Options trading is the buying or selling of an options contract. Options are used to gain exposure to specific stocks without owning the stock. This is known as speculation, and many people buy options hoping that their value will rise before they expire, at which point they can sell them for a profit.

Options are contracts between buyers and sellers that give one party or the other the right but not the duty to buy or sell an underlying asset by a certain date for a specific price. The buyer of an option believes the underlying security's price will increase before expiration, while the seller thinks it will decrease.

The two primary options are calls and puts. A call option gives the holder the right to purchase a stock at a specified price until a specific date, so you would buy it if you thought the stock's price would rise before then. A put, on the other hand, is just like buying insurance. If you think that security will go down in value, don't hold onto it; instead, insure against it by buying options that give you certain rights concerning that underlying asset.

Get a brokerage account.

If you wish to obtain or sell options, you must open a brokerage account. Without one, you won't be able to make any trades. Since options are derivatives of other securities, they will trade in either the cash market or the futures market.

If you're buying call options on stocks that trade on an exchange like Hong Kong Stock Exchange (HKEX), then your broker might only allow you to place orders for those stock options in the cash market. But if it will enable them to be traded in the futures market, you would have access to both types of options contracts.

Determine whether an option is 'in' or 'out-of-the-money.'

An option is out of the money (OTM) when its strike price exceeds the underlying security's market value. For example, if you bought an OTM call option on HKEX for HKD10 while HKEX trades at HKD100 per share, that would be considered out of the money.

Every dollar that HKEX increases in price will result in a corresponding decrease in your call options' value. However, they can still make it profitable to exercise them by selling them before expiration and closing out their position.

If you believe a specific stock's price will increase within a particular time frame, buying put options would give you insurance against losses. However, if you think that the value of a security will decrease in price, then buying call options would allow you to profit from its falling price without shorting it.

Selecting an option strategy

Depending on your market outlook, selecting the appropriate option strategy could limit or maximize your chances of making money when initiating a trade.

The four basic strategies are vertical spreads, iron condors, credit spreads, and debit spreads.

A vertical spread requires the simultaneous procurement and sale of two options on the same underlying security with different strike prices and expiration dates. Buying a vertical spread limits potential profits and keeps risks low, while selling could collect substantial premiums.

An iron condor involves buying and selling an equal number of put and call options with different strike prices, but all four must share the same expiration date. Iron condors are usually traded when investors think a stock or index will stay within a relatively narrow range before expiration.

Credit spreads involve opening a bullish position by purchasing call options on underlying security while opening a bearish position by simultaneously writing put options on it.

This strategy is profitable because the premiums from writing put options are more significant than those paid-to-buy call options. Debit spreads involve buying and selling an equal number of puts or calls but with different strike prices and expiration dates. Buying a debit spread limits potential profits, but it also keeps your risks low since you'll only have to pay for some of the option premia.

Follow your investment decisions closely.

No matter which strategy you use, don't ignore its movement until its expiration date. A general rule is that traders should consider closing out their positions when they're up by 20%.

So you want to make legit money trading in the FOREX market! But before, you should understand how to avoid a FOREX scam. It can bring you a considerable profit, but remember that this will not happen overnight!

Many newbies in this business often consider forex a way to earn easy money, but profitable results take time. Many inexperienced forex traders are impatient and don‘t know this, so they are easily exploited. Forex trading can be a good opportunity for the scams to profit, but you can learn to avoid being suckered into a scam.

You should know that If the offer looks too good to be true, be sure that it‘s almost certainly a fraud! Before you take a risk and walk away empty-handed, you should read a few useful things about forex. Try understanding the basic ideas of forex exchange trading and how it works.

What is Forex (Foreign Exchange Trading)?

Forex or foreign exchange trading, is one of the most liquid and accessible markets in the world, trading $5 trillion every day. Forex market facilitates the currency exchange for the easier exchange of goods and services in this market. Prices change rapidly, therefore creating many opportunities for Forex traders.

These rapid changes reflect on currencies that can weaken or strengthen over time, allowing you to estimate when to buy or sell them. Profit lies in fluctuations in the exchange rates between the currencies. Also, it's essential to correctly estimate whether a particular currency will go up or down about some other. Participants trade through electronic or phone communication networks across the globe, 5 days a week. 

How does forex trading work?

It works, more or less, like any other market – a trader sells and buys the currencies at the current rate. US dollar is the currency that dominates in the financial markets and the exchange rates are mostly expressed in US dollars.

Many factors can influence the exchange rate - economic situation, local or international policy, future perceptions. Forex trading occurs in different time zones, in 3 major regions – North America, Europe, and Australasia. There is no central regulatory body that controls the forex market, and that‘s why it gets hard when scams take place.

Is Forex a pyramid scheme?

Forex is not a pyramid scheme, and you should avoid all kinds of HYIP funds (High Yield Investment Program) that started appearing everywhere. These programs guarantee a great level of return if you temporarily use your investment in their forex fund. This Ponzi scheme shouldn't be trusted 'cause once the funds run out of prospects, it closes down and takes all the money.

What is a Forex Scam?

A scam in forex means that somebody wants to deceive you on purpose in order to take the money from you unsuspectingly. A potential forex trader must learn how to separate fact from fiction to avoid forex trading frauds.

Most of the forex complaints related to scams involve commissions, selling guide software to teach newbies to gain profit, managed accounts, false advertising pyramid schemes, and promises that involve low risk and high profit.

However, many people think that forex is a scam since they have been trading forex for a while but not making any money. You should know that some people don‘t understand the currency market fluctuations. Not gaining profit is their failure. Also, many traders spend a relatively short period in demo trading and develop no reliable methods and strategies in forex trading. Then, they discover that things are different in the real market with real money. If you only deal with worries about losing money, you better not enter the forex market adventure.

How to protect yourself from getting scammed in forex?

There are a few simple methods to help you survive in the harsh forex trading system and these are just a few strategies of hedging against risk:

Compare price feeds

You cannot rely only on the price feed of only one trading platform. Minimizing forex exchange risk means having a broad idea of what‘s happening in the rest of the forex world. If you want to become a smart and profitable trader you must learn how to avoid the risk of losing money. This means that you should be able to notice if your broker widens spreads, manipulates rates or runs stops. You should be able to see the general changes in the forex market and to know if the chosen broker‘s actions are justified.

Record everything

Remember to keep track of all your transactions. Take a screenshot of each trade you take; by doing this, you‘ll avoid being manipulated and scammed. Always have ready evidence to support a possible case of fraud or any other suspicious activity.

Take legal action

If you cannot resolve the issue with your broker, a logical thing to do is to take legal action. Most of the suspicious brokers capitulate when threatened with legal action. But if they don‘t, you should, by all means, contact CFTC or NFA which devotedly handle customers' complaints and unresolved issues with questionable brokers. 

Conclusion

As you can see, if you want to succeed in forex trading, you must learn to protect yourself against problematic brokers and train yourself to be a better trader. Finding a reliable broker and discovering how the forex system works is essential. But more important is to learn as much as possible and build trading experience daily.

Before choosing a proper forex broker, do all the necessary research. Check the broker's background and ensure it owns all the licenses and certificates that put it on the positive broker list. Always keep in mind that forex scams exist! To keep your blood-sweat-and-tears-earned-money, you must always be very cautious.

The best defence against fraud is - education! Don‘t let a lawbreaker destroy your dreams of success and prosperity. Disciplined and safe trading is the only way to succeed in the forex market. So, you better look closely at all potential bumps on the road before you start the forex ride.

