In order to execute your forex strategy, you will need to sign up with a broker to use their platform. One of the best way to learn about a platform is to open a live account as some demo account may not have all the features of a live account.
The live account that you need to open is one in which you do not need to risk any of your money at this stage of learning, it’s called a NO DEPOSIT BONUS ACCOUNT. Click HERE to find out more. Irrespective of which platform you decide to use, you need to understand and be able to do the following as a minimum within that platform.
Open both a BUY and SELL position within that platform, but what does BUY and SELL means in forex.
You need to understand and should be able to place the following orders as listed below:-
You should have and understanding of what is LEAVERAGE in forex.
You should be able to choose and set up indicators if your strategy requires it.
You should be able to calculate the spread for a currency pair that you want to trade as this is how much it will cost you each time you place and exit a trade.
As I mentioned before the Forex market is just like any other market in which you have buyer and sellers but what is being bought or sold in this market is not goods or services, it is currencies that are being bought or sold.
In a regular market if you buy goods in order to dispose of these goods you will have to sell.
You can either sell at a profit, i.e. you sell for a price higher than what you bought at or you can either sell at a loss, i.e. you sell at a price lower than what you bought.
The forex market is no different. If you predict that the market will be going up you will have to “BUY” in order to benefit from this move. In order to get out of this BUY POSITION you will have to SELL.
As mentioned above, in order to get out of your BUY POSITION you can SELL at a profit if the market goes in your direction, in forex you would place what is know as a LIMIT ORDER (TAKE PROFIT) at the price in which you want to get out of this BUY POSITION to make a profit.
On the other hand you can SELL at a LOSS if the market does not go in your predicted direction. In forex, you would place what is known as a STOP LOSS OR STOP ORDER at the price at which you want to get of of this BUY POSITION thus making a loss.
See diagram below that demonstates this.
YOU NEED TO PAY CAREFUL ATTENTON TO THIS
Not only can you make money when the market is going up in forex, you can also make money when the market is going down. CAN YOU BELIEVE THIS!!!!!! WOW! This is what can be confusing to new forex traders.
In order to benefit from the market when it is going down, instead of buying first you will have to SELL first.
In order to get out of this SELL POSITION you will have to BUY.
If the market goes down in your favor you will BUY to get out of this SELL POSITION thus making a profit. The price which you set to exit the market is called your LIMIT ORDER (TAKE PROFIT) in forex.
If the market goes against you, that is, it goes up you will still have to BUY to get out of your SELL POSITION. You will then make a loss. The price which you set to exit the market is called your STOP LOSS. It’s basically the opposite to what happens when you are in a BUY position.
See diagram below that demonstrates this
PLEASE NOTE! IF YOUR LIMIT ORDER IS REACHED YOUR POSITION WILL BE CLOSED AND AS A RESULT YOUR STOP ORDER THAT IS LINKED TO THAT SAME POSTION WILL AUTOMATICALLY BE CLOSED AS WELL.
ON THE OTHER HAND IF YOU STOP ORDER IS REACHED YOUR POSITION WILL BE CLOSED AND AS A RESULT YOUR LIMIT ORDER THAT IS LINKED TO THE SAME POSITION WILL AUTOMATICALLY BE CLOSED AS WELL.