Let’s start from the beginning. This is not going to be easy and you won’t see yourself diving through dollars overnight. If you have made your decision to learn how to trade Forex. And if you want to benefit out from your newly learnt skill, you are most welcome in here. Whatever your reasons be; just make a little extra on top of you Monday to Friday job. Or to make trading your main source of income in the long run. Just keep on reading this article. Take notes and read as many times as you need until you understand.
Throughout my career as trader and mentor for the past 14 years in watching charts; I have won, lost, I have failed big time and even I’ve been at the edge of bankruptcy. My duty is to help and guide you through so you can avoid my mistakes as much as possible. I’m not confident to say you won’t err, we all do. But as much as possible I hope you will just do it the necessary times. The less traumatic ones if possible. This guide is intended for you to learn to trade Forex. Whether as a part or full-time occupation. Whichever is your case, your learning journey must be with some advantage over those who, like me, did it before.
What do I need to start Trading?
In fact, just a couple of material stuff. But what you will need the most is going to be time and dedication though; many hours of study and practice. If you are fully committed please continue reading. But if you just want to make some fast money because somebody told you banks have a secret they don’t want you to know. If you want to be a millionaire in months. Or your deepest wish is to post a Lamborghini in your social media while wearing your Gucci sneakers. Probably, most probably, this is not your site.
Theer are just a couple of thing you will need in order to learn how to trade Forex. But don’t think you will need an expensive trading station with 3, 4 or even 5 monitors. To learn Forex trading is a lot simpler than that.
With regards to material stuff, you will need a PC, not necessary to be powerful, as much as it works, it would enough. When a PC is not available or as an addition, you will be able to instal an app on your mobile phone which will allow you trade and analyse on your handphone (iOs and Android). You will need as well a notebook (paper) and a pen, especially in the very beginning you will have to write down quite a lot. Lastly, and this is what makes a lot of beginners to turn down due to their economic situation, you will need at least $200 (American Dollar or equivalent in your local currency).
What platform to use to start trading?
You will need to install an application on your PC as well on your cell phone if you have both. If you are planning to trade with just one of the devices, either PC or cell phone will do. If you have both, do not hesitate and go ahead with both. Remember, this is the beginning to learn to trade Forex. You don’t need to invest any money with an expensive laptop/handphone at this point.
The most popular and most extended application for trading among professional traders and brokers is, no doubt, Meta Trader 4 or MT4 in short. It’s the application from which you will execute your trades. You will see and analyise charts, check trades history, price history, etc… It’s the most complete and robust, well equipped with all the necessary tools to trade. The application by itself is quite useless though, you will need to connect it to the server of your broker. The broker is the intermediary between yourself and the market. You can learn more about brokers and my recommendation below.
MetaTader 4 is available for iOS and Android, as well as for Window and Mac. You will find it in your application store or directly in its developer portal MetaTrader MetaQuotes. If you are Mac user you will need special attention and follow the steps provided in this guide to install MT4 for Mac.
MetaTrader 4 is easy to use in both versions; PC and cell phone. Even though it is a powerful tool, its interface is friendly user and quite intuitive to use. You will learn its function as you use it but I would encourage you to take your time, try and test all options and you will discover by yourself a whole new world at your fingertips reach.
Idea💡 A quick guide on how to use Meta Trader 4 for PC and for mobile (iOs and Android) step by step manual. In both articles I won’t go into details about technical details and functions that are of very little use to you now. I encourage you to read through and test byyourselff all other functions.
As mentioned above, the application by itself is simply pointless. At the moment, you can start with downloading and installing it. Continue reading below about a broker so you have have your Metatrader 4 fully operational.
¿Which is the best Forex Broker?
In order to learn to trade Forex, you will need to open an account with your preferred broker, either real or demo. The broker is the intermediary between you and the market. Say you want to buy Euros (EUR) and you send your order to the market, your brokers will send the order on your behalf. They will buy your EUR from another trader, who was selling them.
No better, neither worse… there are thousands of brokers offerings their services and, in principle, all they work. After more than a decade in the market I have seen several brokers to appear and disappear right after. If you want to avoid any kind of scam, these are my recommendations:
- Make sure your broker is regulated under a competent regulation. Among others I would only recommend those in the European Union such as CySec from Cyprus, FCA from the UK or just ASIC outside the EU in Australia. These are three of the most strict regulators watching out for yours and your funds’ safety. Other regulators, mostly from exotic places such as Bahamas, Belice, St Vincent and the Grenadines and some others are not so recommended. Their compliance guidelines are mostly relaxed and so, your money more exposed to risk.