In the last part of our forex trading course for beginners, we will discuss trading psychology, a trading system you can use, and what forex brokers you can trade on.

If you haven't read the previous parts of the guide, I recommend you to do so before reading the current article:

1. Forex Trading Course for Beginners - Forex Fundamentals [Part 1/4]
2. Forex Trading Course for Beginners - Forex Charts & Trends [Part 2/4]
3. Forex Trading Course for Beginners - Forex Indicators & Strategies [Part 3/4]

11. Trading Psychology - Greed & Fear

Besides all of the fundamental and technical factors that a trader must keep track of to succeed, another area that is often overlooked is themselves.

No matter how good your strategy is, the other factor which will always influence your outcomes is your own emotions. After all, it is emotions that move the markets.

Emotions are what most of our indicators are designed to give us a measurement of. And to be able to profit from market movements created by the feelings of others, you must first learn how to read the mood behind the move and how to recognize and control your own.

Greed

As prices rise, they naturally attract more attention. As more and more people jump on board the rally, its climb accelerates. But in all the excitement, there is a tendency to confuse account balance (the amount actually on your account) with account equity (the total value including the sum of your open positions).

People begin to treat their potential profits as having already realized them. This expectation can sometimes cause essential reversal signals to be overlooked.

Additionally, those who missed out on the opportunity early on, when the trend was still young, are becoming hypnotized by the length and size of the rally. However, jumping onboard late is a risky game, as those who got in early will eventually need to take their profits.

There is also a bit of the "greater fool" factor, as anyone who is still buying is now buying at a higher price, and from a seller who has reason to believe the move may soon be over.

The idea then is that hopefully, someone will keep on buying after you, at an even higher price, when you eventually decide to become a seller yourself.

Fear

When prices start falling, they awaken fear and panic. Fear is one of our primal emotions, which explains why prices often fall faster than they rise. People holding longs run for the door trying to sell as quickly as possible, and short-sellers motivated by the falling prices also add their orders to the mix. Temporary rallies can give false hopes when those short orders are eventually covered to realize a profit.

This crowd mentality frequently creates moments of market imbalance which can be capitalized upon once one can learn to recognize the signs and interpret them correctly. Above all else, the key to developing this skill is practice.

How Emotions Manifest on Charts

One of the critical measurements of market sentiment is support and resistance. If resistance breaks, there are more bulls in the market at that time than bears. If it bounces, we know the bears have overpowered the bulls.

Likewise, if a support level holds, we know that any drops in price were most likely caused by normal profit-taking. If it breaks, on the other hand, we know we have short-sellers entering the market along with longs starting to close their positions. Another indicator that mood and sentiment in the market may change is momentum.

Declines in follow-through on moves can often signal a drop in enthusiasm and an increased likelihood of a pending reversal. Both trend-following and oscillating indicators can give us clues and insights, especially as divergences appear on the chart.

Lastly, there is volume. Often overlooked on forex charts due to the lack of a centralized exchange (though still worth paying attention to even if it is only the volume from your broker), the volume should typically increase as trends accelerate in either direction.

If volume suddenly starts to drop off, it can signal an impending end to the trend in question or some turbulent times ahead.

Learning to Control Your Own Emotions

The first step to becoming a more disciplined trader and controlling your emotions is becoming aware of them. If your results are not consistent, take a close look to see if you are indeed following the strategy you outlined for yourself.

Are you entering and exiting positions due to a well-defined signal, or was there another reason?

Here are some of the most common "symptoms" to watch out for, especially if you see the pattern occurring with some regularity:

• Getting out of positions too early, only to see them continue in the direction you hoped, is a sign of fear.
• Staying in positions too long and watching the markets take back some of your profits is often a sign of greed.
• Closing a position for a loss, only to see it reverse and go back above break-even moments later, is a sign of fear.
• Not closing a losing position and letting small losses become larger ones in the hope of a reversal that never comes can often be a sign of greed. After much of it has already happened without you, Jumping into a trend late can stem from a fear of missing out on the move.
• And jumping in too early, before the market's given clear evidence of a direction, can be driven by greed. It is essential to take a step back and closely look at what is going us into and out of the markets. Is it the strategy and signals we have outlined for ourselves (which should be easy to verify), or is it something else?

Our progress in the markets can only be as good as the records we keep and the time we spend reviewing them.

When we hear the news in the markets, it is essential to do a quick reality check to make sure we're giving both positive and negative news the same weight in our evaluations and not allowing our biases towards a position to interfere.

The absolute best time to set both targets and stops is before entering the position. Once the hopes and stresses of the market become your own, we can rely less and less on clear and sound judgment.

12. Money Management and Building Your Trading System

The final and by far one of the most critical factors to your success is money management (sometimes also referred to as position-sizing). To illustrate just how important it is to your final results, a mathematical study confirms that even completely random entries, based upon a coin toss and yielding only a 35% "win" ratio, can produce steady profits when combined with proper money management formulas.

To break it down by level of importance and influence, Experts can say that money management accounts for up to 50% of the final result.

Approximately 40% can be attributed to psychology 8% to exits (including targets, stops, and position management), which leaves 2% for entries. And, yet, when most people believe they have a system, what they mean is they have a set of signals for entry.

The Components of a Good System Every

Every system should include the following components:

• Criteria for entering trades
• Indicators to confirm entry signals
• Criteria for exiting trades (or staying in them)
• Rules for setting stops
• Rules for setting targets
• A method to size positions relative to risk

A way to look back and evaluate trades

A Simple Money Management Formula A good rule of thumb for sizing positions is to risk 2% of your account equity in any one position. That's 2% assuming the worst-case scenario of a stop loss being triggered.

Therefore it should be easy to calculate how much is being risked based upon the total size of the account and the distance in pips to the stop you have in mind for any given position. If you are trading a strategy that requires you to use wider stops to be effective, you will have to consider using smaller lots. Conversely, if you find yourself trading with smaller amounts than you like, you will have to seek a strategy that uses tighter stops (and, therefore, closer targets and perhaps smaller timeframes).

It is far better to make small yet consistent profits than having one or two big wins, followed by an equally significant loss that creates irreparable damage to your account. By far, the biggest mistakes made by new traders are over-trading (due to greed and fear – see lesson 9) and trading with positions too large relative to their account size.

Keep in mind that larger positions are also more uncomfortable if the market moves against you, making it that much more likely to exit early, not giving the markets enough time to move in your favor. You should also note that 2% is the maximum… for positions you feel strongly about. It is also quite acceptable (and recommended) to useless. Additionally, there should never be more than 6% of your account balance exposed at any one time as a sum of all open positions.

Risk vs. Reward

The other critical factor is a healthy risk-to-reward ratio. What is the distance from your entry price to your stop vs. the distance to your target?

You should avoid trades with a ratio of 1:1. Strive for a minimum ratio of 1:2 (that is, your target distance is twice as big as your stop). This does not mean arbitrarily tightening stops or widening targets – You must still obey the rules of your strategy – it just means passing on trades that do not satisfy this requirement.

Of course, your overall percentage gain improves dramatically once you become good at identifying trades with risk-to-reward ratios of 1:3, 1:5, or even better. When combined with proper money management, these two keys become the final pillar of your trading system.

Complete recap

And there you have it. In the 4 parts of our forex trading for beginners course, you learned almost anything you need to start trading the markets.

What you need now it's to grab some hands-on experience.

