How to start trading forex


In this article, you will learn how to get started in Forex trading. Here you can learn how to choose a broker, set up a trading account, fund the trading account, how to use the funds, and other useful things when starting to trade Forex.

Having a regulated broker

When learning how to trade Forex, the first step is to have a secure trading environment. Protecting your investment in the stock market starts with choosing the right broker!

Trading in the financial markets is a regulated activity in most countries around the world and it is certainly a regulated activity in the world's financial centers such as the UK, USA, EU, Japan, Australia, Canada, and a few others. Regulated activity means that there is appropriate legislation and dedicated governmental or semi-governmental institutions that license and regulate financial brokers. These institutions will be your recourse if you ever have a dispute with your online broker.

If the broker has no license, you are protected only by the terms of the contract they offer, which is often random.

The online brokerage world is unfortunately full of unscrupulous people and for the same company name, there can sometimes be several companies. When opening a trading account, make sure that you are working with a regulated broker who is licensed, unless the opposite is your goal.

Otherwise, there are many trading account providers to choose from. Each one can match you to some unique criteria.


Brokers according to their performance

After selecting a broker, it's important to understand which order execution model the broker uses. A market maker, as opposed to a simple access provider, is a type of broker that creates a market for its clients by displaying actual price quotes but does not place orders in the interbank market. In this case, the broker is the client's counterparty: he wins when the client loses and he loses when the client wins. As your broker represents the market, he is the market maker.

No Dealing Desk brokers are also called ECN brokers and they simply work as access providers for their clients in the interbank market. This type of account allows for more market depth, have floating spreads, and longer order execution time. When an order is placed in an ECN account, the ECN broker processes it and forwards it to the market. This way, instead of trading with your broker, you trade with one of the millions of traders present in the interbank market.

For many traders, a market maker broker is not a good thing and they prefer to work with an ECN broker. But is a Dealing Desk broker a bad thing?

A short answer - if the broker has a license issued by a serious financial authority, like the FCA in the UK or the AMF in France - you can trust your broker. You can be sure that the broker does not manipulate prices or charts. Also, you can trust that the funds are in segregated accounts and that you will be protected if your broker goes bankrupt.

Another thing that is very interesting in trading is the speed of order execution. When the broker is a Dealing Desk broker, the order is sent to the broker and the execution takes place immediately. So, if the speed of order execution is essential to your trading strategy, having a Dealing Desk broker may be an alternative to consider.


The Forex Trading Account

Now that you have chosen a broker, we come to step two: choosing and opening your online trading account.

A trading account is similar to your current account, with one important difference - you can use the funds in your trading account to profit from the financial market. In this example, you can use funds to start trading Forex online.

Trading accounts come in a wide variety and most forex brokers offer several types of accounts at the same time.

The things to watch out for depending on your trading strategy and trading plan. Account types vary in their minimum deposit, the leverage offered financial instruments available, and other trading specifics.

Micro accounts allow you to trade with as little as 10 Euros using very small volumes, such as 0.01 or a micro-lot. This type of account sometimes allows leverage of up to 1:1000, which allows the trader to make very large gains or losses. The list of financial instruments on these accounts is usually limited to 20-30 of the most popular currency pairs.

Brokers also offer a "standard" account. This type of account allows you to start trading on Forex and CFDs, metals, futures. In other words, the majority of instruments available with the broker will be available on the standard account. The initial deposit on this account is likely to be a bit larger, starting from $100 to $200. The leverage is lower and the spreads are around 1-2 pips on the major currency pairs.

Sometimes brokers offer account types specially designed for very active traders, with lower spreads and with a higher minimum deposit, like 1000 euros and the leverage is very often lower, around 1:100 or even lower.

Sometimes brokers have VIP accounts with additional features. Deposit bonuses, no-swap, or no-spread accounts are offered to attract more affluent clients.

No matter what type of trading account you choose, make sure you understand the contracts and information related to margin trading.


Forex Leverage

If you want to learn about how to learn trading and trading-related topics on the forums, you will come across the question of whether leverage is a good or bad thing for the trader. It is important to know that the most important leverage on the types of investments is the one offered by the forex brokers. When using leverage, the line between good use and abuse is very fine.