- Its cost to you for trading has to be low, the lowest the better. A broker makes profit with every trade of yours. Either with the difference between the buying and selling price (spread) or by form of a commission per trade. Whichever the method it is, for your own benefit, this should be the lowest possible.
- Compatible with MetaTrader 4 (MT4). Some brokers out there offer their own trading application. From my own experience (some time ago), these applications are lacking lots of functions, stability and execution delay. Typically these brokers with own application target beginner traders without much knowledge. Serios and those brokers targeting professional traders won’t spend their money in developing and maintaining fautly applications, instead they rely on a third party app which is the most popular, extended and robust among traders.
- Their servers must share the closing time of New York market. As you will learn in my PROfessional Price Action Trading Course, a daily candlestick must open and close when a day starts and ends. This is with the opening of the Asian session and closing of the American session. Otherwise your candlestick won’t represent and exact trading day. This may sound like something silly but it is not at all.
- Certain reputation and track record in the market. There are hundreds of brokers popping up like mushrooms every single year, typically with some attractive promotions and a nice website. Even claiming their registered in the UK, USA, etc… Please note being registered as an entity does not imply to be licensed as brokers. Many of them will disappear leaving behind customers without their funds, trust me I have seen a few every year. For your own safety please stay away from extra new brokers, let others try first 🙂 Rely on a broker with several years of track record and positive feedback from customers.
Personally I work and recommend the broker I work with since 2011. It is the ideal choice to follow my course and charts in your situation when you just want to learn how to trade the Forex market. Frankly speaking I have been approached by many brokers and I have even tested some. I ended up declined their proposal always due to either lack of regulation, incompatibility with MT4, slow speed in executing trades or high spreads. Even though they have offered me good commissions I will never recommend you to work with a broker i would not not with, fair enough I guess.
AXI is the broker for professionals ideal to learn trading
AXI is the broker I work with since 2011, working with them for over a decade I can assure the experience has been excellent so far. All charts you will see in this course as well as prices are from AXI’s servers. If you work with the same broker it will be easier for you to analise as well as comparing equal to equal charts it’s going to be, definitely the best.
Needless to say you can work with whichever broker you prefer to. Any broker you feel comfortable and confident with. I would just add please you make sure it complies with all 5 pointers highlighted by me in the paragraph above. Emphasising the importance of their server timing to match Asian opening and American closing times, otherwise you may see patterns in your charts that won’t be correct.
If you belive you are ready to open a real account, make sure that:
- You have enough knowledge and you know the risks implied in CFD investment.
- You are going to invest at least $200. This is my advised minimum investment in order to be able to follow my strategies featured in my course learn to trade from zero to hero. With a lower balance you will be able to trade, of course, but you will have to take lots more of precautions.
- You can afford to lose the capital you are going to invest. Never ever trade with money that you need to pay your rent, food, family needs, studies, or anything else that can’t wait, NEVER! Your desperation to make profits will make you trade wrongly, really. If you don’t have the money to trade now it is fine. Just continue reading and learning and practice with a demo account. You will be ready to invest real money soon, I’m sure of it.
- It is not loaned money that you have to return within a given time. Similarly to trading with money that you need for something else, this situation will make you trade wrongly and you will end up owing the initial capital plus interests. Not the ideal situation at all. Read, learn and practice on demo instead.
Open a real account with AXI
Open a demo account with AXI
If you are not sure about the settings of your future trading account, simply open your account with my recommended configuration:
- Currency: USD*
- Leverage: 1:30**
* The currency in which most of commodities and indexes are traded. All information, charts and data shared in this portal and course are shown from and account in USD. If you reside in Europe and prefer to trader in EUR you are free to do so of course but be aware our prices won’t match.
** The recommended leverage for a beginner is the lower the better. You will be able to change it from your dashboard in the broker’s portal. Below I will explain about leverage and you may then choose the most convenient to you. Personally I would not advise this to be more than 1:30 as this is the maximum allowed by the EU for retail trader in order to trade in a safe environment.
I have my trading account, what’s next?
