What would you do if I said that beginning today, you could begin learning the basics of trading forex for free?
You’d probably ask how this is possible. After all, when you think about it, learning to trade forex for free goes against everything we’ve been taught. We’re told to invest our money wisely in order to grow it and eventually retire with a massive nest egg. But what happens when the value of your investments suddenly drops by 20%?
How can you possibly recover from investing 100% of your wealth into an IRA or 401K only to have it stolen from you due to a sudden market crash? You can’t! No one can! If you want true financial security then learn how to trade forex on the right side of the market.
What Is Forex Trading?
Forex trading is one way to protect your money from sudden market crashes that wipe away your wealth in a matter of hours or less. Unlike stocks, futures, real estate, or other investment vehicles forex trading allows you to use leverage. Leverage means using margin to control larger positions than you could normally afford to buy with just your own cash reserves.
Using this method, even individual traders can make huge profits by trading forex for free. For example; let’s say you deposit $10,000 dollars into your account and trade it along with $40,000 worth of borrowed money (margin). This means you are effectively controlling $50,000 dollars worth of currency contracts! As long as the currencies move in your favor, you are making money, lots of it.
With that said, there are risks associated with forex trading. Even though the trades are only placed for a short period of time (usually less than 1 month) currencies can be very volatile and lose large amounts of value in a very short period of time. This is why leveraging yourself up to control more dollars or pounds or yen is so dangerous!
What Traders Need to Learn
The most important things traders need to learn are technical analysis, charting, and timing. This means learning how to read charts, identify support and resistance levels, buying trends, spot reversal signals, identify countries with strong economies for trading on the upswing, etc.
There are also more advanced techniques like pivot points, Fibonacci retracement levels, Elliott wave theory (which is self-similar patterns or fractals), stochastics which use moving averages along with overbought/oversold indicators.
All of this stuff can be learned online through free courses. Most brokers offer some type of beginner trading course that will teach you everything you need to know about becoming a successful trader without breaking your bank account.
Learn How To Make Money Online When You Trade
What traders need to learn is how to use their own skills, knowledge, and intuition in order to predict how a currency pair will play out over the next few hours or days. This means your goal should be to identify when a currency is going up or down so you can plan your trades properly. With that said, here are some things you’ll need to know:
How To Spot A Currency Reversal – How much momentum does a currency have? If it’s losing 50 pips every hour during the day then odds are strong that it’s headed for a reversal soon. Use Fibonacci retracement levels in order to find areas of high volume where reversals tend to happen. If price action keeps bouncing off of the 38.2%-61.8% retracement level then odds are this is a good area for a reversal signal.
How To Use Support and Resistance Levels – Once price action penetrates the 38.2%-61.8% Fibonacci retracement levels it’s time to start looking for long trading opportunities on the upswing (circled in green). The idea here is that if the price keeps bouncing off of 61.8% you know there will likely be another bounce at some point which means you should keep your eyes open just in case an opportunity presents itself to trade with the trend using support and resistance levels as selling or buying opportunities. The same works for short-selling opportunities too because just about every reversal has a 38.2% retracement level for momentum to bounce off of before heading down again.
How To Identify Market Trends – In the example above, you can see that we have clear market trends that we can take advantage of using support and resistance levels and Fibonacci retracement levels. The idea is that once you identify these areas:
1) You should expect the price to continue in one direction until it hits a supply/demand zone
2) Look at the chart and determine whether there’s more downward or upward momentum
3) If you think upward momentum will win out then look for buying opportunities on the upswing
4) If you think downward momentum will win out then look for short-selling opportunities on the downtrend
5) Use volume to confirm what you think the market momentum will do so you don’t get caught in a bad trade before a reversal happens
The Bottom Line
There you have it. Using these tactics, you can get your start. Everyone from the beginners in the United States to the best forex broker in Lebanon uses these tactics.
All of this is easier said than done, but with time you will be able to tell where the momentum is headed. On top of that, by taking advantage of high probability trade opportunities you will make a lot more money in the long run.
There are plenty of books and videos online that can teach you how to read charts like a professional so it’s just a matter of getting some experience under your belt. Therefore, go out there, start learning, and begin your trading career.