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How to Trade on TradingView: Tips and Tricks for Forex Traders

Fusion Markets

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For those familiar with the trading landscape, you’re probably already well aware of  TradingView. Founded in 2011 by brothers Stan and Constantin Bokov, this widely recognised platform was created with the aim of being an all-in-one platform for traders to connect, share ideas and learn from each other. Today, it is one of the most widely used trading sites on the internet - with over 50 million users worldwide. 



Now, picture this: Trading on the advanced charts on TradingView at some of the lowest costs available on the market. Sounds exciting, doesn’t it? By connecting your TradingView account with your Fusion Markets account, you now can. At Fusion, our mission has always been about making trading accessible to everyone by offer radically low costs and no hidden fees or catches. That’s why we’ve partnered with TradingView to make low trading at the highest quality even more accessible.  



This article will delve into what TradingView is, its key features, and a step-by-step guide on how to effectively trade on the platform. 




Contents


Getting Started

Navigating the TradingView Interface

Trading on TradingView

Managing Positions and Live Trades on TradingView

TradingView Strategies

Conclusion



Getting Started



Before you dive into the world of trading on TradingView, you'll need to set up an account. Here's how to get started: 



  1. Account Creation: go to tradingview.com and sign up for a free or paid account. The free version offers a wide range of features, while the subscription provides additional perks, such as more alerts, indicators, and the ability to use multiple charts. 
  2. Personalising Your Profile: Customise your profile by adding a profile picture and filling out your bio. This can help you connect with other traders on the platform and share your insights. 
  3. Selecting a Subscription: If you decide to upgrade, choose the plan that suits your needs best. You can compare the available plans on TradingView's website. 

 

You will also need to create a Fusion Markets’ account or login to the existing one. If you struggle with selecting whether to sign up for a Classic or Zero account, visit our Accounts Overview page. 

Once it is done, here’s what you have to do next: 



  1. Go back to tradingview.com and open a chart that you want to start trading from. 
  2. Click on Trading Panel at the bottom and choose Fusion Markets;  
  3. Select your account type and click on ‘Continue;  
  4. Log in using your Fusion Markets account;  
  5. Tick the accounts that you wish to use and click on Allow when finished. 

 

You are all set!  




Navigating the TradingView Interface



After setting up your account, the next step is to familiarise yourself with the TradingView platform. The platform is intuitive and straightforward to navigate, with a wide range of features and tools neatly organised for ease of use. 


Homepage Overview: The homepage provides an overview of the financial markets. On the right-hand side, you'll find the news feed, watchlist, and trading panel. 


You can customise it by adding watchlists and widgets for specific assets or markets you're interested in. 


 

TradingView_Homepage



Charting: TradingView offers a wide range of technical indicators, drawing tools, and chart types. The platform offers flexibility in setting candle time frames, ranging from one second to one year. Indicators can be chosen from a drop-down list located in the top toolbar. For additional analysis such as annotation, measuring tools, and trendlines, the platform provides over 90 drawing tools accessible from the toolbar on the left-hand side of the chart.  


TradingView_AUDUSD


The TradingView platform facilitates the analysis of market data through a variety of chart types, conventionally categorised into two groups. 


The first category consists of traditional charts, constructed based on time, including: 


  • Bars 

  • Candles 

  • Hollow candles 

  • Columns 

  • Line 

  • Line with markers 

  • Step line 

  • Area 

  • Baseline 

  • High-low 



The second category comprises charts constructed solely based on price changes, such as: 


  • Heikin Ashi 

  • Renko 

  • Line break 

  • Kagi 

  • Point & figure 

  • Range 


Users can easily select their preferred chart type from the drop-down menu located on the top toolbar. 


TradingView_Charts



Indicators: TradingView offers a robust selection of over 100 indicators. You can add these to your charts to analyse price movements, trends, and other essential data. Popular indicators include Moving Averages, Relative Strength Index (RSI), and Bollinger Bands. Additionally, users have the flexibility to craft custom indicators in JavaScript through the platform's API. This API empowers users to design a diverse range of indicators, incorporating various plot types, styles, colours, and mathematical functions. 


Within the user interface, individuals can seamlessly integrate custom indicators onto the chart. Adjustments to specific indicator parameters can be made using the dedicated Indicators and Settings dialog. It's important to note that while users can add custom indicators and modify certain parameters through the UI, the platform does not allow the creation of entirely new indicators or the modification of existing code for pre-existing ones. 