AXI will send you a confirmation e-mail with your account credentials, either demo or real. Check your e-mail and note three items you will need in order to make Metatrader 4 (MT4) work.
- Server. (typically with the format AxitraderUSreal03 or similar
- User ID. (typically number, letters or both combined randomly)
- Password. (mixture of letters and numbers mixed randomly)
With this you must open MT4, either in PC or Mobile > Configuration > Add Existing account > Search and select server name > key-in your user ID > Key-in your password. Voila! you should have your Metatrader 4 up and running.
If you have reached this point and followed the steps indicated but still you face any inconvenience, you can reach AXI’s Customer Service from their portla or contact me directly, I will help you with the first steps and settings.
The broker asked me to verify my account
Definitely. A broker is a Financial institution working under a license as such, like any other bank or corporate handling third party money. Due to compliance regulations, safety and anti-money-laundry laws you will have to verify your account like you would do when you opened an account with any other bank.
The verification is quite straightforward and you should have all information handy, I’m sure. The broker with e-mail you with a link for you to upload just 2 documents. 1) Scanned copy of your National Identity Card or Passport and 2) A proof of address. As such it’s accepted any correspondence under your name from your bank, utilities, tax agency, etc.
In the future (hopefuly soon), when time to do withdrawals come, the broker may request from you a scanned copy of the first page of your bank account or computerised statement showing your name as the account holder. Again this is for your safety and withdrawals to third party accounts is not allowed.
Is it normal that my brokers need some documents from me?
A part from normal is necessary and desirable. The moment you are asked to identify yourself it means that your broker is regulated and they trade under a safe jurisdiction laws. Their business is monitored by competent authorities and they can only accept compliant customers.
If by chance you found a broker which did not ask you for any identification document, for yours and your funds safety, please run away. A non-regulated broker is equal to passing your money to a completely extranger thousands of kilometers away from you, would you trust it? Who would you call in case of discrepancy or fraud? If you value your hard-earned money don’t play games with it and go with a regulated broker.
What is a PIP?
The pip is the smallest portion or unit of the price of any instrument in which it changes. When you enroll in my Price Actions PROfessional Course to learn to trade forex or reading any trading forum you will notice that we traders refer to pips instead of dollars when talking about the result of a trade. For instance “with this trade I made 235 pips” instead of “with this trade I made $800” Wait, don’t try to find the value based on my example, it doesn’t work that way and both statements are just unlinked examples.
A pip does not have a value in money by itself. It will all depend on the size of your trade. We will talk about size of lots and trades later below.
In pairs with United States Dollar (USD) and Euros (EUR), which are the most common Forex pairs, the pip is the fourth decimal digit. In mathematics terms we refer to the ten thousandth portion or the result of dividing 1 / 10,000. As an example, for the price 1.23456 we refer as pip to the number 5 highlighted in blue.
Many or all brokers will show you prices with 5 decimal digits. Please do not mix up things, the last digit is not necessarily the pip.
Again, taking as an example this sale (refer to the picture). We sell at 1.23456 and the prices drops to 1.23321. We then closed our trade. The result of this trade is the difference. This is 13 pips as shown in the picture. In fact this is 13.5 pips to be exact if you were wondering.
Out there you may find different information and confusing at times, they call pip to anything; sometimes the third digit, sometimes the fifth.
You may have noticed or will notice soon that some pairs don’t have the price format with 5 decimals. They may look like 133.547 or 1,764.23 for instance. These are the pairs in Japanese Yen (JPY) or some commodities such as Gold (XAU) in this example.
For pairs in JPY is quite easy to identify the pip as it is just the second decimal, as simple as dividing 1 by 100. For the example mentioned above; 133.547 the pip is the number 4.
This can sound confusing if you are not familiar with it and specially if this is you first time reading about it. You are just starting to learn how to trade the Forex Market and it is not necessary to memorise it by just reading it in here once. I recommend you to take notes and read this article as many times as you need. In fact it is simpler than what it seems. When you go hands-on it will be much easier after you make your calculation a couple of times.
What’s the value of a PIP?
I’m sure your motivation, when you started to learn to trade Forex and being interested in trading, was money. It is natural to translate all your thought into its value in dollars, at the end of the day money is the reason why you are here. However note a pip does not have a value in dollars but itself. It will depend on the size of our trade.
