about Pivot Points.If you are totally new to the topic, Candlestick and Pivot Point Trading Triggers by JohnL. Person is a good choice. You can learn here how pivot works, how to use them andsee some setups examples.For more advanced stuff about Pivots, I recommend Secrets of a Pivot Boss by FrankOchoa. One of best trading books. Not a cheap one, but worth its price. Lot ofknowledge and trading ideas.FibonacciAs you know, I am a big Fibonacci fan. I write alot about that topic, but if you want toread a book about Fibonacci, then there is one position I can recommend. It is FibonacciTrading. Master Price Advantage by Carolyn Boroden. It is a good introduction tovarious Fibo tools.IchimokuThere are few books about Ichimoku Kinko Hyo. I read them all, but I can recommendonly Ichimoku Charts by Elliott Nicolle. I use Ichimoku only as additional indicator, butit is still important one. Especially in Forex.Forex trading for beginners – tutorial by Comparic.com 14

Read blogsThere are many good trading blogs which you can follow. Below few of my favorites:http://comparic.com – your number one source for Forex knowledgehttp://alphatrends.net/blog/ – mostly about stocks and some content is premium only.Still, great free video summaries of market.http://thepatternsite.com/Blog.html – blog from Thomas Bulkowski. OK, it looks like itwas started in the 90’s and is rather about stocks. Still, a great source for new tradersto learn more about price patterns and how to setup a trade.http://www.babypips.com/blogs – great site for new traders. Lots of resources,training materials. Even complicated things are well explained. I like articles abouttrading systems – you can learn here how you can come up with a trading system andhow to test it.http://www.theforexguy.com/ – lots of good, educational materials. Especially greatsite if you want to learn more about trading forex with price action.http://www.forexcrunch.com/ – one of the best blogs/portals about FX. Lots of newsand good educational articles.http://www.newtraderu.com/ – Steve writes in interesting way about trading. You canfind here many trading tips and materials not only about technicals but also abouttrading psychology and risk management. Steve is also very active on twitter.https://wwww.dailyfx.com/ - it is a mix of forex portal and blog. You will find herenews section, but also good educational articles.https://www.youtube.com/user/DailyFXNews – Dailyfx.com has also a great YouTubechannel, where you can watch daily analysis from their experts.http://www.forexlive.com/ – if you look for most important, short forex news’s thenthis is a great site. Also, active on twitter.Forex trading for beginners – tutorial by Comparic.com 15

Watch webinarsYou can find many great webinars which are free. Fxstreet.com is a good example, youcan also find webinars organized by brokers. Some are about technical analysis, someabout psychology, fundamentals. They are run by different traders. They show youscreen so it is very easy to see how others are trading, what is most important for them.What’s more, you have chat window. In most cases, you can ask questions during awebinar or there is dedicated Q&A session right after webinars finish.Go to coursesYes, many Forex traders are losing money. Brokers know that. That is main reason whythey organize free trading courses (online and stationary). Often they hire well knowntraders who teach you about trading.Of course, not every course is free. Sometimes you can find good trading course whichcosts quite a lot. Decision is yours. I can say from my perspective that you can learn alot during such courses. I attended few of them, each was 2-days long. I must say – thiswas a knowledge based on trading experience and it helped me to jump into anotherlevel.Follow other traders on twitter/fbSocial media are great. There is so much valuable information here, better than cats :)Look for traders via hashtags and other search terms.Twitter is a great app. Most people follow here celebrities, but you can find also manygreat specialists. Traders too. They share their quick thoughts about market,sometimes they twit some chart or interesting link.Forex trading for beginners – tutorial by Comparic.com 16

-traders-follow-twitter-2015/ andsee which you like most. My favorites? Dante, alphatrends and Stewie.ForumsI do not read any forex forums. I used to, but for me there is too much bullshit.Thousands of systems, many argues It is not for me, but if it is your thing then go andcheck http://www.forexfactory.com/forum.php.What is the main point of all this sources?There is no one ready to go trading system. You must build trading system by yourself.Your trading style will change over the years. To be successful you should learn fromothers, see what they are doing. That way you can improve your system and yourapproach to trading.Forex trading for beginners – tutorial by Comparic.com 17

