Forex Trader: The Ultimate Guide For Beginners In 2020
Isn’t it annoying when you are trying to find out what a Forex Trader is, yet all you read about is HOW much money you can make? On top of that, you walk away with more questions?
It might be a good opportunity for some people, but people always leave out one piece of information:
Being a forex trader is not for everyone.
Forex trading is difficult, but it has its rewards!
It’s a lot more than just putting your money on the line, it’s about mental fortitude and being able to self-reflect.
That is why we have sourced out the key topics of a forex trader that anyone researching or aspiring to be a currency trader must know and understand 100% before risking a penny.
I’m sure you’d agree with us that a lot of non-traders believe that trading forex is just a gamble.
Or do you agree with the outsiders, and believe it’s just a 50/50 on buying and selling at the right time?
If you are in the latter population, then you’ve finally arrived at the right website…
Whichever camp you are involved in, we have written the Forex Trader: The Ultimate Guide to get you up to speed and what is involved in becoming a currency trader.
What Is A Forex Trader
So you are researching to find out what is a forex trader.
What is it you are looking for as an outcome?
- A stepping stone to becoming a trader?
- Learning what is a forex trader?
- Just browsing?
Either way, let’s start at the foundations and begin by learning what is a forex trader.
The most common explanation of a forex trader is someone who speculates in the forex markets (foreign exchange markets).
This is concise and to the point, but there are many sublevels of a forex trader.
These are separated by:
Type of Forex Trader
Technical or Fundamental Analysis based?
A technically focused trader is someone who only uses price action and indicators to generate trading ideas.
Whereas a fundamental analysis focused trader generates their trading ideas by using the key economic data points to judge the strength of economies against one another.
Both have their strengths and weaknesses, but the best traders in the world combine both forms of analysis.
Fundamental analysis to capture the bigger picture opportunities and focus on trading in the direction of the market as a whole.
Then technical analysis to execute their trading ideas more precisely in lower time frames.
For example: If the main theme of fundamental analysis is that the US economy is weakening, whereas the United Kingdom economy is strengthening – the view in a long term approach is that the sell USD and buy GBP.
This would translate to a professional to only looking for buying opportunities in the GBP/USD cross.
Because the momentum and fundamentals are driving the price upwards, there is a high chance of making a profit buying – rather than trading against the trend and shorting the asset.
You can still take short opportunities (to profit when the market falls), but if the fundamentals are strong and clearly indicating an opportunity to buy GBP over the next 3-6 months, then you will want to be taking trades where the smart money is doing so as well.
To put it into other words, in the ocean institutions are the sharks and retail traders are the feeder fish that stick to the sharks as close as possible to get a free ride and protection.
Otherwise, you could be just their next dinner!
Timeframe & Trading Style
Traders can be categorised into different types further by how long they hold on to a trade, or which timeframes they focus on.
The higher the timeframe, the fewer trades are taken, yet the more pips that can be captured.
The lower the timeframe, the more trading opportunities are available, yet there are fewer pips to capture.
Most people see forex traders as only intraday (people who trade during the day, 5 days a week) traders. Therefore, many beginners only focus on this – which may not be right for them!
Most trading styles are covered by these categories:
- Scalper – someone who trades frequently, taking small profits but often during a single trading day.
- Swing Trader – A swing trader is someone who wants to capture market reversals at the earliest stage from the swing low to high of a market trend and vice versa.
- Trend Trader – someone who waits for a valid trend to formulate and would then trade with it. “The trend is your friend until the bend at the end”.
- Carry Trader – someone who wants to collect interest on the currency pairs they hold. This can produce income for the trader.
So, a scalper can be in and out of a trade within seconds, whilst a carry trader can hold their position for months or years.
In addition to the timeframe, the risk and reward ratio goes from smallest to highest. So again, with scalpers, they may look for 10-20 pip moves – whereas a trend trader may be looking for 1,000 pip+ moves.
Is there a style you like the sound of already?
Grab a pen and note it down whilst its fresh in your head, or even better – get in touch with us – maybe we can help you home in your trading style.
By now you should understand what a is a forex trader and at the very least pencilled in the route you want to take.
Forex Trader For Beginners
Moving on from understanding what is a forex trader, it’s time to make progress and delve a little deeper.
We talk about this a lot on our free forex course and that is trading is easy, but you have to go through some (financial) pain before you can gain.
You should have heard the expression “no pain, no gain” already.
This is true, but the pain is GOOD. Pain reinforces us to make better decisions next time.
Knowing how to trade is a different story altogether.
This is due to concepts that cannot be transferred or taught, such as mindset, experience, recognition and repetition of trading.
The above are forged over many days, months or years of trading.
Here are some core tips to help build out with your learning, as a forex trader for beginners:
Tip 1: Don’t spend a penny, yet.
When there is SO much money to be made trading, it seems like a quick fix will accelerate you to you financial abundance.