In the third part of our complete forex trading course for beginners, I'm going to show you how to use indicators to better analyze trends and be able to predict price movement

If you haven't read the previous parts of this Forex Guide for Beginners, I strongly recommend you to do so before reading the current section. Here are:

• Forex Trading Course for Beginners - Forex Fundamentals [Part 1/4]
• Forex Trading Course for Beginners - Forex Charts & Trends [Part 2/4]

Now that you did it and know the FOREX fundaments and how to correctly read the charts let's move into indicators.

9. An Overview of Forex Indicators

An indicator is a tool that helps you analyze price movements. There are two groups which most indicators fall into –trend-following indicators are the most useful when the price is trending in one direction or the other, meanwhile oscillating indicators can be helpful when the price is consolidating into a range. It is important to know which group the indicator you are using falls into and to choose the correct indicator for each situation.

Below we cover some of the most popular indicators used by currency traders.

9.1 The Average Directional Index (ADX)

ADX The Average Directional Index is a special type of trend follower that can also help you decide whether a trend follower is, in fact, the best tool for the job at that particular moment. Trend-following indicators will function best when the ADX is over 30. When it is below 30, then an oscillating indicator may be a better choice.

When the ADX is rising, this indicates that the trend is gaining in strength, and when it begins declining it is a sign that the trend is losing steam and a trading range may soon develop. Likewise, when ADX begins rising again it indicates that price is breaking out of its range and a new trend may emerge. The ADX does not however show which direction the trend is going (up or down), only its strength.

In the example above, note how the ADX starts off low as the price is trading within a range near the left side of the chart. Then, as the price begins dropping, the ADX rises above 30 to indicate a trend is in progress. The ADX also confirms that the trend is over by beginning to decline once again. And when it finally drops below 30 we find ourselves trading once again in a tight range.

Check below a video tutorial that explains in detail what the ADX indicator is and how you can use it:

9.2 MACD

MACD or the Moving Average Convergence Divergence measures the difference between a short-term and longer-term moving average. When the red line crosses above the blue line it indicates an uptrend, and when the red crosses below the blue it indicates a downtrend.

Additionally, the green bars (called the MACD histogram) give us an indication of the trend’s strength or weakness. And, unlike the ADX, they also show us the overall direction of the trend. Longer bars indicate increasing strength, and shorter bars indicate decreasing strength.

In the above example, we see the red MACD line fall below the blue one as price begins its move downward. The green bars in the histogram are increasing in length as well, indicating that the down-trend is gaining momentum. When the price reverses momentarily to head up, the histogram reflects a loss of downward strength. Downward strength resumes as the next long red candle posts on the chart.

However, it is important to note that while the price made a lower low, the histogram did not make it quite as far down. This is known as a bullish divergence and indicates that the trend will soon end and be followed by a reversal.

Here is a good video tutorial that explains exactly how to use the MACD indicator, as well as goes over an effective MACD trading strategy.

9.3 Momentum

The momentum indicator measures the rate of change in closing prices, and functions very similarly to the MACD histogram. It is often useful in identifying likely reversal points due to its ability to detect trend weakness.

In the example below, the moment indicator perfectly identifies the point at which the downtrend ends and the new uptrend emerges. As we near the end of the downtrend, the momentum indicator begins tracing a bullish divergence. When momentum is below zero and turns sharply upwards following a bullish divergence, it can signal a long entry.

Similarly, when it is above zero and turns sharply downwards following a bearish divergence, it can indicate a potential short entry. As we near the right edge of the chart, we see that momentum is indicating that the uptrend is nearing an end and a reversal may be imminent.

In the following video tutorial, you will find out why the Momentum Indicator represents one of the best forex indicators for scalping (scalping Forex tips) and how to identify and follow the trend using Momentum indicator and what are the best settings for the indicator (day trading momentum trading strategy).

9.4 Bollinger Bands

Bollinger Bands are volatility bands placed x standard deviations around a moving average. Developed by John Bollinger, the bands widen in periods of increased volatility and narrow when volatility decreases.

Traditionally, the bands are used to highlight potential oversold and overbought areas. For example, if a price move breaks the upper band, then the price can be expected to return to its mean, or in this case, the mean moving average.

Calculation:

• Middle Moving Average = 20-period simple moving average (20 SMA).
• Upper Band = 20 SMA plus the 20-period standard deviation multiplied by 2.
• Lower Band = 20 SMA minus the 20-period standard deviation multiplied by 2.

9.5 Stochastics

Stochastics consist of a fast line and a slow line, and oscillate between 0 and 100. Levels above 80 are said to be over-bought and levels below 20 are referred to as over-sold. When the red line crosses above the blue we know that the bulls are overpowering the bears. When the red line crosses below the blue, on the other hand, we know that the bears are beginning to overpower the bulls.

It is best to enter long positions when stochastics first cross above 20, returning from over-sold conditions. This indicates the greatest amount of “room” left for an upward move. As stochastics near 80, we know that we are closer to the end of the move rather than the beginning of it, and may consider staying out of the trade if not already in it from before.

As the stochastics begin to turn and cross, we are given a signal to close any remaining long positions. As they cross back below 80 and return from overbought conditions, we may look to enter short. If the stochastics are closer to 20 than to 80, we may wish to think twice about entering into any new short positions.

Once they cross, we would also look to close any short positions already open from before. Then, as the stochastics break above 20, the cycle repeats and we begin looking to enter long once again.

9.6 Relative Strength Index (RSI)

Developed by J. Welles Wilder the Relative Strength Index (RSI) is a momentum oscillator that measures price movements' direction and velocity. 

The Relative Strength Index is similar in its function to stochastics, except it uses 30 to indicate oversold conditions and 70 to indicate over-bought. RSI signals a potential long when it breaks above 30, and a potential short if it comes from above and breaks below 70. In addition, levels above 50 confirm an uptrend, while levels below 50 indicate a downtrend.

The indicator compares upward price movements in the closing price to downward movements in the closing price over specific time periods. The default period, suggested by Wilder, is 14 periods.

Calculation:

RSI = 100 – 100 / (1 + RS) 

Where RS equals Average Gain divided by Average Loss

• Average Gain = [(Sum of gains over previous 14 periods / 14) * 13 + current gain] / 14
• Average Loss = [(Sum of losses over previous 14 periods / 14) * 13 + current loss] / 14

9.7 Simple Moving Average Line

SMA or simple moving average is the most common indicator plotted on forex charts. 

Moving averages are used to help smooth price fluctuations over a certain period, giving the trader a clearer picture of the direction of the price movement.

Calculation:

SMA = Sum of the closing prices/number of periods.

10. Top 3 Forex Trading Strategies

10.1 Support & Resistance

Preferable timeframe: 1h

This strategy follows the old business cliché, “buy low and sell high.” Forex traders quantify how low a price’s low and how high it is by analyzing areas where prices have stopped and changed direction.

The support refers to the level where the price rarely falls below before turning around, and the number of buyers exceeds that of sellers hence causing the price to rise.

On the other hand, the resistance is the level where price rarely exceeds, and the number of sellers exceeds that of buys hence lowering the price. In both cases, the price stops and turns around.

Check our article on how to trade using support and resistance zones.

10.2 Pinocchio Strategy

Preferable timeframe: 1h, 4h

A Pinocchio bar is a candlestick bar with a tiny body and a very long wick (nose). It is also called Shooting Star, Hanging Man, and Gammer. You may remember that Pinnochio's nose grew long when he was lying.