Forex trading questions – our Forex tipsNaked trading and price actionYou must try it at least once. As stated before, most indicators are calculated based onprice. Yet, still many traders can’t read a single thing from a chart. It is all because theyrelay so heavy on indicators and do not put enough attention to price itself.Goal here is to remove all indicators, all moving averages and other indicator fromchart. You want chart to be naked. This way you can see clearly price action and makedecisions based on price itself.I have read about trader who uses indicators and other tools. Every few weeks he turnsthem off and trade only based on price action.Why is that important? Thanks to naked trading you will learn much faster about priceaction. There are moments when it is crucial. You will get first signals from price andthen, later, from indicators. Therefore, it is important to know how to spot signalswhich price gives you.Fundamental vs technical analysisIt is a personal choice.Only one advice here. Do not ignore the other side. If someone says that he is technicaltrader and do not look at fundamentals and news, then he is not someone you wantto followThere are so many evidences that news can move the market. Many big players simplyclose all trades before important news, because market can be unpredictable.I mostly use technical analysis, but I always start the day from checking news schedulefor current day.Good source for news and data? http://www.forexfactory.com.Forex trading for beginners – tutorial by Comparic.com 18

Avoid magic trading systems!When you browse Internet looking for info about Forex, most likely you will see ads orreviews of some super automatic trading systems. In a description, you will see list oftrades made on historical data even 10 years back:Looks great. Where is a catch? These systems are optimized for historical data. Onmany times, you will see that possible drawdown is very big. It is because authors usevery wide stop losses. This way many trades are closed eventually with profit, but whensomething goes wrong, you end up with huge loss.Another way to con the system is to optimize robot for historical data. When you putthat same robot in real live trading results are not so great anymore.There is no magic automated system for 99 or 999 . Forget about it. Work hard, learn,trade.Forex major currency pairsYou can see a lot of pairs in your brokers offer, but four of them are most popular.Traders call them majors: EUR/USD: The euro and the U.S. dollar.Forex trading for beginners – tutorial by Comparic.com 19

USD/JPY: The U.S. dollar and the Japanese yen.GBP/USD: The British pound sterling and the U.S. dollar.USD/CHF: The U.S. dollar and the Swiss franc.Which pair is best to trade?I think that it is best to start with majors, because you have there the lowest spreadsand best liquidity. Maybe without USD/CHF, because after Swiss central bankinterventions it is not good pair to trade.EUR/USD is still a good pair to trade; it is great both on lower time frames and on biggerones.I also recommend to check Yen pairs, especially GBP/JPY. Here you can find many goodtrend moves, even on lower timeframes. On chart below there is 1-hour GBP/JPY chart.It took only couple of days for this pair to move more than 1300 pips up.Forex trading for beginners – tutorial by Comparic.com 20

Other Yen pairs are also nice to trade.Now, because of Brexit it is good to keep close eye on GBP pairs. Pound is generallygetting weaker and weaker across the board. Thanks to that we can see here somestrong moves both down and strong corrections up.It is not recommended to trade on exotic pairs. There are two reasons for that:-High spreads – costs of trading here can be very highLiquidity is not that good as on major pairsUnless you have some long-term approach; maybe you are resident of that country.But stick to the most popular pairs.How many pairs should you trade?As a new trader, you should start with one pair. Why? Two or more pairs are hard tofollow. Remember that you should check situation on few time frames to take a trade.With two or more pairs you will struggle to follow price actions. Select one pair. It isenough.Every pair has its own characteristic. If you jump between pairs, you won’t notice this.Also, it is important to check situation on higher time frames. When you do that onmany trading pairs, it is hard to follow price action for new traders.Do I need 10 displays?You probably saw photos of trade stations where traders have 4, 6 or even moredisplays. It is not necessary; you can easily start with your current setup.So why traders use so many displays? Couple of reasons. They follow action on manypairs. They also follow news, check important levels on other time frames. Simply, i