It is important to understand how leverage works. Leverage does not change the number of points in the market, but it can change how much you will gain or lose on a trade. It all has to do with the size of the order.

It is true that with higher leverage you can trade larger order sizes. Overall, opening positions with a larger order size or opening multiple orders will result in higher margin requirements and higher pip values. Trading CFDs in excess is quite dangerous, as the trading account balance moves faster and the trading account cannot cope with the volatility of the market.

This is a textbook example of how not to trade online. If we keep the same trading account with low order sizes and good menu management and low leverage, the same negative scenario can occur. Too little leverage generates margin calls, even if the account is well-capitalized. Like the result, your account can suffer losses if the volatility is higher.


Equity in the trading account

First of all, you should never trade with funds that you cannot afford to lose. Starting Online Trading is similar to any other investment in the stock market and it is a risky business and only funds that you can afford to lose should be used. Trading with funds that one can afford to bet in the stock market helps the trader not to be stressed in his trading and allows him to approach this investment activity more calmly.

Most beginner traders are careful with their initial deposits and fund their trading accounts once they get a taste for online trading. This usually means two things: they have lost the initial deposit and they want to recoup the investment with new deposits, adopting a chit or double strategy. Sooner or later this strategy inevitably leads to disaster. In trading, excessive risk-taking pays off sooner or later.

Statistically, you have a 99% chance of losing your initial deposit if you go into trading without any trading strategy and any training in online trading. Not all orders are winners and the experience of taking losses is also a learning experience.

Loss is the price to pay for learning if you are motivated to spend the time to learn. The market is not your enemy. Your broker is not your enemy either. The most important thing in your trading is yourself!

The real question is: What have you learned from making a costly trading mistake and are you prepared to never repeat it? As simple as that.

 

How much does a trader earn?

Portrayed in literature and movies, and sometimes even in the press, like millionaires, traders are the envy of many. But if some traders are indeed billionaires, the reality is quite different for the vast majority of investors. So how much does a trader earn?

How much do traders earn in the world?

Traders' salaries vary widely depending on the country where they work. Let's take a look at different examples of institutional trader salaries by city or country in the world: in France, London, Wall Street, or Dubai.

How much does a trader earn in London?

Now let's compare these data with the salary of traders in London. According to the specialized website Glassdoor, the average salary of a trader in London is £71,533 per year (average base salary on 375 reported salaries updated to May 25, 2021). This average ranges as follows:

- Lowest London trader salary: £33,000 per year,

- Average London trader salary: £72,000 per year,

- Highest London trader salary: £154,000 per year.

On top of these salaries, there are estimated bonuses of £38,295 per year on average, ranging from a low of £5,609 to a high of £261,461.

Here are also examples of trader salaries in London (average base salaries per year) that are more specific to the bank or financial firm in which they are employed:

- Barclays: £116,909 per year,

- J.P. Morgan: £91,868 per year,

- BNP Paribas: £88,174 per year,

- Goldman Sachs: £87,913 per year,

- Citi: £60,329 per year.

As for the other market finance jobs in the City, which are close to the trader's job, here are the corresponding salaries (average base salaries per year):

- Assistant Trader London salary: £35,031 per year,

- Commodity Trader Salary London: £82,655 per annum,

- Equity Trader Salary London: £92,805 per annum,

- Junior Trader London Salary (or Junior Trader): £49,599 per annum,

- Chief Trader London salary: £132,000 per annum.

How much does a trader earn on Wall Street?

Now let's leave Europe and go to the United States and more precisely to New York. According to the Glassdoor website, the average trader salary on Wall Street is $127,000 per year (average base salary out of 583 reported salaries updated as of May 25, 2021). This average ranges as follows:

- Lowest Wall Street trader salary: $73,000

- Average Wall Street trader salary: $127,000

- Highest Wall Street trader salary: $205,000

Bonuses are added to these Wall Street trader salaries. Note that unlike bonuses in France, bonuses are completely uncapped in the United States. According to data from the Glassdoor website, they amount to $53,446, out of a range of $136 to $271,791.

