How to open a forex broker

Find The Right Broker

To trade currencies in the forex market, you will need to find a broker. Retail currency trading has evolved as a decentralized and lightly regulated activity in an over-the-counter market. Thus, it's recommended that prospective currency traders carefully research the reputation of brokers before opening a trading account. You can do this by checking with local national regulatory agencies to verify whether the broker has any history of unfair or irregular practices.

You may also want to research the services offered by a broker before opening an account. Some may be more basic, plain-vanilla brokerages; others may offer more sophisticated trading platforms with analytical resources that can help you make better-informed trading decisions.

Traders will also want to compare commissions or other fees charged by brokers for their services. Quite often, forex brokerages will charge for trades through a bid-ask spread, which is a small percentage difference in the current buying and selling prices of a currency. However, some brokerages may have other types of commissions or fees for their services. These additional costs can be important to consider when determining the overall profitability of trading.[1]

Procedure For Opening An Account

Opening a forex trading account is not complicated, but traders will need a few things to get started.

They will usually have to provide information on an application regarding their level of trading experience and knowledge, along with their trading intentions. They will also need to provide identification and make a minimum deposit of funds in their account.

The exact steps involved in opening an account may vary from brokerage to brokerage, but the procedure typically involves the following:

1. Enter the broker's website and review the account types of accounts available. These can include small-scale accounts with low minimum balances designed for beginning traders; or accounts with sophisticated features designed for active traders.
2. Complete an application form.
3. Upon completing the application, you will be registered with a username and password that will give you access to your account.
4. Log in to the brokerage's client portal.
5. Arrange for the transfer of funds from your bank to deposit funds into your account. This may be through check, credit or debit card, or electronic transfer from your bank account. Note: Using a credit card for this purpose can be subject to interest charges.
6. Once your account has been funded, you are now ready to start trading. At this point, you will want to review any recommendations or special details that your broker provides regarding use of their trading platform before actually making your first trade. Some brokerages may offer trading simulator programs to allow traders to practice before actually putting money into trading.[2]

 HOW TO TRADE FOREX FUNDAMENTAL NEWS

News trading has long been one of the most common forex trading strategies in this field. Today, I want

to show you how to trade forex fundamental news, which are important news that impact the market

significantly.

2 main ways to trade forex fundamental news:

- Directional bias trading

- Non-directional bias trading

Directional bias trading

“Directional” means that you expect the price to move in a certain direction after a news release. When

a trader knows about some news that can make the price move, he/she will look for trading

opportunities in a certain direction.

How to trade

To put it simply, you apply this forex trading strategy by predicting how a certain news can affect the

market and where the price would go. Your prediction should base on how the market reacted to similar

news before.

Let’s have an example:

The unemployment rate in the US is constantly rising. 6 months ago, it was at 1% and last month, it

reached 3%. You believe that the upcoming data will show that unemployment rate would continuously

rise, so USD value would decrease. In this example, you’re trying to sell the USD/JPY pair.

At least 20 minutes before the news release, you should look at the price movement of USD/JPY and

figure out the movement range. Take note of the peak and bottom, which would become your breakout

points later.

Since you predict that USD will decrease, pay attention to the lower breakout point of that range. Set

your Entry Point at a few pips lower than that lower breakout points. Then, set a Stop Loss at the upper

breakout point and Take Profit by the number of pips between those breakout points.

When the news is published, there will be two scenarios:

• If the news is not what you expected, which would make USD/JPY rise, your orders will not be

executed. Nothing happens.

• If the news is what you expected, now you just need to sit and watch the trade happens. Then,

you just need to take profits.

The key to properly assessing trends is that you have to understand the concepts behind the

fundamental news you intend to trade. If you do not understand the effect it has on specific currencies,

you can make the wrong decisions that cause losses to your account.

Non directional bias trading

The more common way to trade forex fundamental news is to approach the market in a non-directional

way. This method will skip guessing the direction of the prices and focus on a simple fact that the market

will definitely move in a certain direction whenever there’s big news. This means no matter which

direction the market will head, you’ve already had a forex trading plan for it.

For this method, you don’t need to try to guess whether the price would go up or down. That’s why it is

called non directional.