In business, it’s the businesses that spend the most get the client.
However, as a complete beginner in trading, you should put your wallet (or purse) away.
The best price in the world is free, and there are a lot of amazing resources out there that are free to grasp the underlying concepts of trading.
99% of the courses out there are just repackaged free content with a price tag on it.
At least with the free content, you will keep your hard work money to yourself whilst you are trying to learn how the forex markets work.
Remember, about 60% of your success will be from the learning how to trade and the remaining 40% will be from actually trading.
There are services that provide strategies, these are shortcuts to finding proven blueprints on how to generate trading ideas, but without the core knowledge to execute the trades – the strategies are worthless.
So as a main tip, forex trader for beginners, keep you money for now. If you find someone, ask them questions and get a feel for what they are selling.
Tip 2: Avoid Trading Signal Providers.
Telling people NOT to use these services is like telling your friends you’re only going out for one beer.
No matter how many times you say it, you still ignore it.
Now, don’t get us wrong – some, and we mean a very small percentage, are okay.
The rest just want you to open up broker accounts (where they get a back payment for you opening an account) to follow their signals blindly.
You are better than this. Learn to trade.
Tip 3: Accept You Will Lose
As soon as you let go of the idea that you will be able to trade at 95% success rate without losing a penny the better.
Trading involves risk. Risk of losing funds and risk of your emotions taking over.
Trust us, losing money can be hurtful. Especially 5 figures+…
The soon you accept that it’s normal, the sooner you will lose your focus and emotions on “losing” a trade and finally focusing on winning trades.
As a beginner, if you have several positions open and they are all losing 9/10 you would cut them because they are in the red. Your focus is to stop the losses.
When in reality, they have yet to touch your stop loss. The predefined area of the market you were happy to get taken out of if the trade went against you.
Beginners cut their winners short, and their losses quicker.
Veteran traders let their winners run and cut their losses at the stop loss.
Just with these tips alone will hopefully push you in the right direction and save you some money!
Forex Trader Strategy
Having a forex trader strategy is imperative when it comes to trading the currency markets (You can use a currency strength meter to find out).
“Fail to plan, plan to fail” –
A forex trader strategy is underlined by setting a series of rules which define how a currency trader would enter, exit, and manage their trades.
Each strategy is as independent as each person.
Not every strategy works for every trader, as we discussed earlier – there are plenty of different types and personalities of forex traders.
The strategy will always be there in the background.
- At first, it might a burden to follow a strategy:
- You see an opportunity
- You review your strategy
- You read it twice because you want to make sure that the opportunity can be successful and matches your rules
- You read it a third time because you don’t want to make an error
- You read it a fourth time because you don’t want to lose money
- You miss the trading opportunity
Joking aside, following the plan for the first few months will take time but the more you follow it and follow-through, the faster you will become.
If you have ever ridden a bike, or driven a car, do you remember the feeling of starting out?
“What if I fall off” or “What if I crash” Or “I don’t know what I’m doing”
These are common questions, but after you practice a few times you no longer ask those questions.
In fact, most people don’t even think about driving – that is because they have learned and practiced driving so much that it’s autonomous.
Getting to that level is the same as your forex trader strategy.
Instead of questioning each step of the strategy every time, you will be just doing a “yes/no” response:
Does this match my strategy? Yes, go for it.
Okay, so how do you generate a forex trader strategy?
Well, this again is based on your trading style. The core concepts you need to incorporate are:
- What to look out for; what are the signals you want to find in the markets to indicate a possible trade?
- How to enter the trade
- How to manage the trade (set stop loss levels/trailing stop losses/ scaling trades in…)
- How to exit the trade
That’s it really.
Forex trader strategies are not there to be complex at all.
If you want to find some strategies to test, you can use Google to find some – or you can view ours.
Forex Trader Platform
In order to speculate on the markets, you need access to the markets.
Now, believe it or not, you don’t get direct access to this. Remember, a retail trader is just a feeder hitching a ride with the shark.
Instead, you place your orders with your broker, and they act as an agent between you and the market.
It is with the broker that you have a forex trader platform with, all platforms are provided by the brokers and are free of charge.
There are a few types of platforms, these are:
- Metatrader 4
- Online based – usually the brokers own
- App-based – usually MT4 mobile or brokers own app
These platforms grant access to trading tools, analysis, execution, and technical indicators. Essentially, everything one would need to be able to participate in the markets.
We use the Metatrader 4 platform because it offers the most customisation and ability to set up our platform how we see fit.
The image above It will be an excellent idea if you had a look at the different forex trader platforms available and choose whichever suits you best.
Forex Trader Scams
Sadly, with anything that is lucrative – scammers look to play with people’s dreams and emotions to trigger their suspects to hand over cash for nothing in return.
Most scams come from Trading Signal providers, that is because they are unregulated in most countries – except in the United Kingdom.