As before, here are some more specific examples of trader salaries in New York at various banks and financial firms. Glassdoor lists the following examples of trader salaries (average base salaries):

- Trader at HSBC Holdings: $201,401 per year,

- Trader at Deutsche Bank: $181,275 per year,

- Trader at Jane Street: $169,438 per year,

- Trader at SG Americas Securities Holdings: $167,593 per year,

- Trader at Société Générale: $158,099 per year,

- Trader at Citadel: $156,146 per year,

- Trader at Bank of America: $154,433 per year,

- Trader at Citi: $153,945 per year,

- Trader at J.P. Morgan: $144,746 per year,

- Trader at Morgan Stanley: $132,695 per year,

- Trader at Barclays: $130,977 per year,

- Trader at RBC (Royal Bank of Canada): $116,212 per year,

- Trader at Goldman Sachs: $112,501 per year,

- Trader at UBS: $106,572 per year,

- Trader at Flow Traders: $94,412 per year.

How much does a trader earn in Dubai?

As a final example, let's finally look at trader salaries in Dubai. The Glassdoor site has less data here (3 salaries reported as of May 25, 2021) and shows an average monthly base salary of 20,000 euros, with a low of 13,000 euros and a high of 40,000 euros per month.

The average bonus reported is 80,000 euros out of a range of 10,000 to 150,000 euros.

Here are also examples of trader salaries in Dubai more specific to the companies that employ them:

- National Bank of Fujairah: between 38,000 and 42,000 euros per month,

- MubasherTrade: between 19,000 and 21,000 euros per month,

- NHS: between 12,000 and 14,000 euros per month.

How much does a trader earn in France?

According to the specialized website Glassdoor, the salary of traders in France (average base salary on 54 salaries communicated updated on May 25, 2021) is 65,781 euros per year. The assistant trader earns an average of 47,573 euros per year and the Derivatives trader 226,847 euros.

The salary of a trader in France ranges as follows:

- Lowest trader salary in France: 41,000 euros per year,

- Average trader salary in France: 66,000 euros per year,

- Highest trader salary in France: 124,000 euros per year.

Here are some more specific salary examples to see how much a trader in France earns depending on the bank or other financial company that employs them:

- Natixis: between 97,000 and 118,000 euros per year,

- Exane: 89,938 euros per year,

- BNP Paribas: 81,074 euros per year,

- Société Générale: 69,534 euros per year,

- HSBC Holdings: between 58,000 and 63,000 euros per year,

- CIC: between 35 000 and 38 000 euros per year.

How much does an Independent Online Trader earn?

Let's see how much an individual trader or home trader earns for his account, whether he is a day trader, swing trader, or even how much a Forex trader earns.

Unlike the institutional trader, whose salary is declared, the earnings of the independent trader are very difficult to estimate. Trading income is extremely variable from one trader to another.

Since online trading is open to everyone, the profiles of individual traders are very diverse and the average earnings of a trader cannot be representative. How much a trader can earn depends on some factors, including the background of the trader and the amount of time they spend trading.

It is logical to expect that the traders who earn the most are those who have previously studied market finance or who have previously worked in the banking or financial sector. Similarly, one can also expect that a trader who makes trading his or her primary activity will generate more income than a trader whose trading is a secondary activity for supplemental income. Of course, there are other parameters to take into account, such as the capital invested.

Can you trade without a deposit?

The question of how much initial capital is needed to start trading is one of the most common questions asked by beginning traders. Contrary to popular belief, it is not necessary to have a lot of capital to start trading. But can you trade without a deposit?

Trading without a deposit on a demo account

Let's emphasize right away that the only way to trade online without a deposit is to trade on a demo account.

A demo the account is a trading account where you trade with fictitious capital, free of charge and without having to deposit an initial capital.

This type of account allows beginners to learn how to trade, to become familiar with their trading platform, and, in general, to put their stock market training into practice.

In addition to beginners, the demo account is also useful for more experienced traders. It can be used to test new markets, discover new instruments, or refine new trading strategies.

Minimum deposit: Start trading with as little as $1

Online brokers have different entry requirements and minimum deposits for opening a trading account.

Other accounts can also be opened as low as $100.

Forex Deposit: How much to invest?