A pip’s value by itself in relation to $1 is $0.0001 or $1 divided by 10,000. Hence if you invested $1 and your profit is 1 pip, you would have earned just 0.0001. This sound like very little, right? In the first place we won’t trade for earning just $1 and, secondly, in order to multiply our profits we will make use of the leverage. We will see about leverage in the following paragraphs. For now simply take note of the following values, which will be useful in the future:
If your investment is 1 standard lot, means you have invested $100,000 and we said 1 pip is 1/10,000. Hence, the result of dividing your investment ($100,000) by 10,000 (pip) is 10. Hence the value of 1 pip when trading 1 standard lot is $10.
If your investment is 0.10 standard lot, means you have invested $10,000 and we said 1 pip is 1/10,000. Hence, the result of dividing your investment ($10,000) by 10,000 (pip) is 1. Hence the value of 1 pip when trading 0.10 standard lot is $1.
If your investment is 0.01 standard lot, means you have invested $1,000 and we said 1 pip is 1/10,000. Hence, the result of dividing your investment ($1,000) by 10,000 (pip) is 0.10. Hence the value of 1 pip when trading 0.01 standard lot is $0.10.
Calculate profit from pips
Now, back to the picture of the previous paragraph, where the result of the trade was 13 pips. You can now have an idea of the profit in dollars based on the size of your lot traded. If your trade was for 0.02 standard lot, each earned pip’s value was $0.20, timex 13 (number of pips), your profit would have been $2,60. Bu instead, if you had traded 1 standard lot, each pips at $10 value, multiplied time 13 pips, you would have earned $130
This point reached, if it is still not clear to you, there’s nothing to worry about, this is normal. Just go back to the beginning of the paragraph and read it again, take notes if you need so and don’t be ashamed to read it for a third of fourth time of needed. This may be is one of the toughest parts of the process to learn to trade forex, but believe me, before you know you will be familiarised with all concepts.
What is a Standard Lot in trading?
In Forex Trading we refer to a Lot as the unit of trading. Like any other instrument or goods that can be traded such as Oranges by kilograms, eggs by dozens or oil by liters.
A Standard Lot is equal to $100,000 if we refer to pairs trading American Dollars (USD) or Euros (EUR). Other pairs with other currencies such as Japanese Yen (JPY) or Swiss Francs (CHF) may have other values. For a start and with the purpose or learning the theory, we will refer to Standard Lot in EUR/USD pair.
With regards to commodities such as gold (XAU), silver (XAG), crude oil (WTI) or coffee (KF) or indexes such as S&P500, IBEX35, NASDAQ, etc… their values may change, not just their Lot’s size but also their denomination. It will depend on the broker you work with. I recommend you to check each instrument’s Lot size before you open any new trade.
Due to each’s broker operations and marketing strategies, the value of each lot may vary. The easiest way to check and verify a Lot’s size from MT$ is by tapping on the pair and click on “details”. You will then see the size of a Lot among other information referring to the particular pair.
What is the recommended Lot Size to trade?
Definitely it will depend on your capital (equity) and your appetite for risk. If you equity is $500 your trade size will be limited as compared if your equity was $50,000 instead. The size of your trade must be in accordance to your equity always.
When you open a trade, your balance (equity) will increase or decrease as you move into profit or loss. Therefore, the size of your trade is crucial. It must allow you enough margin to keep your trade open before your account is liquidated. If your equity is $500 and you enter into loss for $500 it is known that your trade will be closed automatically. Even though you had not closed it manually. At this point your balance would be zero. Even sometimes, when the liquidity in the market is low, your trade may be liquidated beyond. This will lead to a negative balance. In other words you would have lost more than your initial deposit. Hence you would owe some money to your broker.
If you follow my instructions and my Price Action PROfessional Trading Course, even without previous knowledge, you will learn to avoid being liquidated. You will not just learn to trade but also how to manage your risk while trading. Basically, you need to know how to keep you money safe and make it grow.
There’s no magic formula to teach the size of your lote/trade. It must be you, better than anybody else, the person to decide the size of your lot. Take into account 1) Your equity and 2) Your appetite for risk. However you may make a mistake if you trade bigger size lote than the one you can afford. This is one of the most common mistakes by beginners and the reason why they give up before they can even profit out from the market.