The same happens with this strategy: when the wick is longer than the body, this tells us that the market is deceiving us and that we should trade the opposite way.

The entry point varies: some traders prefer to wait for the next candle to retrace to the 50% Fibonacci level of the Pin bar, while others enter immediately after the Pin bar closes. A long wich indicated strong selling pressure; a long tail suggests intense buying power.

10.3 The Double Red Strategy

Preferable timeframe: 5min

The double-red strategy is a short-term reversal system based on price action and resistance. The trade is planned on a 5-minute chart and signaled when two bearish candles follow a resistance test.

How to make a profit?

Choose an asset and watch the market until you see the first red bar. Then wait for a second red bar. If the second red bar closes lower than the first red bar, then it's a jackpot. Usually, what happens is that the third bar will go even lower than the second bar. This is the point where you should open a short position.

Quick recap

In the third part of our FOREX guide you learned what are ones of the most used FOREX indicators (ADX, MACD, Momentum, Bollinger Bands, Stochastics, RSI, SMA) and three Forex trading strategies you can use to make a profit on trading currencies.

In the last part of the guide you will learn about psychology of trading, systems you can use and what brokers you should choose.

Welcome to global financial markets! Just as a trader or investor buys stocks in a company, the foreign exchange (or FOREX for short) allows you to buy and sell currencies, like owning a piece of the future rise or decline of an entire country's economy.

In the following Forex Trading Course, you will learn how to make money by trading currencies. The course has four parts and gradually explains the fundamentals (what is FOREX, what influences the markets, currency pairs, how to read a forex chart, trends and trendlines, how to use forex indicators, and how to choose the best forex broker for you).

Plenty of things to learn, so we better start!

1. What is Forex?

Forex is short for 'foreign exchange' – the game of buying and selling various currencies in the foreign exchange market.

In the global foreign exchange market, retailers, investors, speculators, and institutions determine the relative value for converting one currency to another via buying and selling currency pairs.

It's a dynamic, liquid marketplace with a daily turnover of more than 5.3 trillion dollars.

The trade-in Forex occurs between two currencies because one currency is being bought and another is sold simultaneously.

Now that you know what the Forex market is let's find out what influences the currency movements and influence the forex market.

2. What Influences the Forex Market

Let's examine the five main factors that influence the value of a given currency in rapport to another.

2.1 Supply and Demand

To determine where a country's economy may be headed next, traders turn to various data, including gross domestic product (GDP), imports, exports, employment, unemployment, growth, debt, etc.

Collectively, these are often referred to as the fundamentals.

Like any other market, the value of currencies responds to changes in supply and demand. For example, when the world needs more dollars, the dollar is worth more. When too many dollars are available on the market, or the need for them declines for some reason, the dollar drops in value.

2.2 Currency Pairs

The world's currencies trade in pairs - one currency's value either rises or drops compared to another. Each currency has a 3-letter abbreviation, and the trailing currency of any pair is considered the base currency. The price at any given time tells you how much of the base currency is needed to equal precisely one unit of the leading currency.

For example, when the EUR/USD pair is priced at 1.5000, this means that it takes 1.5 US Dollars to exchange for 1 Euro. If the Euro rises in value, then the EUR/USD price will also increase, as more U.S. Dollars are needed to buy each Euro. Likewise, if the Euro drops in value, then the price of the EUR/USD pair will also drop, as now you need fewer U.S. Dollars to be equal to each Euro.

The value of the leading currency is not the only factor in the value of a particular pair. Any change in the base currency value also affects this relationship.

So, in the same example, if the U.S. Dollar now rises in value, then the EUR/USD pair would drop, as now you need fewer dollars to buy each Euro. And if the U.S. Dollar drops in value, then the EUR/USD price would rise, as you need more of those U.S. Dollars to equal each Euro. Therefore, You can say that each currency pair goes up and down in value proportionately to the rise or drop in the value of its leading currency.

Likewise, the same currency pair also moves up and down in an inverse relationship to the increases or drops in the value of its base currency; hence, if a trader expects that the U.S. economy will go up and the value of the U.S. Dollar with it, then they may wish to sell the EUR/USD pair since it will most likely go down in price in such a scenario.

If the trader believes that the European economy will go up, bringing up the value of the Euro, then they would buy the EUR/USD pair instead.

2.3 Interest Rates

Another critical factor that influences the value of a given currency is the interest rate that the central bank of a specific country charges for the use of its money. These interest rates are constantly changing, so it is wise to keep track of them.

For example, if the Federal Reserve in the United States (commonly referred to as the FED) lowers its interest rate, then typically, the value of the U.S. Dollar will drop as well, causing the EUR/USD pair to rise.

If the Fed raises rates, the U.S. Dollar will typically go up, causing the EUR/USD to drop. The Fed's counterpart in the European Union is the European Central Bank (the ECB). If they raise their interest rate, then usually, the value of the Euro will go up as well, causing the EUR/USD to rise. If they lower their interest rate, the Euro will typically drop in value, causing the EUR/USD to fall.

Central banks are constantly caught in a delicate balancing act. If a country's currency rises too far, its exports become too expensive, and other countries may look elsewhere. Interest rates are sometimes also cut to stimulate the economy, but if they get too low, then inflation can set in. Then it is time to start raising them again to slow growth.

Higher interest rates also tend to attract more foreign investments (which is why that country's currency frequently goes up in step with the interest rates); meanwhile, cheaper interest rates tend to stimulate lending inside the country and, therefore, economic growth.

2.4 Political News

The political landscape plays a vital role in the overall outlook for a country and, consequently, the perceived value of its currency. Forex traders are constantly monitoring political news and events to anticipate changes in the economic policies of national governments. These can include shifts in government spending and adjustments in regulations imposed on particular sectors or industries.

Exchange rates often react favorably to wins by pro-growth or fiscally responsible parties. A referendum can also have a substantial impact on exchange rates. A good example is the Brexit vote, which dramatically affected the British pound when the U.K. voted to leave the E.U.

Any government's fiscal and monetary policies are the most critical factors in its economic decision-making. Central bank decisions that the forex market keenly watches impact interest rates for any changes in critical rates or the future outlook of policymakers.

2.5 World events

Geo-political events, crises, and impending elections can all affect the strength of a currency based on how that affects the perception of a country's stability. A positive event can attract foreign investors, with a rise in foreign capital increasing the currency's value. A country in crisis can lead to a loss of confidence and depreciation of its currency value.

For instance, look in the picture above at the RUB/USD currency rate fluctuations when the Russian Federation invaded Ukraine on Feb 24, 2022.

3. How to Read a Currency Quote?

Forex is the business of currency conversion, and since you are constantly comparing the value of one currency to another, FOREX is always quoted in pairs.  

For example, the quote of EUR/USD shows how many U.S. dollars you will get for one Euro.

The first currency is called the base; the second is called the quote. When you buy a currency pair, you buy the base currency and sell the quote currency. Simple.

MAJORS are widely traded by beginners and professionals alike. They have the most liquidity, lowest spreads, and the broadest range of movements. Unlike minor currencies, majors are generally more stable. These nations' economic and political institutions are usually long-established and predictable compared to other countries.

MAJORS pairs: EUR/USD, USD/CHF, GPB/USD, USD/JPY, EUR/JPY, USD/CAD

THE CROSSES are any currency pair that doesn't feature the USD, and they do not hold any less profit potential than the majors. Too much U.S. Dollar exposure can lead to all your trades heading in the same direction, a big problem if that direction is against you.