How to trade

For this method, you don’t need to guess whether the price will rise or fall after the news release. You

can still trade and take profits as long as the news is big enough to affect the market. When news such

as economic data or central bank announcements are released, traders should keep in mind that news

like those often impacts the market the most.

Similarly, you should figure out the movement range and breakout points at least 20 minutes before the

news release. The breakout points will be your entry points. You should set Stop Loss at 20 pips above

and below the breakout points and Take Profit at the similar range.

For this method, you will trade in either direction. No the matter which direction the price will take,

you’ll have pending orders for both direction. This prepares you for every scenario. If the price moves in

another direction, it will soon hit Stop Loss and your order is closed. If things go smoothly, you will not

face any losses.

One of the best things about non directional bias trading is that it completely removes your emotions

from the equation. No matter how you feel about the news, you have to follow the exact procedure

strictly.

Conclusion

There are many ways of how to trade forex fundamental news, but these are the 2 most common

methods. Like in any other trading methods, you need to take time to practice. To be more successful in

the news trading method, you need to study economic indicators to understand why they are

important. And remember that no success comes easily, so be patient and you will find that news

trading is very rewarding when you understand it!

Risks in forex

  

forex trading requires leverage and traders use margin, there are additional risks to forex trading than other types of assets. Currency prices are constantly fluctuating, but at very small amounts, which means traders need to execute large trades (using leverage) to make money.

This leverage is great if a trader makes a winning bet because it can magnify profits. However, it can also magnify losses, even exceeding the initial amount borrowed. In addition, if a currency falls too much in value, leverage users open themselves up to margin calls, which may force them to sell their securities purchased with borrowed funds at a loss. Outside of possible losses, transaction costs can also add up and possibly eat into what was a profitable trade.

On top of all that, you should keep in mind that those who trade foreign currencies are little fish swimming in a pond of skilled, professional traders—and the Securities and Exchange Commission warns about potential fraud or information that could be confusing to new traders.

Perhaps it’s a good thing then that forex trading isn’t so common among individual investors. In fact, retail trading (a.k.a. trading by non-professionals) accounts for just 5.5% of the entire global market, figures from DailyForex show, and some of the major online brokers don’t even offer forex trading. What’s more, of the few retailer traders who engage in forex trading, most struggle to turn a profit with forex. CompareForexBrokers found that, on average, 71% of retail FX traders lost money. This makes forex trading a strategy often best left to the professionals.

Forex Terms to Know

 

Currency Pair

It is the quotation of one currency unit against another currency unit.

For example, the euro and the US dollar together make up the currency pair EUR/USD. The first currency (in our case, the euro) is the base currency, and the second (the US dollar) is the quote currency.

As you see, we use short forms for currencies: euro is EUR, US dollar is USD, and Japanese yen is JPY.

Exchange Rate

It is the rate at which you exchange one currency for another. The exchange rate shows you how much of the quote currency you need if you want to buy 1 unit of the base currency.

Example: EUR/USD = 1.3115. This means that 1 euro (the base currency) is equal to 1.3115 US dollars (the quote currency).

Now take a quick peek at how the euro is doing against the Japanese yen: for 1 euro I can get 106.53 Japanese yen (i.e. EUR/JPY=106.53). Maybe I’ll wait until the euro gets stronger before I exchange it and fly to Tokyo again.

The exchange rate may change in 2 days or 1 week, though. It may even stabilize for a while. Okay, but when? If you’re a time freak like me, the when is important to you, too.

The when is a question that nobody can answer precisely. It depends on a great deal of social and economic factors, many of which you’ll be watching more closely when you start trading forex.

Why? Because currency rates change all the time, and you want to know when to buy one currency and when to sell another to make a profitable deal.

Quote

It is a market price that always consists of 2 figures: the first figure is the bid/selling price, and the second is the ask/buying price. (e.g. 1.23458/1.12347).

Ask Price

Also known as the offer price, the ask price is the price visible on the right-hand side of a quote. This is the price at which you can buy the base currency.

For example, if the quote on the EUR/USD currency pair is 1.1965/67, it means that you can buy 1 euro for 1.1967 US dollars.

Bid Price

It is the price at which you can sell a currency pair.