These services offer financial advice and the people behind them don’t have the right competency qualifications, let alone are regulated.
The goal of the scam is to get you to follow their signals (for free) but you MUST open an account with their broker and do X amount of trades with them.
For them, it doesn’t matter if the signals go up or down in your favour.
As long as you are trading, they are earning money – win or lose.
This type of forex trader scam exploded with binary options trading.
People were being paid a percentage of the trades lost, just like how gambling companies pay their affiliates.
So, if you bet £1,000 on a binary option and lose the bet 60 seconds later, there is a high chance that the signal provider made £350-£500 on that loss.
Think £1,000 is a lot? These scam artists got people to trade big sums of money and deposit thousands of pounds to trade. Making them a lot of money, with the trader out of pocket.
Tips To Avoid Forex Trader Scams
- Is the person offering you an incentive to join a broker? “Join the broker, deposit and get free signals” is a HUGE red flag.
- Is the company pushy to get you to sign up?
- Be careful of fake screenshots. The latest craze is scammers are setting up Hungarian Florien based accounts, with the exchange rate £2,631 to 1,000,000 HUF (at the time of writing). They use these accounts to show you that they’ve made millions trading Forex.
- Always do your due diligence
- Have they been around for long, or have they instantly been set up with hundreds, or thousands of reviews and customers out of nowhere?
- Check their social media for their followers – are they fake? (Use Social Blade to find this out).
Follow the above tips and you should be fine looking into a service.
The best tip is to avoid any services that promise to give you trading advice/ideas altogether and learn how to trade yourself.
Forex Trader Salary
A very common question is what is a forex trader salary?
It’s difficult to say, some retail traders are lucky to come away with any profit.
Other traders could be earning huge amounts of money into the 7-figure region.
The difference between being a forex trader and working for a living is that every time you take money out from your trading account, you hurt your gains and reduce your trading power slightly.
The ideal place to be is to be able to trade whilst doing another job as you start out, then once you can start taking out £1,000 per month profit slowly build it up until you can take out a more significant chunk of money – without it hurting your trading account.
It is not uncommon for professional traders, to earn £100,000 per year plus.
How to become a forex trader
Let’s get you going and learn how to become a forex trader.
By now you will have read essentially the foundations of what is a forex trader and what type of trader you’d like to focus on.
The good news is that anyone can become a forex trader it doesn’t involve anything too rigorous.
All you need to be educated and experienced in trading the markets whilst consistently profiting. Easy eh?
The bad news is that it will take time, an emotional toll on losing money, or the fear of losing it, and of course – you will have lost some money during the process.
Instead of saying you lost money, reframe the idea into money invested into the experience learned.
The market easily takes money away from you, but with enough experience, the market will easily hand you the money back 10-fold.
Don’t fret, we have already pointed you in the right direction.
Right now, if this is the start of your journey into becoming a forex trader then it’s time to rack up them trader miles and dive into a forex trader platform and get used to how it all operates.
Learn the basics and understand supply and demand trading, from there you will understand the market structure and give you an edge when it comes to finding trading opportunities.
The best time to start something is… Now.
If you want to read about some cool forex trader tips, check out this article here from Investopedia.
Forex Trader Course
Now, one of the absolute musts when becoming a forex trader is getting the right education. That is following forex trader course that has lessons in it that makes it not only easy to understand, but also easy to translate into the real trading world.
The best forex trader course is one that not only highlights and explains what the terminology means but also how to use it clearly.
We have seen many courses that are the same information, with an inadequate explanation behind the theory.
We can tell you why too:
Information was originally translated from books on to websites.
This meant people essentially took texts from books and reworded them to put on to the Internet.
Now, over time people have copied and regurgitated others copied versions from others and as you can imagine, like a game of Chinese Whispers, the art of trading is lost with every person interpreting how things work or put their own spin on it to sell to the public.
Yet people can’t understand how the majority of traders lose?
Even better, the brokers are pushing to the same lack of information and poor understanding of how the forex markets work.
So how are you supposed to win, and get the right forex trader course?
Simple, do your own research. If you have to pay for a course, but you know that the upfront fee will be paid many fold over because they have taken the time to discuss with you your needs and you’ve vetted them – then go ahead.
Or you can try our free forex course online.
Forex Trader: The Ultimate Guide Wrap Up
So today we have gone through an awful lot of information if you are reading this then congratulations!
It’s a long read, but we trust it was worth it.
We hope you’ve been able to consume this article and grasp a much more enlightened view of what is a forex trader and hopefully, we’ve revealed some home truths about being a forex trader.
Whether you managed to find which trading style you’d lean towards, or want to visit our free forex trading course after this, please feel free to get in touch if you have any questions.
Post them on social media or give this article a share if you think someone else would benefit from it.
The final question from us is:
Are you going to take action?
We hope you do and can’t wait to hear from you and your progress.