Popular Crosses pairs: GBP/JPY, EUR/GBP, CAD/JPY, AUD/CAD, EUR/AUD, NZD/JPY.

THE "EXOTIC" currency pairs are less traded and more costly to buy or sell. Don't let the cost put you off because many of the greatest traders made their fortunes with exotics. For example, one of the five greatest forex traders, George Soros, gained $800 million in profit from selling Thai Baht (THB) in the 1997 Asian crisis.

Popular Exotic pairs: USD/TRY, EUR/TRY, USD/ZAR, USD/MXN, USD/SGD, EUR/SEK

4. What is a Pip?

The most famous piece of the terminology used by forex traders has got to be the humble 'pip.'  

A pip is simply a unit you count profit or loss in.  

Typically, forex pairs are quoted to four decimal places (0.0001). The '1', four spaces after the 0, is referred to as a pip.  

The number '7' in red shows the decimal unit of a pip.

If a trader buys GBP/USD for 1.6000 and then, later on, sells it for 1.6020, that's a difference of 0.0020 or 20 pips.  

The exception is Yen pairs ( i.e., USD/JPY), which are only quoted to two decimal places. In this case, the second spot after the 0 is referred to as a pip.

Quick Recap

In the first part of our four parts course on forex trading for beginners, you learned what the Forex market is the factors that influence the Forex markets (Supply and Demand, Currency Pairs, Interest Rates, Political News, and World events). How to read a currency quote and what a PIP is.

Now that you're up to speed let's move on to the second part of the guide, where you will learn to read a forex chart.

You can skip the second part and move into more advanced stuff but I highly don't recommend it if you are a forex beginner:

• Forex Trading Course for Beginners - Forex Indicators & Strategies [Part 3/4]
• Forex Trading Course for Beginners - Fore Trading Systems & Brokers [Part 4/4]

Brokers are usually individuals who deal with customers’ orders to buy and sell securities. Trading brokers are intermediaries operating between the securities that trade on the market and the investors that buy them.

Investors must find the best trading brokers to handle their transactions. This article will review the firms that have recruited these talented people and how they can help you with trading securities.

We will also detail each firm’s commission costs per trade, minimum balance requirements, and what type of investors they fit best.

The Best Trading Brokers You Needed to Know

Before one becomes a certified stockbroker in the United States, one has to pass two licensing examinations issued by the National Association of Securities Dealers (NASD).

The examinations are Series 7 and Series 63. The purpose of these tests is to ascertain that a broker is well aware of what they are selling and that they are knowledgeable of the rules and regulations that govern the securities domain. The following trading brokers have proven to be the best by bringing their customers’ investments to fruition.

10. Motif Investing

Motif Investing is a brokerage firm best suited for advanced traders, stock traders, and traders who plan to invest in motifs (30-stock or ETF baskets). The firm offers its investors flat-rate commissions of $4.95 for stocks and ETFs. Moreover, it has an account minimum requirement of $0 for trading accounts and a $1,000 minimum for their Motif Impact accounts.

9. Interactive Brokers

This is yet another great brokerage firm that guarantees investors meager commission costs. The firm is ideal because of its high-quality trading platform and international trading capabilities. However, it demands a high minimum investment and charges an inactivity fee.

As such, it may not be suitable for infrequent investors and beginners. Interactive Brokers charge a commission with fixed-rate and volume-tiered pricing starting at $1, has an account minimum of $10,000, and its promotion has special terms for customers aged 25 and below.

8. Ally Invest

Many stockbrokers require no minimum investment to open an IRA. However, the price charged to open a regular brokerage account is usually higher.

Ally Invest, however, cuts trading costs to $3.95 for the investors that place 30 or more trades for each quarter and those that carry a balance of $100,000. The broker demands a commission of $4.95, has no account minimum requirement, and discounts are available depending on trade volumes. They suit active, options, and forex traders best.

7. Robinhood

Robinhood used to shine thanks to its easy-to-use mobile app and $0 trades. However, today, all of the largest online brokers offer free stock and ETF trades. As a result, it is much more difficult for Robinhood to outduel the competition.

Like many other $0 discount brokers, Robinhood charges no commission for trading stocks, ETFs, options, or cryptocurrency. Robinhood offers stocks (including fractional shares), ETFs, options, and cryptocurrency trading.

Most online brokerages, with the exception being TradeStation, also do not offer cryptocurrency trading. However, mutual funds and bonds are not supported, nor is futures trading.

6. Trade Station

TradeStation supports casual traders through its web-based platform and active traders through its award-winning desktop platform, all with $0 stock and ETF trades.

On Trade Station, you can trade Stocks, ETFs, Futures, Options, Futures Options, Crypto, IPOs, and Mutual Funds.

TradeStation 10 is a desktop-based, downloadable trading platform for online trading that is robust and full of trading tools. In our testing, TradeStation 10 is rivaled only by TD Ameritrade's platform.

From monitoring multiple watch lists and setting price alerts to analyzing stock charts and placing trades, TradeStation Mobile provides a fantastic all-around experience for traders.

5. Merrill Edge

Merrill Edge is a full-service broker that offers equities and options trade. The firm’s accounts are linkable to any Bank of America account. It also offers up to 100 free trades per month via the Preferred Rewards Program.

Merrill Edge has competitive pricing and efficient customer service. Moreover, its clients have access to investment advice from over 2,000 Bank of America locations.

The firm takes a commission of $6.95 per trade with no additional charges for stocks less than $1 per share. Its account minimum requirement is $0, and it has a promotion of $100 to $600 cash bonus depending on the account size.

It is best suited for Bank of America customers, penny stock traders, high-balance customers, commission-free trading, and investors who value customer service.

4. ETRADE

ETRADE is among the best trading brokers operating via an online platform. Customers prefer this firm for its full-court-press advertising and marketing practices.

Furthermore, this broker offers a user-friendly website and a high-quality mobile experience. It also offers its clientele thorough research that guarantees customer satisfaction. In addition to the research material, ETRADE’s trading platforms are designed to enable easy navigation.

The firm demands a commission of $6.95 with volume discounts available. It also has a $500 account minimum requirement and a promotion that offers 60 days of commission-free trades with deposits exceeding $10000.

Usually, ETRADE is best suited for retirement planning assistance, research and data, commission-free exchange-traded funds, frequent traders, and beginner investors.

3. Charles Schwab

This broker offers high-quality customer service, a large selection of commission-free exchange-traded funds, and competitive trading platforms. In addition, the firm offers no-transaction-fee mutual funds.

The firm is committed to offering its clients more value and better experiences through constant improvement. It has two trading platforms and a low minimum investment requirement.

The features make it suitable for both active and new traders. It also has a trade commission of $4.95, a $1000 account minimum requirement, and a $100 promotion referral award for first-time customers. 

Charles Schwab is best suited for advanced traders, beginner investors, value no-minimum index funds, and investors seeking commission-free ETFs.

2. Fidelity

Fidelity boasts of numerous services that include securities executions and clearance, discount brokerage services, annuities, and wealth management services, among others.

Research is usually key for stock trading, and Fidelity is well equipped to provide its investors with the tools to conduct extensive stock analysis research. The firm charges a trade commission of $4.95, which is quite inviting.

Fidelity also demands an account minimum of $2,500 and a promotion of $300 that is commission-free and trades with a qualifying deposit. It provides its services to businesses, individual investors, financial advisors, and institutions.

Fidelity stands out among other brokers because it has a lineup of research from more than 20 providers. It also invests in fixed income markets and public equity globally.