For example, if the EUR/USD is quoted at 1.4568/1.4570, the first figure is the bid price at which you can sell the currency pair.

Bid is always lower than ask. And the difference between bid and ask is the spread.

Fractional Pip

It is an extra decimal place in the exchange rate. In the case of non-JPY pairs, we have 1.23456 instead of 1.2345, while in pairs that contain JPY, we have 123.456 instead of 123.45. We call the last decimal place in such pricing a pip fraction or tenth pip.

Lot

·              Lot. Forex is traded by what’s known as a lot, or a standardized unit of currency. The typical lot size is 100,000 units of currency, though there are micro (1,000) and mini (10,000) lots available for trading, too.

Pip Value

Short for percentage in points, a pip refers to the smallest possible price change within a currency pair. Because forex prices are quoted out to at least four decimal places, a pip is equal to 0.0001.

Margin 

Trading with leverage isn’t free, however. Traders must put down some money upfront as a deposit—or what’s known as margin.

If you trade on a 1% margin, for instance, for every USD 100 that you trade, you need to put down a deposit of USD 1. And so, in order to buy 1 standard lot (i.e. 100,000 of USD/CHF), you need to maintain only 1% of the traded amount in your account i.e. USD 1,000. But how can you buy 100,000 USD/JPY with only USD 1,000? Basically, margin trading involves a loan from the forex broker to the trader.

When you carry out a forex transaction, you don’t actually buy all the currency and deposit it into your trading account. Practically speaking, what you do is speculate on the exchange rate. In other words, you estimate how the exchange rate will move, and you make a contract-based agreement with your broker that he will pay you, or you will pay him, depending on whether your estimation has proved to be correct or wrong (i.e. whether the exchange rate has moved in your favor or against your initial speculation).

If you purchase a USD/JPY standard lot, you don’t need to put down 100,000 USD as the full value of your trade. Instead, you will have to put down a deposit that we call margin. This is why margin trading is trading with borrowed capital. In other words, you can trade with a loan from your broker, and that loan amount depends on the amount you initially deposited. Margin trading has another big advantage: it allows leverage.

Leverage

Because of those large lot sizes, some traders may not be willing to put up so much money to execute a trade. Leverage, another term for borrowing money, allows traders to participate in the forex market without the amount of money otherwise required

Leverage depends on the broker and its flexibility. At the same time, lLeverage varies: it can be 100:1, 200:1, or even 500:1. Remember that with leverage you can use $1,000 to trade $100,000 (1,000×100) or $200,000 (1,000×200), or $500,000 (1,000×500).

This sounds great, but how does it actually work? I open a trading account and I get a loan from my broker as simply as that?

Firstly, it depends on what type of account you open, what the leverage for that particular account type is, and how much leverage you need. Don’t be greedy – but don’t be too shy, either. Leverage can be used to maximize gains – but also losses, if you are too greedy.

Secondly, your broker will need an initial margin on your account, that is, a minimum deposit.

Equity

It is the total amount of money in your trading account, including your profit and losses. For instance, if you deposited USD 10,000 into your account and you also made a profit of USD 3,000, your equity amounts to USD 13,000.

Used Margin

It is the amount of money kept aside by your broker so that your current trading positions can be kept open and you don’t end up with a negative balance.

Free Margin

It is the amount of money in your trading account with which you can open new trading positions.

Free margin = Equity – Used Margin.

This means that if your equity is USD 13,000 and your open positions require USD 2,000 margin (used margin), you are left with USD 11, 000 (free margin) available to open new positions.

Margin Call

Margin calls are a major part of risk management: as soon as your Equity drops to a percentage of the margin used, your forex broker will notify you that you need to deposit more money if you want to maintain your position. 

Profit/loss Calculation

Now that you’re not a complete beginner any more, let’s get down to calculating your profit (or loss).

We will take the USD/CHF currency pair. You want to buy USD and sell CHF. The quoted rate is 1.4525 / 1.4530.

Step 1: you buy 1 standard lot of 100,000 units at 1.4530 (ask price). Wait! In the meantime the price has moved to 1.4550, so you decide to close the position.

