Beginner's Guide to Forex Trading with Price Action Download From Here
Learning how to trade the foreign exchange market, or Forex, can
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Welcome to the World of Forex
The first thing you need to do before you start forex trading is get a basic understanding of how currency pairs work.
In most cases, one country’s currency (the base currency) is paired with another country’s currency (the quote or counter currency). The price of a given forex pair will fluctuate based on supply and demand for both currencies in that pairing.
Different Ways to Trade the Markets
If you’re a newbie in trading, it can be a challenge figuring out which method of trading will work best for you. The truth is that there are many different ways to trade; some work better than others
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depending on your style, personality and what you want out of trading. Here are some options when deciding how you want to trade If you like to take quick action: Active trading works well if you’re a high-energy person who likes taking quick action on markets. Active traders use technical analysis tools such as candlestick charts or moving averages to identify price patterns that signal an upcoming move, then they jump in and make trades accordingly. With active trading, things happen fast—and they also tend to happen quickly in both directions (meaning lots of profit potential but also lots of risk). One downside: You need money set aside specifically for active trading because one losing trade could wipe out all your profits from previous wins.
Understanding Currency Pairs
The first thing you need to know about trading forex is that it’s all about currency pairs. When you trade a currency pair, you’re buying one of two currencies and selling its counterpart.
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This means you can use only two currencies for any given trade (one for buy and one for sell). As an example, let’s say your chosen currency pair is EUR/USD: You buy euros and sell U.S. dollars. If you think that the euro will appreciate against the dollar over time, then you’ll want to buy euros and sell dollars. If you think that both currencies will depreciate against each other, then you’ll want to do just the opposite: Sell euros and buy dollars.
Recommended Trading Timeframes
Metatrader4 (MT4) and Metatrader5 (MT5) trading platforms support a variety of timeframes, with every second counted from GMT.
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Of these, tick data has a higher frequency than minute bars, which itself has a higher frequency than 4-hour bars. The most common time frames are 5 minutes and 15 minutes on MT4, while 1-minute is favored by many on MT5 because it displays significantly more price information on your chart.
The Basic Rules of Price Action
Price action trading is a short-term trading strategy that does not rely on lagging indicators or forecasts. Rather, it focuses on identifying price movements and using them as an entry signal for new trades.
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Price action traders place high importance on candlestick patterns as well as support and resistance levels in price charts. This is because they help determine future price movement—especially when two different formations appear next to each other.
Reading Candlesticks in Detail
When trading in forex markets, it is imperative that you understand how to read price action. For many novice traders and investors, reading candlesticks correctly seems like a difficult task.
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Candlesticks represent a certain asset’s opening price, closing price, high and low for each given time period. These prices are plotted on an x-axis (time) and y-axis (price). Each candlestick displays four elements: open, close, high and low.
Indicators Are Not Magic
For traders new to forex, one of their first misconceptions is that technical indicators are magic. It's true that they are used by traders around the world, but how exactly do they work?
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This free guide will show you which ones you should know about, as well as how to use them. Indicators can be used on any time frame and with any type of trading strategy. When it comes down to it, not all indicators are created equal.
A Word on Money Management
Another thing that is important to remember when trading currency, or anything for that matter, is money management.
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It’s important not only to keep your losses small but also ensure you can ride out any short-term drawdowns. You don’t want all of your hard work and discipline flushed down the toilet because of a $2,000 mistake on an entry point.
Types of Traders
The most important distinction you can make in understanding forex trading is between intra-day traders and day traders. As its name suggests, an intra-day trader trades for one day (or less) at a time, with individual positions lasting anywhere from minutes to hours.
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Day traders on the other hand hold their positions overnight; a position might last several days or even weeks, depending on what type of assets are being traded. The biggest difference between these two types of traders is that while intraday trades usually begin with an opening order and end with a closing order, there’s no such thing as an opening or closing trade for a day trader—just as many orders as it takes to manage their position through its life cycle.
Conclusion
It may not be as simple or easy to learn price action at first, but if you're willing to put in a little work and set your mind to it, then price action can be an invaluable tool for learning forex trading. If you're ready and willing to begin, we'd recommend starting with ATR. In any case, you should always remember that practice makes perfect: when you feel ready, start making small trades with demo accounts until you feel more comfortable going live. Good luck!
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