1. TD Ameritrade

If you want to buy and sell stocks or maybe trade options, TD Ameritrade is one of the best trading brokers available. The firm has excellent customer support, advanced trading platforms, and no trade minimum. Moreover, TD conducts extensive market research whose findings are free for its customers.

Some of its most impressive features include a $0 minimum balance requirement, a commission of $6.95 per trade, and its promotion range from $100 to $600 in cash bonus, depending on the account size.

In addition to the appealing bonuses, TD has numerous subsidiaries. It also offers trade and investing services to over 7 million funded accounts that sum up to more than $750 billion in assets.

TD has over 5700 independent registered investment advisors (RIAs). The firm is best suited for advanced traders, beginner investors, and investors who want portfolio-building advice. 

Conclusion

Choosing the best trading brokers entails several things.

An investor must choose the best trading broker if he/she wants to succeed as a trader. The best trading brokers provide low-cost stock trading, offer reliable trading tools, and have easy-to-use platforms.

The cost associated with a broker should be quite low. The broker should also have reliable analytic tools to aid with forecasting and risk assessment. It is also essential that you assess the educational resources that a stockbroker offers before settling for one.

In the second part of our forex trading course for beginners, I'm going to show you how to correctly read forex charts and interpret trends and trendlines. There is no escaping it. Fortunately, we've created this detailed guide to get you started.

If you haven't read the previous parts of this Forex Guide for Beginners, I strongly recommend you to do so before reading the current section.

Here there are:

• Forex Trading Course for Beginners - Forex Fundamentals [Part 1/4]
• Forex Trading Course for Beginners - Charts & Trends [Part 2/4]

You have to crawl before you can run. And forex charting is no different - you need to understand the basics before moving on to more advanced things.

So let's get started.

4. What is a Forex Chart?

A forex chart is simply a graphical depiction of the exchange rate between two currencies. 

It shows how the exchange rate of currency pairs has changed over time. 

For example, the chart above (Euro vs. U.S. Dollar) shows how the exchange rate between Euros and U.S. dollars has fluctuated over time. 

You can plot forex charts for various currency pairs, from major pairs like EUR/USD and GBP/USD to minor pairs like AUD/CAD and NZD/JPY. 

5. How do Forex Chart Timeframes work?

The amount of time shown on the chart depends on the particular timeframe you select. 

Our forex charts are set to daily (1D) timeframes by default. 

This means that each point on the graph, whether it be a line, candle, or bar, represents the trading data for one day. 

If you changed the timeframe to a 60-minute chart, each point would now represent 60 minutes worth of trading data.

Example below:

With most free forex charting tools, you can choose to display timeframes from as low as 1 minute up to one month. If you get more advanced charting software, you can view lower timeframes.

6. Types of Forex Charts

Forex traders have developed several types of forex charts to help depict trading data. The three main chart types are line, bar, and candlesticks. For forex traders, candlestick charts seem to be the crowd favorite, and it's easy to see why.

6.1 Line charts

A line chart is the most basic and most straightforward price representation in forex. It marks different price points of a particular asset on the chart and then connects the neighboring points with a solid line.

Below is an example of how the EURUSD course shows on a line chart:

While line charts are straightforward to understand, they are too simple. That's because they only represent the closing prices of currency pairs. The line chart would not provide the necessary details for traders who want to get more complex information like opening or highest / lowest prices.

6.2 Bar charts

Bar charts are more complex than the line F.X. chart types and offer even more prices than the previous ones. This bar shows four different currency pair prices in a certain period of time - either minutes, hours, days, or higher.

Below is an example of how the EURUSD course shows on a bar chart:

Here are these four prices: The top and bottom of the bar represent the high and low prices of the asset over the period. A short vertical line on the left shows the opening price, and the same one on the right shows the closing price.

Bar charts are far more complex than line charts for obvious reasons: while the line chart represents one price, the bar chart does that for four different prices. But when it comes to the most complex chart type, even the bars aren't enough.

6.3 Candlestick - Most popular forex chart

Candlestick charts combine the two previous types. A candlestick chart is the most popular method for visualizing Forex price movements in a given period of time.

Compared to a line chart, which shows the price close to close, candlestick charts show four times the amount of information, displaying the close, open, low, and high price of a given period.

With these additional details, you can examine "how" the price has moved over a period of time, compared to see where the price was closed.

The red and green parts of a candle are called the "body." 

The body of a candle represents the difference between the opening and closing price of the currency for a certain period of time. 

If the candle's opening price is lower than the closing price, the candlestick color is green. If the opposite happens and the opening price is higher than the closing price, the candlestick color is red. 

The black lines above and below the candles are called 'wicks' or 'shadows.' 

Wicks represent the highest and lowest prices reached during the given time period.

7. Support, Resistance, and Moving Averages

As price moves up and down on our charts, it encounters "barriers." If this barrier acts as a floor, keeping the price from dropping any lower, it is known in trading terminology as support. When it acts more as a ceiling and stands in the way of upward moves, it is called resistance. 

What is interesting to note is that if a certain price level acts as resistance on the way up (such as the Doji candle, which highlights a moment of market indecision on the way up at 1.4848 in the example on the right), then it also has a high probability of acting as support on the way back down (and vice versa).

7.1 What Causes Support & Resistance

When the price is moving up, it means that more people are buying than selling. These bulls eventually need to take their profits. Likewise, bears, who are waiting in the wings and looking for an opportunity to enter short, are more likely to do so the higher the price gets. When the number of sellers eventually overpower the buyers, a resistance level is formed (as shown in the illustration above when the price reached 1.4862). Similarly, when the price moves down, there are more sellers than buyers.

The sellers will eventually need to cover their short positions and take profit. Likewise, if bulls are waiting to buy, the lower the price, the more tempting it becomes for them to enter into new long positions. Eventually, the number of buyers will overpower the sellers, creating a support level.

Since many traders use pending orders set at a specific level, the same level is likely to act as support or resistance multiple times until it finally breaks (as seen in the example above as we approach 1.4848 for the second time, now to test it as support). There can be many different support and resistance levels at any given time, and the wise trader tries to be aware of as many of them as possible so as not to be caught by a surprise reversal.

As price approaches each level, it will either break it and go on to the next or bounce. A good technique may be to zoom out to the longer time frames and draw horizontal lines at key levels where you observe price stalling or reversing. Then, as you zoom in to find your trades, you will have reminders of these critical levels.

7.2 Moving Averages

Additional likely support and resistance levels can be identified by drawing moving averages. A moving average is simply a line chart that shows the average value of a series of periods. There are several different kinds of moving averages. Most are an average of the closing price, though there are cases when they can also be calculated on the high or the low of the periods being averaged.

When the value being plotted is a straight average with no modifications, we refer to it as a simple moving average. The blue line in the chart on the previous page represents a 21-period simple moving average (21 SMA) – at any given time, its value reflects an average of the closing prices of the previous 21 candles.

Since the blue line is an average, it is slow to respond to sudden movements in price by its very nature. The red line in the chart above is an exponential moving average for the same 21 periods (21 EMA).

Here there is more value placed upon the most recent candles. And, as you can see, it responds a bit faster to both the sudden drop in price and the rally which follows. Both kinds can have advantages and disadvantages, depending on the situation. As you can see in the above example, moving averages can act as both support and resistance when price approaches them. But unlike regular support and resistance levels, they do not remain at one stationary level and can also move on your chart.