Step 2: you can see the new quote for your USD/CHF currency pair. It’s 1.4550 / 1.4555. You are already closing your position, but don’t forget that you initially bought a standard lot to enter the trade. Now you are selling in order to close your trade. You must take the bid price of 1.4550.

Step 3: you start calculating. What do you see? The difference between 1.4530 and 1.4550 is .0020. This equals 20 pips.

Do you remember our calculation formula earlier? You will be using it now.

100,000 x 0.0001 = CHF 10 per pip x 20 pips = CHF 200 or USD 137.46

Important! When you enter and exit your position, you must always watch the spread in the bid/ask quote.

As you learnt it before, you use the ask price when you buy a currency, and the bid price when you sell a currency.

Position

It is a trade that you hold open during a certain period of time.

Long Position

When you enter a long position, you buy a base currency.

Supposing that you choose the EUR/USD pair. You expect the EUR to strengthen as compared to the USD, so you will buy EUR and profit from its increase in value.

Short Position

When you enter a short position, you sell a base currency. If you choose the EUR/USD pair again, but this time you expect the EUR to weaken as compared to the USD, you will sell the EUR and profit from its decrease in value.

Close a Position

If you enter a long (buy) position and the base currency rate has gone up, you want to get your profit. To do so, you must close the position.

Order Types

Market Order / Entry Order

It is an order to buy or sell currency instantly at the current price.

Open Order

It is an order to buy/sell a financial instrument (e.g. forex, stocks, or commodities like oil, gold, silver, etc.) that will stay open until you close it, or you have your broker close it for you (e.g. via telephone trading).

Limit Order

It is an order placed away from the current market price.

Assuming that EUR/USD is traded at 1.34. You want to go short (place a sell order on this currency pair) if the price reaches 1.35, so you place an order for the price 1.35. This order is called limit order. So your order is placed when the price reaches the limit of 1.35. A buy limit order order is always set below the current price whereas a sell limit order is always set above the current price.

Stop-entry Order

It is an order that you give to buy above the current price or an order to sell below the current price when you think the price will continue in the same direction. It is the opposite of a limit order.

Let’s assume that EUR/USD is traded at 1.34. You want to go long (i.e. place a buy order on this currency pair) if the price reaches 1.35, so you place a stop-entry order to buy at 1.35. This order is called stop-entry order.

Take Profit Order (TP)

It is an order that closes your trade as soon as it has reached a certain level of profit.

Stop-Loss Order (SL)

It is an order to close your trade as soon as it reaches a certain level of loss. With this strategy, you can minimize your loss and avoid losing all your capital.

You can make stop-loss orders with automated trading software. It’s a great thing because even if you’re on holiday when you don’t watch how the market and currency rates change, the software does it for you.

Execution

It is the process of completing an order.

What moves the Forex markes

 

Like any other market, currency prices are set by the supply and demand of sellers and buyers. However, there are other macro forces at play in this market. Demand for particular currencies can also be influenced by interest rates, central bank policy, the pace of economic growth and the political environment in the country in question.

Central banks
Supply is controlled by central banks, who can announce measures that will have a significant effect on their currency’s price. Quantitative easing, for instance, involves injecting more money into an economy, and can cause its currency’s price to drop.

News reports

Commercial banks and other investors tend to want to put their capital into economies that have a strong outlook. So, if a positive piece of news hits the markets about a certain region, it will encourage investment and increase demand for that region’s currency.
Unless there is a parallel increase in supply for the currency, the disparity between supply and demand will cause its price to increase. Similarly, a piece of negative news can cause investment to decrease and lower a currency’s price. This is why currencies tend to reflect the reported economic health of the region they represent.

Market sentiment

Market sentiment, which is often in reaction to the news, can also play a major role in driving currency prices. If traders believe that a currency is headed in a certain direction, they will trade accordingly and may convince others to follow suit, increasing or decreasing demand.

Economic data

Economic data is integral to the price movements of currencies for two reasons – it gives an indication of how an economy is performing, and it offers insight into what its central bank might do next.
Say, for example, that inflation in the eurozone has risen above the 2% level that the European Central Bank (ECB) aims to maintain. The ECB’s main policy tool to combat rising inflation is increasing European interest rates – so traders might start buying the euro in anticipation of rates going up. With more traders wanting euros, EUR/USD could see a rise in price.