Knowing how much to invest in the stock market is a common question among beginning traders. It is a very personal question because it is based on different parameters to be taken into account.

For example, you can start from the amount you need to live on. For example, it can be estimated that to live on his or her stock market earnings alone, an individual trader should be able to generate a monthly income of about 1,500 dollars, which corresponds to the gross monthly amount of the minimum wage.

In reality, everyone's needs and desires are different, and an independent trader may well be looking to generate much more. To know how much to invest according to the desired income, we can apply the following formula:

C = Rv / Rd

where C is the capital to be invested, Rv is the desired monthly income and Rd is a realistic monthly percentage return (10-15%).

Let's see how this works with our example of the minimum wage. So let's start with an estimated $1,500 per month in earnings and estimate without leverage. Now let's apply an annual return of 10-15%. This gives us a starting capital of $120,000 to $180,000.

As you can see, this is a far cry from the $1 or $100 minimum deposits required to open an account. Fortunately, there are several ways to increase your investment capital without paying more when you want to trade with $10. Let's take a look at them.

Deposit Bonuses and No Deposit Bonuses

In terms of no deposit trading, we also talk about a no deposit bonus. This type of bonus is by definition offered to traders with no deposit required. Generally, the size of such a bonus is modest and varies between 5 USD and 50 USD. The idea is that traders will be more motivated to trade successfully and to learn how to trade the foreign exchange market more effectively.

These bonuses can be used for real accounts as they help to get a good overview of the trading conditions. Note that this type of bonus is not very common. If you find one, make sure that the broker who offers it is trustworthy.

The no the deposit bonus is interesting for experienced traders when it comes to developing new trading approaches or strategies without risking large losses. Their main disadvantage is that they mostly attract novice traders. However, instead of learning about the stock market on a demo account, some novice traders start trading with a no deposit bonus on a real account. This can prevent them from learning the basic rules and risk management. This is why novice traders should not opt for this type of bonus.

There are also deposit bonuses, among which are the exchange rebates. This is a commission or part of the spread that is returned to the trader's account once he has closed a position. In some cases, the refund process is quite quick. However, some brokers tend to refund every month.

In general, one should be cautious about deposit bonuses, which can be as high as 200 or even 400%. There are many scams in the online market and the rule to remember is to choose a reliable and regulated broker rather than the most attractive bonus.

What is online trading ?

You may hear more and more about online trading, which is correct, because many people decide to start trading to try to increase their income, or even make it their career!

Online Trading

Trading definition: Online trading is simply buying and selling financial securities via an online trading platform or mobile trading application. These online trading programs are made available to traders, usually free of charge, by internet brokers. They are available to anyone who wants to invest in the stock market and trade financial instruments on the markets.

The activity of online trading consists of speculating on the financial markets, trying to take advantage of price variations of assets to earn money between the time of purchase and resale, or vice versa, as it is possible to sell a product that you do not own.

Online trading is a serious activity and should be understood as a profession, not a way to make big money quickly without risk and knowing nothing about it. In addition, indeed, all people who are prepared to work hard and participate 100% in this activity can conduct online transactions, and psychology is a daily challenge.

Origin of Online Trading

Online trading has grown considerably since 1990 due to technological advances in high-speed computers, affordable prices, and Internet connections:

- Internet: the growth of the Internet is staggering due to its accessibility, as evidenced by global statistics. People now use the Internet to trade and invest.

- Computers: Moore's Law indicates that the overall processing power of computers will double every two years, allowing the trader to quickly connect to the Internet and do their analysis on their computer.

These two trends have spurred rapid growth in online trading and democratized access to the financial markets like never before.

More and more people are now able to trade online and this trend seems to be growing exponentially. Especially since more than 1.7 billion people with cell phones are still excluded from the financial system, but not for long!

What is CFD Trading

CFD trading is the buying and selling of one or more CFD products.

To better understand CFDs in the stock market and their importance to the individual trader, we will list the characteristics of a CFD.

First of all, "CFD" comes from the English word "Contract For Difference", which means "Contract for Difference". It is the derivative product that can be applied to almost any financial product such as

- Stock market indices

- Forex

- Commodities

Explained most simply, the CFD makes it possible to speculate on the rise or fall in the value of a currency pair, an index, or even gold.