7.3 Common MA Strategies

People use moving averages in many different ways. Traders will often check whether the price is trading above or below its moving average to decide if they are a bull or a bear (especially on a longer time frame). As price gets closer to the moving average, traders look closely to see whether it will bounce back away from it or break that barrier, just as with any other support and resistance level.

And, as price moves further away from its moving average, the trade becomes ever riskier as the price is thought to be out at an "extreme" (since the moving average is still an average, logic suggests that eventually it and price will meet again at the same level). Some people even use crosses of various different moving averages back and forth to signal entries and exits.

7.4 Going Further

Advanced tools which can help us identify other likely support and resistance levels include pivot points and Fibonacci retracements and extensions. The common factor among all support and resistance levels is their likelihood to either break or bounce when the price reaches them, so it pays to be aware of them.

8. Trends & Trendlines

A trend can do one of 3 things: it can go up, go down, or go sideways. An uptrend is defined as having higher highs and higher lows. Similarly, a downtrend is defined as having lower highs and lower lows. When a trend moves sideways, the price is said to be in a range.

8.1 Trendlines

Lines can be drawn connecting the tops of support levels and the lows or resistance levels to form trendlines. Typically, when drawing trendlines, people use the candle bodies instead of the wicks.

Connecting the prior tops and extending the line gives traders an idea of where resistance is likely to be in the future. Connecting the previous lows gives an idea of future support levels. As long as the price continues obeying these levels, we can continue to trade inside the range – as long as we also stay aware of the other support and resistance levels that may be found inside it.

The trendlines themselves become additional support and resistance levels. When price breaks past the support or resistance levels defined by a trendline, we look to take a trade in the same direction as the breakout. One needs to be cautious, however, as 81% of all breakouts end up being false breakouts – so, therefore, an additional step is necessary to "confirm" them.

8.2 Avoiding False Breakouts: the Re-test

When price breaks below a trendline acting as support, it will typically come back up to test that same level again – but this time as resistance. The best short entries are taken not on the initial break but rather on the second move downwards, following this "re-test" of the level in question.

A successful re-test is defined as a candle body closing outside that level. In the example below, we can see that price broke below support, failed the first retest as resistance, but went on to pass on the second attempt successfully:

This is a pattern also known as the "good-bye kiss." The same scenario can be reversed when price breaks above a trendline that has previously acted as resistance. Then we look for that same trendline to be re-tested as support before taking a long position.

8.3 The Trendline Break System

One of the most straightforward trading systems can be formed simply by using trendlines. In an uptrend, we connect the bottoms (as shown below). We then look to enter short as soon as price breaks this trendline to the downside.

Similarly, in a downtrend, we connect the tops of the candle bodies (as shown to the right). If we are short from before, we look to exit our trade as soon as the price breaks to the upside. If we are not yet in a trade, we may consider taking a long position at this point.

Quick recap

In the second part of our guide, you learned to read FOREX charts, what types of FOREX charts are available, how to identify support, resistance, and moving averages, trends, and trendlines.

In the following part, we will move into more advanced stuff like Forex Indicators and Trading strategies.

Everyone thinks trading is a straightforward task and starts trading without knowing the details of the specific market they are into.

Some of the novices start with a very high leverage trading account and intend to make a quick profit. But it would help if you never tried to make quick money in this market. If you do so, you will be losing most of the capital within a short time.

The professional traders strategically manage their trade so that they don't have to lose more money from a single trade.

There are many ways by which you can protect your capital, but in this article, we will highlight the most promising strategies.

#1. Follow the trading routine.

You need to follow a specific trading routine as it will help you to take the trades systematically. If you randomly take trades, you will lose most of the money within a short time.

Please have a look at a professional trader and follow their steps. While developing that trading routine, make sure you are not making it complex. If you try to trade the market with a complex trading routine, you will lose money most of the time.

Trading should be done simply, and only then can you expect to make a big profit without losing too much money. So be smart with your actions, and you should be able to earn more money.

#2. Learn to trade with the trend

Trend trading strategy is one of the most effective ways by which you can make a big profit from this market. However, to analyze the trend, you have to rely on the daily or the hourly time frame.

Some might say higher time frame trading is very boring, but it is the most efficient way to find good trade signals. Learn about the different phases of the market trend and use the Fibonacci retracement tool to execute the trade at the end of a corrective move.

Take a look at this site and learn more about the trend trading methods. It will allow analyzing the market better, and you can avoid many common problems. But, remember, nothing is absolute in the Forex market. So, be prepared to lose some trades.

#3. Stop overtrading

Overtrading is the key reason for which the rookies are losing money. The novice traders think that by trading more, they can change their life fast. Unfortunately, you don't have to trade more to earn more money.

To make your life better, you have to learn the proper way to find quality trade signals. Learn to analyze the candlestick pattern and execute the trade at the key support and resistance level.

Take your time and find the faults in your system. Developed you fixed sets of rules so that you don't have to trade randomly.

#4. Trading with high leverage

The traders often start trading without knowing the risk factors. To protect your trading capital from the big losses, you need to trade the market with managed risk factors.

At times you might have the urge to trade with a big lot, but this is where you need to gain control over your emotion. Unless you learn to control your emotions you are going to lose money most of the time.

Stop thinking about the big profit and try to find the high-quality trade signals in favor of the existing trend. And make sure you are not using leverage more than 1:10 as higher leverage increases the overall risk exposure.

#5. Avoid the news

As a novice trader, you should avoid trading high-impact news. This is because the market becomes extremely volatile during the high-impact news release, and it becomes nearly impossible to make a consistent profit.

So to protect your trading capital, you must learn to trade during the stable hours of the market. By doing so, you will be able to manage your trade more efficiently, and thus you will succeed as a retail trader.

As we all know, cryptocurrency trading can be highly profitable in very short time – compared to other assets. However, trading is a skill which has to be learned – somewhat like playing poker profitably.

Beginners with no crypto trading experience tend to make the typical beginners mistakes, which soon lead to more and more losses.

Simply knowing about those mistakes and not doing them ever again are the first step to becoming a successful crypto trader who‘s able to build wealth by trading – Don‘t let those errors hold you back from making money!

#10 - Not having a Plan for the Trade

Having a plan includes the ability to answer ALL of these questions in detail:

• What different technical analysis signals tell you that there is a good entry?
• Why do you enter at that specific price and not higher or lower?
• How long do you expect your trade to last?
• Where do you put your stop loss?
• What‘s your risk: reward ratio?

Professional traders know all these details in advance, as they are crucial for successful trading. Beginners often act without clear plans and wonder why they lose too much money overall instead of building wealth.

#9 - Feeling that Price will go up and not just use Technical Analysis

Beginners often think that they see where price will go on a chart because the few other experiences they had with charts looked alike – so „this one will for sure do the same“.

That‘s of course simply the way how human brains function. Past experiences lead to subconscious biases about future circumstances.

That‘s how humans generally learn things and try to understand the world. If you are a begginer trader and have just seen a hand full of price charts in your life, which might all even have looked like more or less – of course, you‘ll think the next chart will again unfold the same structure.

Or the beginner sees a recent pump in a chart and expects the price to pump soon again, because for his eye this would just fit so much into the picture of the chart. These biases are fatal as they lead to imprudent and unprofessional behavior.

Beginners have to learn that they can never be sure about price movements, especially guessing price out of feelings or in comparison with other charts is a strategy for losing money asap.