What is forex Automated Trading?

 

Automated trading requires a lot of research to find the right software that will perform trades correctly. Sitting back and letting an automated device perform the work for you can be a real temptation, and it's here that Forex robots come into play. A forex bot is a computer program that is based on a set of forex trading signals which help to define whether to purchase or sell a certain currency pair at any particular time.

A forex trading robot is a computer program based on a set of forex trading signals that helps determine whether to buy or sell a currency pair at a given point in time. Forex​ robots are designed to remove the psychological element of trading, which can be detrimental. While trading systems can be purchased online, traders should exercise caution when buying them this way.

Trading robots are available 24/7 to Forex traders, and can easily be bought over the internet. It is imperative to confirm that there is absolutely no such thing as the 'holy grail' of trading systems, regardless of the type they belong to and regardless of where you are from. Whether you are searching from the UK or you are looking for the best forex robot in Africa, it really doesn't matter, because this is practice that is carried out in the digital world.

How Forex Trades Are Quoted

 

Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price (the quote), it is essential to develop a sound understanding of how to read currency pairs.

Each currency pair represents the current exchange rate for the two currencies. Here’s how to interpret that information, using EUR/USD—or the euro-to-dollar exchange rate—as an example:

• The currency on the left (the euro) is the base currency.

• The currency on the right (the U.S. dollar) is the quote currency.

• The exchange rate represents how much of the quote currency is needed to buy 1 unit of the base currency. As a result, the base currency is always expressed as 1 unit while the quote currency varies based on the current market and how much is needed to buy 1 unit of the base currency.

• If the EUR/USD exchange rate is 1.2, that means €1 will buy $1.20 (or, put another way, it will cost $1.20 to buy €1).

• When the exchange rate rises, that means the base currency has risen in value relative to the quote currency (because €1 will buy more U.S. dollars) and conversely, if the exchange rate falls, that means the base currency has fallen in value.

A quick note: Currency pairs are usually presented with the base currency first and the quote currency second, though there’s historical convention for how some currency pairs are expressed. For example, USD to EUR conversions are listed as EUR/USD, but not USD/EUR.

Ways to trade Forex

 

Spot Trade fx

A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date. Most spot contracts include the physical delivery of the currency, commodity, or instrument; the difference in the price of a future or forward contract versus a spot contract takes into account the time value of the payment, based on interest rates and the time to maturity. In a foreign exchange spot trade, the exchange rate on which the transaction is based is referred to as the spot exchange rate.

Currency Futures?

Currency futures are a exchange-traded futures contract that specify the price in one currency at which another currency can be bought or sold at a future date. Currency futures contracts are legally binding and counterparties that are still holding the contracts on the expiration date must deliver the currency amount at the specified price on the specified delivery date. Currency futures can be used to hedge other trades or currency risks, or to speculate on price 

Retail Forex

There is a secondary OTC market that provides a way for retail (“poorer”) traders to participate in the forex market, Access is granted by so-called  “forex trading providers“.
Forex trading providers trade in the primary OTC market on your behalf. They find the best available prices and then add a “markup” before displaying the prices on their trading platforms.
This is similar to how a retail store buys inventory from a wholesale market, adds a markup, and shows a “retail” price to their customers.

How Currencies Are Traded

 

Trading of currency pairs are conducted in the foreign exchange market, also known as the forex market. It is the largest and most liquid market in the financial world. This market allows for the buying, selling, exchanging and speculation of currencies. It also enables conversion of currencies for international trade and investment. The forex market is open 24 hours a day, five days a week (except holidays), and sees a huge amount of trading volume.
All forex trades involve the simultaneous purchase of one currency and sale of another, but the currency pair itself can be thought of as a single unit—an instrument that is bought or sold. If you buy a currency pair, you buy the base currency and implicitly sell the quoted currency. The bid (buy price) represents how much of the quote currency you need to get one unit of the base currency.