This type of online trading has become very popular as CFD trading allows for speculation on the rise and fall of many financial products such as stocks, commodities, or stock indices and above all with little capital!

What is Forex Trading

When we talk about the Forex market we are talking about the foreign exchange market or currency market. The currency market simply represents the respective values of currencies to each other.

Foreign exchange trading is the activity of investing and speculating on currency pairs, such as :

️ Euro Dollar EUR USD

️ Pound Sterling Dollar GBP USD

️ Dollar Japanese Yen USD JPY

️ Euro Japanese Yen EUR JPY

Forex trading is very popular.

This can be explained simply in terms of its advantages:

High Forex liquidity with large volumes in the currency market

Real-time Forex quoting (24 hours a day, 5 days a week)

So it's a market that's open day and night, allowing Forex traders in every corner of the world to trade the Forex rates of their choice. The Euro and the US Dollar both top the list of most traded currencies!

The foreign exchange market has low fees, making it very accessible for a novice trader and several features such as leverage, spread, and CFD contract size.

What is a trader?

The profile of the typical trader can be defined under three distinct:

1️ The analyst, the trader analyzes the context in which a particular instrument is found, using both fundamental and technical analysis, although it is common to see particular traders using only one of these two analyses.

2️ The actual trader, who buys and sells instruments such as CFDs to make gains, based on the difference between the buying and selling price of trading positions.

3️ The risk manager since the trader must above all manage the risk he takes on the markets to remain profitable and continue his activity.

You have understood it a trader must be able to wear several hats to carry out his online trading activity in the best conditions, but a trader is above all a professional of the financial markets, knowing how it works and how to interpret and read the price fluctuations visible on the trading charts to profit from them.

Long Term Investment - Better Opportunities for 2021?

Are you thinking about retirement? Or a new home? If so, you'll need a long-term investment strategy and this article is designed for you.

Long-term investing is giving up some of your resources in the present, for more than one year, to earn a return in the future. 

Characteristics of Long Term Investment

The above definition implies some of the main characteristics of long-term investment.

Time horizon

It can be defined as the time during which a certain investment will be maintained.

The definition of long-term investment considers that the time horizon should be longer than one year, although it is common to think of longer time horizons when considering a long-term investment.

How are these horizons delineated? That should be your starting point. In exchange for what are you willing to give up the enjoyment of your money today?

Usually, the answer lies in the goal:

- Buying a home

- Retirement

- Children's education

Alternative, the 50/30/20 rule 

If what you are looking for is a quick way to calculate how much you can invest each month without affecting your lifestyle, you can use the 50/30/20 rule.

According to this rule:

- 50% of your net monthly income should go to cover your primary needs.

- 30% will go to expenses of personal choice or whim

- The remaining 20% will be used to achieve your financial goals, i.e. saving and investing.

Therefore, the quickest way to calculate how much you can contribute monthly is 20% of your net salary.

Required Return

After knowing the final goal, the initial disposition, the contributions, and what is the objective of your long-term investment, the required profitability to reach your goal can be calculated.

The following table shows an example of how the required return on investment varies by changing basic investment parameters, such as a long-term investment calculator.

Initially, the goal of saving for retirement is considered as early as age 28. We assume that no additional initial capital is available and that monthly contribution will be $100 per month. 

In addition, retirement is assumed to occur exactly at age 68, a time horizon of 40 years. 

The financial goal will be to achieve an additional monthly income of $1,000 until age 90. Thus, the capital required at retirement to achieve the goal will be $264,000. 

Subsequently, different scenarios were evaluated:

- Normal stage (1)

- Doubling the monthly contribution (2)

- Add initial capital (3)

- Reduce the time horizon too (4)

- Double the additional monthly income at retirement (5)

Differences from other Types of Investments

It is interesting to differentiate between short, medium, and long-term investments. If you are looking for a high return in the short term, you are probably looking for very high risk and high volatility stocks. In these cases, stocks that have recently fallen sharply could be interesting.

In the long, term, greater diversification of assets will be sought since the objective is to achieve a certain return with the least amount of risk.