Only technical analysis can deliver signals for potential trades. TA is for estimating likelihoods for price movements. If price movement in a certain direction looks way more likely than in the other direction, we have the circumstances for a trade entry.

Still, there won‘t be a 100% guarantee that the chart will unfold as expected – that‘s again why traders include the stop loss in their trading setup.

#8 - Listening To The Crowd‘s Trade Alerts

Be very careful with using Twitter or other social media for advice and trade alerts. When everybody shouts that a certain coin pumps soon, it likely won‘t happen like that.

Example – all the tweets about Dogecoin going Moon in end of May / June 17. Let‘s make it short: Doge didn‘t pump again, the chart had already had it‘s top before.

People who recommend coins and talk about pumps coming soon mostly just want to support their own trades. They‘ve just bought certain coins themselves and are trying to activate the crowd for the pump they want to see.

That can even be a lot of people at the same time, so you might think that if everybody talks about a coin pumping soon, it will. Just don‘t be surprised if it doesn‘t. If your TA tells you that there is a possible trade, then you should enter it, but not because of the crowd shouting for it.

#7 - Trading in a bad mood

Trading is a rational business which shouldn‘t be influenced by feelings. Being in a bad mood means you shouldn‘t trade at that moment or on that day.

As you are human and not a robot, a bad mood can influence all you do in a negative way. We‘re more likely to make mistakes or wrong decisions when we feel bad, due to not being concentrated and seeing things with a negative bias.

So being emotionally down, stressed, sick, not concentrated, feeling impatient etc. are circumstances where you should better do something good for yourself – take a nice bath, relax, get a massage, call a friend, do sport or watch your favorite series. Better don‘t do crypto trading.

#6 - Not Using A Stop Loss In Every Trade

What new traders often don‘t know, is that a stop loss is not just an optional order type which experienced traders use from time to time – it‘s obligatory for each trade from a professional point of view.

Professional traders use a stop loss in every trade, as a clear decision about the loss they are willing to take is as important as their plan where to take profit.

#5 - No Concrete Idea About Risk: Reward Ratio In Each Trade

When a professional trader enters a trade, he knows exactly how much potential loss he might have to accept compared to the potential profit he might be able to take. The loss should be relatively small to the potential profit.

The loss can obviously only be guaranteed to stay small by using a stop loss order. Not knowing these areas of stop loss and potential profit areas in advance is the typical behavior of beginners who don‘t have a plan for their trades, which will soon lead to constantly losing money.

#4 - Trading With Too Big Amounts In Single Trades

Beginners with little to no trading experience and knowledge tend to put way too much of their whole trading capital in one single trade. As each trade always includes a risk, it‘s simply a numbers game how much of your whole capital you should risk each time.

Too much capital in single trades can lead to a massive reduction of the whole trading capital in short time. But that‘s what often happens to beginners. Professional traders don‘t do that. Traders shouldn‘t take more than a few percentages of their whole trading capital for a single trade. Max. 5%.

So if you take 5% of your whole trading capital and the risk of this single trade would be 10% (meaning you put your stop loss at 10% below your entry), then it would be a 0,5% loss for your whole trading capital. (10% of 5%)

On the other hand, if the trade becomes a success and you could take let‘s say 150% or even way more profit, you‘d have gained at least 7.5% on top of your whole trading capital at once, which is massive.

Tell that to a Forex or stock trader. Just imagine you could catch a couple of such pumps and would be able to take profits from 100% to maybe even 500%, your whole trading capital would be doubled fast, even while sometimes being stopped out with the small losses as described.

There might be traders who got rich with a few trades or with maybe even one big trade where they had put all their capital in this one single pump of 3000% or so, which then luckily occurred. But that‘s like winning in the lottery and the concept behind it is gambling, without risk management.

You see the risk to do that: If such a pump doesn‘t happen and the price even falls, the trader has to take a loss of a few percent of his whole trading capital when having put a stop loss wisely.

Another problem is, when you put all your money in one single trade, you are completely dependent on this certain coin to pump.

If it doesn‘t pump very soon, your capital keeps stuck in this trade while you wait for the pump, which maybe happens next year or never like expected.. or you just get stopped out with a relatively high loss, compared to losses when using less capital for single trades.

Hopefully, you get the idea of risk management by not using too much capital at once.

#3 - Become Cocky After A Few Successful Trades

A big common mistake: Enhancing the amounts for single trades (percentage of the whole trading capital) after a few gains in a row, because of thinking „wow, it‘s easy“ and „I‘ve already got how it works..!“

We‘ve seen traders who did it correctly at the beginning: In their first trades, they used only small amounts of their trading capital. Let‘s say one had 8 BTC and he would only use 0.1 BTC for a trade, which is fine.

Fortunately, a couple of trades immediately got very profitable and the trader felt happy and had gained confidence.

Out of this confidence, he thought that it seems pretty easy to make money in crypto – so he decided to take bigger amounts. As he had been able to at least double his 0.1 BTC each time – he could also double a whole Bitcoin or more – right??

With this conclusion in mind, he started to take entire Bitcoins for trades, which meant a dramatic increase in the percentage of his whole trading capital risked in single trades.

Now guess what happened? After a short time the trader reduced his entire trading capital to less than 50%, so 8 BTC soon weren't more than 4 BTC, and continuing to fall as his capital was stuck in altcoins which just went further down continuously.

So the trader sees his capital dwindle each day, hoping for future pumps to at least get his capital back. Breaking basic rules because of becoming cocky after a few successful trades is a very bad idea!

#2 - Chasing The Price – Wrong Entry

Often new traders have just recently heard about cryptocurrency trading from a friend who has had great profits and who‘s talking about those exciting cryptocurrencies.

Those newbies tend to jump randomly into trades when they see a rising price on a chart. Like „oh, this coin has pumped 38% overnight - it will for sure go further – the chart looks promising! My friend also made 200% profit with it..„ It even often happens that they buy around the aspex before price dumps again with no further pump soon.

Unfortunately, those traders don‘t even get out early again when the price falls. Afterwards, such new traders see price descend over days or even weeks till they can‘t stand it anymore and sell low.

If this scenario sounds familiar to you – make sure you don‘t randomly jump into pumps anymore. This unprofessional behavior is also called „FOMO„ in trader circles – fear of missing out – which is like a mean disease among beginners.

#1  Confusing Investing with Trading

Traders with no real idea just buy, without a concrete trading plan behind the purchase, and hold, expecting the price to go up soon/further, to any good looking high-profit target. That happens to people who are completely new to trading and who haven‘t invested the time yet to learn how profitable trading works.

They just think that trading is something where you buy an asset and sell it higher. Which is true, of course – but that‘s pretty much all they know. Just buying altcoins and waiting for future pumps because the trading beginner thinks the coins always have to pump again soon.. that‘s not trading. It‘s investing, and even not smart in that field.

Consciously investing in an altcoin, hoping for a higher future price, means that the investor should have an idea about the coin – the concept and the fundamentals.

Altcoins can easily lose their value at all and disappear if the concept turns out to be useless for whatever reasons. Trading means actively buying and selling to take tangible profits within certain timeframes and not just hold.

Now you know the crucial mistakes which hold new traders back from being successful. Hold on to those basic rules and have fun with trading. We wish you massive gains!

Action to take

Now that you know what you should avoid you may start doing cryptocurrency trading using a broker. We use and recommend you eToro for trading cryptocurrencies like BTC, ETH, LTC or Dash.

You already do cryptocurrency trading? Join the forum and meet our gang of investors, traders, and enthusiasts.