If you are reading this I would not go wrong if I assume you are starting to learn to trade the Forex market. I assume as well you are not in the position to take unnecessary risk. Take my advice as a norm: Cautious traders are profitable. You should then take precautions and protect your capital. If you want to take risks you may want to consider visiting a casino instead of trading 🙂
As an indication, based on my knowledge and experience, I can recommend you not trade more than 0.01 lot per every $100 of equity. Following this, below a nice and simple table:
| Account Equity | Maximum Lot |
|---|---|
| $100 | 0.01 |
| $200 | 0.02 |
| $500 | 0.05 |
| $1.000 | 0.10 |
| $3,000 | 0.30 |
| $5.000 | 0.50 |
Note: The maximum size is referring to all your open trades simultaneously. i.e. if you have several open trades at one given time, all trades together won’t exceed my recommended maximum lot size.
What is Leverage?
The Leverage is a multiplier that help us to increase (multiply) our trading capacity. When you open a trading account with our Preferred Forex broker, you will be asked to chose your leverage. This can be either 1:30, 1:50, 1:100, 1:200 and so on.
Take as an example the leverage 1:100. This means that the vale of your equity will be multiplied x100 and, with it, your trading power will be 100 times your equity. Note: You will not see your balance increased. You will instead have higher trading power with yoru same balance.
If your equity is $500 and your leverage 1:100, you will be able to open atrade for $50,000 ($500 x 100). Please do not get excited at this point and try to trade fully leveraged. This is really dangerous and you can lose your money within seconds when you are fully leveraged.
Based on my trade size explained above and even if you trading power is $50,000 you will need to still trade your 0.05 lot size maximum! According to your $500 equity.
When you multiply your trading power you will, therefore, multiply your profits. It is logic that if you invest $500 and your profit is X, when you invest $50,000 ($500 x 100), your profit to be 100X.
It sounds great! you must be thinking. The negative note here is that the same theory applies to losses. I hope you understand know why I insist on being moderate with the lot size.
Let’s make some numbers with all what we have learnt so far. Based on my lot size recommendation, your balance and leverage:
Say you have an account with $500 and the leverage you choose is 1:30. This means that your trading power is for $15,000 (i.e. $500 x 30 = $15,000)
For a $500 balance we said you will trade as a maximum 0.05 lot size. A standard lot is $100,000. Hence with your 0.05 lot you are trading $5,000 this is one third of your maximum trading capacity.
By trading just 1/3 of your maximum trading capacity you are putting yourself in a safe position. Allowing your trade to develop, go up and down as per market fluctuations in a safe manner when you trade is in negative, as you would have enough margin to allow your trade go positive following yoru analysis.
Which is the best Leverage to Learn to Trade Forex?
At times is not easy to give advice on this as nobody else better than you know your risk appetite. I would advise you to make your number and decide based on your trading style and the risk you are comfortable with.
If you follow my recommendation on trading lot size, you will not need a leverage higher than 1:30. This would allow you trade with peace of mind of not being liquidated upon a sudden market move against your trade. 1:30 is also the leverage recommended by the EU for retail traders (you and me). This recommendation is with the purpose of protecting investors capital as much as possible.
I understand that you may be tempted to take a higher leverage in order to open trades for even bigger size. This would be typically the end of a traders’ career. You may be lucky once, twice and even thrice… Yes, you would then think you know everything you need… I have been there before you, trust me. And no! I won’t do it again. I know that feeling and I also know is the easiest way to lose my capital.
Last thoughts
Even after reading this and other of my articles. Even knowing listening to my advises and that these are based on my experience. Again, I know you may want to try “your way” with higher lot size. (Specially when you had won a few consecutive trades. Yes I know you think you are a champion). Probably you will try sooner or later. Let me tell you what will happen:
- It may go well. Congratulations! After one time going well you will want more, of course, and the second time my go well again. Congratulations again! At this point you would have lost fear (and respect) to the market and your ego going higher. At this point you are closer to the big loss, which would be bigger than all your past wins. Trust me. I hope this paragraph makes you think.
- It may go wrong. If you lose your high-risk trade from the very beginning you would have learnt from the start that it is not worth to risk more that what you can afford to. Higher risk means higher loss, specially when you are just starting.
In your career to learn how to trade the forex market you will have to learn to be patient. To learn to go step by step. Growing yoru capital little by little. Shortcuts exist and may work sometimes but, believe me, when shortcuts fail, they fail big!
Happy Trading! Get in contact with Federico Sicilia here.
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