Welcome to part 2 of our guide detailing how you can learn to trade Forex online. In part 1, we looked at reasons why you may want to consider Forex trading and some of the advantages that it offers the retail trader (that’s us!)
Now we will look at how you can go about finding all the information you will need to build a profitable trading career. Everything necessary to learn Forex trading is available online for free, much of it is right here at Forex Firefly. We will also recommend some other great sites which we believe provide fantastic content for new traders. This guide is designed as a reference for you, pointing out where you need to go in order to gain vital information you will need to absorb in order to be a successful trader.
Learn to Trade Forex for Beginners
In order to understand later lessons it is important to make sure you are familiar with certain terminology, as well as a few numbers which will always come up in Forex discussions (nothing complicated). We suggest you check out our Trading Forex for Beginners section which will cover these essential aspects of trading. You may need to read the lessons more than once, but when broken down everything is pretty simple. You do not need to know any complex math or have a college education to learn to trade Forex successfully.
Some key beginners lessons . . .
Learn About Technical Forex Analysis
This is a very large subject and one which needs to be broken down into several sections. Forex technical analysis is basically the study of charts and price movements. There are many well known price patterns which have a tendency to repeat themselves time and again. If you want to learn to trade the Forex markets then being able to recognise the most common patterns in technical analysis is an important skill.
We suggest you begin your technical analysis studies by reading about Forex candlestick patterns and price action. Candles represent the movement of price on a chart and allow you to see what has happened in the past. This information can be used to make predictions about what is most likely to happen next, and most experienced traders rely heavily on candle patterns to inform their trading decisions. Forex Firefly has a complete section on Forex candlesticks which covers the most important formations.
Your next recommended step is learning about Forex support and resistance. This is a simple trading methodology that relates to specific areas of a chart which are expected to affect the movements of price, therefore giving you some idea about what you can expect to happen in the future. Support and resistance Forex trading is relatively simple to understand and is covered here at Forex Firefly in a three part tutorial. Part one and two were linked to earlier in this paragraph, the third and final part is entitled: Forex support and resistance levels.
The use of Forex indicators makes up a large part of technical analysis trading. Indicators use past price data and display it visually. All indicators are known to be ‘lagging’ meaning that they rely on events that have already happened, you will see though that this information can be used to estimate future price action. Indicators are very often used to confirm trading signals given by Forex support and resistance trading and candlestick patters or price action. Read our sections on Forex indicators for a breakdown of the most popular ones used by traders today, as well as how they should be utilised.
Learn About Fundamental Forex Analysis
Fundamental analysis is the study of economic and political data, usually relating to the economies of the currencies you are trading. Rather than looking at price charts and technical indicators, fundamental analysis takes an overall look at the current state of economic climates. This information will affect currency prices in one way or another, both on a long term and a short term basis.
All sorts of data can be analysed using fundamental analysis. Examples include employment figures, interest rates, manufacturing and central bank policies. When released, these pieces of information often have a dramatic short term effect on price movements and many traders are only active during the times when these news reports are released. Fundamental data can also be analysed over much longer periods in order estimate long term trends in the currency markets. You can read about fundamental analysis in the Forex Firefly guides.
Forex Trading Strategies and Plans
If you want to learn to trade Forex successfully you will need to know what to do with all the new information you pick up relating to how prices actually move on a day to day basis. After technical and fundamental analysis has been covered it is time to start thinking about your own Forex trading strategies and making a trading plan.
There are quite a few different currency trading strategies you could adopt, many of them highly profitable. Not everyone is suited to every style though so you will need to figure out what method of trading will work best for you. It could be scalping, day trading, intraday trading, swing trading, long term position trading or some combination of the above. We cover the various trading strategies and lay out what each style entails, pointing you in the direction of further resources which could help you to decide how you would like to proceed with your trading career. Forex Firefly also discusses how to formulate a trading plan which you can actually use to place your trades – after all, as traders this is what we are all about!
Forex Risk Management – Position Sizes and Stop Losses
After you have decided how you are going to be trading the Forex market it is important to learn about managing your risk before you actually take any trades. If you can perfect this then your chances of going broke and losing your deposit amount should really be minimal. This is an area where many traders who want to lean to trade foreign currency end up falling down though. Maybe they are just too eager to start trading. Check out the Forex Firefly guides to minimizing your risk, calculating position size and mastering stop losses.
Forex Trading Psychology
Believe it or not, learning everything we have outlined so far will not necessarily make you a profitable Forex trader. Many successful traders will tell you that psychology plays a very large part in profitable trading. It is important to learn a bit about the kind of mindset you will need in order to succeed. We will be covering this and detailing how you need to be thinking about trades as you are taking them. It is also important to know how to deal with wins and losses.
Learn to Trade With the Right Forex Broker
There are many different Forex brokers to choose from. Even if you just stick to the largest players, you still have quite a choice. As a new trader it can be hard to differentiate between brokers so Forex Firefly will offer some guidance to help you pick the best broker for your needs.
Avoiding Forex Scams
Unfortunately, there are scammers out there trying to make a quick buck from people who genuinely want to learn to trade Forex. It is not too difficult to find out if someone you are thinking of paying money to is involved in any Forex scams. A great place to start is the Forex Peace Army website. They are dedicated to providing reviews of Forex service providers.
Learn to Trade Forex Free of Charge
We have covered the basics of learning Forex trading, pointing out the most important things you will need to become familiar with before you can begin to trade profitably. We have focused on websites and resources that allow you to learn to trade Forex free, without spending a dollar. The guide here will continually be updated as we discover other useful trading websites and carry on updating the Forex Firefly knowledge base.
Futher Reading
Investopedia.com – A comprehensive trading and investing website covering a huge range of subjects.
BabyPips.com – Dedicated Forex trading community. The school of Pipsology guides you while learning to trade Forex.