All currencies are assigned a three-letter code much like a stock’s ticker symbol. While there are more than 170 currencies worldwide, the U.S. dollar is involved in a vast majority of forex trading, so it’s especially helpful to know its code: USD. The second most popular currency in the forex market is the euro, the currency accepted in 19 countries in the European Union (code: EUR).
Other major currencies, in order of popularity, are: the Japanese yen (JPY), the British pound (GBP), the Australian dollar (AUD), the Canadian dollar (CAD), the Swiss franc (CHF) and the New Zealand dollar (NZD).
All forex trading is expressed as a combination of the two currencies being exchanged. The following seven currency pairs—what are known as the majors—account for about 75% of trading in the forex market:

Why trade forex ?

 While the financial markets have become accessible to more people, it has become challenging for them to choose the most suitable one. A trader should consider the potential advantages and drawbacks of a financial market before investing. 

Forex is a market that requires fewer resources to get started, and it also offers high flexibility in terms of time. This makes forex market the most suitable choice for pros and novices alike. Other types of trading businesses need considerable investment capital and, most probably, a business plan too. 

1. Small Start-up Capital:

As mentioned above, the forex business doesn’t require huge investment. With a fractional fee, you can open your trading account and start trading. Forex trading allows you to start slow and then grow big with the help of forex affiliate programs. Sky is the limit in the forex business. 

2. Time Flexibility:
Forex trading business offers convenience in terms of time. Time flexibility is one of the top reasons why you should start forex trading business. The forex market remains active 24/7 as it involves global electronic currency exchange. It operates 24 hours each day as currencies of different countries from around the world float in this market. This enables you enter or exit a trade whenever you want. Therefore, you can start trading whenever you have time. Forex is one of the few businesses that allow you to trade anytime.

3.High Profitable 
One of the best things about forex business is that it has potential to make you a millionaire overnight if you trade wisely. The profitability rate is high if you win your trades. Most people who started forex trading as a part-time business ended up quitting their jobs to focus on forex trading because they have earned good profits than they expected. The key to earn more profit is to invest more. The more you invest, the more profit you are likely to earn. You need to learn forex business and make smart decisions to win trades successfully.

4. High Liquidity:
The foreign exchange market is one of most liquid financial markets in the world. The liquidity of a financial market is determined by the number of buyers and sellers.  It means forex market has large number of buyers and sellers that are matched within a fraction of second. This enables traders to have greater opportunities to win a trade by getting a fair price to buy and sell their currency pairs. That is why forex market is extremely liquid. High liquidity means low risk of price manipulation by a few big players. High liquidity and large size of the market, it’s almost impossible to manipulate prices.

5. Anyone can Start Regardless of their Experience and Knowledge:
It’s highly risky and difficult to start a business without the proper knowledge and experience. However, it’s not the case with forex trading. It is open to anyone regardless of their experience and knowledge. Although having knowledge is an extra advantage, but as a beginner, one can start with a few dollars of investment and then grow gradually by gaining experience over time. Forex business has endless opportunities to grow. You don’t need a training course nor special skills or experience to get started. All you need is the consistency and ability to learn.  

Forex, also called foreign exchange, is a global, decentralized market for trading currencies. Let’s delve into the top 5 reasons to start forex trading:

INTRODUCTION TO FOREX TRADING

 

The foreign exchange market, or forex (FX) for short, is a decentralized market place that facilitates the buying and selling of different currencies. This takes place over the counter (OTC) via the interbank market instead of on a centralized exchange.
Without knowing it, you have probably already participated in the foreign exchange market by  buying good from different online platforms . 

Currencies are traded in the foreign exchange market, a global marketplace that’s open 24 hours a day Monday through Friday. All forex trading is conducted over the counter (OTC), meaning there’s no physical exchange (as there is for stocks) and a global network of banks and other financial institutions oversee the market (instead of a central exchange, like the New York Stock Exchange).

Up until the mid-1990s, the currency markets were slow. Getting an accurate price required an army of brokers and traders but the mid to late 1990s brought the internet and advances in communication that changed everything.

The currency markets became more sophisticated and convenient. Banks created their own trading platforms and retail brokers introduced internet-based trading platforms for individuals. Currencies were no longer shut off in political systems and emerging markets like those in Southeast Asia thrived.

Forex has a long history and its future holds much potential for success. Already, digital currency trading is growing and many technological advancements are taking place and presenting perpetual opportunities for forex traders.