 


Alerts: TradingView alerts provide instantaneous notifications when the market aligns with your personalised criteria. For instance, you can set an alert such as, "Notify me if Tesla surpasses $250." All users have access to various notification options, including visual pop-ups, audio signals, email alerts, email-to-SMS alerts, and PUSH notifications directly sent to your mobile device. 


You can also set alerts on indicators, strategies, and drawing tools and even customise your trigger settings. 




TradingView_Indicators




Drawing Tools: TradingView's drawing tools offer a versatile range of functionalities, allowing users to make annotations, insert comments, highlight trends and patterns, conduct measurements and forecasts, and calculate price levels. These tools are conveniently positioned on the left panel of the chart, providing easy access for users to enhance their analytical capabilities and visually communicate insights. Whether you need to jot down notes, emphasise specific points, or perform detailed analyses, TradingView's drawing tools allow users to interactively engage with charts and convey valuable information effectively. 



TradingView_Drawing_tools




Watchlists: Watchlists are located on the right side of the screen. You can create a new watchlist by clicking on ‘Create new list' or import the existing one to keep track of your favourite assets. Please note that the import option is only available for Pro accounts. To add assets to your watchlist, click on the '+’ or ‘X’ if you wish to remove it. 



TradingView_watchlist



Social Features: The ability to publish and share your trading ideas is a pivotal feature, facilitating collaborative learning. You can exchange trade-related information or engage in discussions about current market conditions with fellow traders who share your level of experience or interact with more seasoned traders.  



For a dose of inspiration, navigate to the "Community" section in the header menu and select 'Trade Ideas.' Here, you have the option to explore trade ideas by specific assets, follow the curated selections from editors, or delve into the trending ideas on the platform. 



TradingView_community



Every member of the community has a badge. Let’s go through them one by one: 


  • MOD - The red MOD badge is assigned to TradingView moderators, distinguishing them within the community. This badge serves as an additional layer of security for all members, enabling easy identification of moderators. In case you have inquiries or require assistance, this badge helps you discern who is a moderator and who isn't. 


moderator_badge



  • The BROKER badge, available in blue (platinum), gold, or silver, is designated for broker accounts on TradingView. Members adorned with this badge are exclusively recognised as official broker representatives. The broker page offers comprehensive details on Terms of Use and reviews from live-account owners. 



  • WIZARD - The green WIZARD badge is awarded to Pine Script™ Wizards, who are exceptional programmers proficient in Pine Script™—the language employed for developing indicators and strategies on TradingView. These Wizards make noteworthy contributions to the community by assisting numerous traders with their code-related queries. Read our blog [ADD LINK] to learn how to use PineScript for trading on TradingView.


  • TradingView official accounts, along with badges for TradingView employees, feature a distinctive blue badge adorned with a TV logo. This badge serves as a visual identifier to distinguish and authenticate the official presence of TradingView and its staff within the community. 



The conversations unfold in real time, allowing you to connect with individuals trading the same instruments as you. You can share links to your charts, articulate your trading concepts, and receive feedback and comments to foster mutual growth and prosperity in the trading community. The overarching goal is to enhance your trading and investing skills by gaining insights from the actions of others.  




Trading on TradingView




Understanding how to correctly place trades on TradingView is crucial. One of its standout features is Pine Script, a domain-specific programming language that allows users to create custom indicators, strategies, and scripts. Visit our blog [LINK] to learn how you can leverage PineScript for trading on TradingView. 


Once you have logged into your trading account, you'll notice four tabs at the bottom: Positions, Orders, Account Summary, and Notifications log. The Orders tab conveniently provides a filter for all possible order statuses. Each column in the Orders tab displays key values from the Account Summary, represented by a grey line. 



At the top-right of the Trading Panel, you'll find a menu containing main settings for trading, a button for disconnecting trading, and an option for selecting another broker. Your account ID is prominently displayed, and if it's a multi-account ID, a dropdown allows you to switch between sub-accounts.




TradingView_order

 



To place an order, you have several options. You can do so through the context menu on the chart or trading panel, the Plus menu on the chart, or by using the Buy/Sell buttons. The easiest way is to click on ‘Trade’ on the trading panel, and a new window will pop up.  




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When accessing your TradingView execution platform, the Buy/Sell buttons are prominently displayed directly on your chart. In the chart's centre, the market spread is visible, and on the right, you have the option to adjust the number of contracts. Initiating a Buy or Sell order opens the order execution window. 



order_window_TradingView




Order Placement: Upon clicking Buy or Sell, you initiate the opening of the execution window and gain the ability to adjust the parameters of your trade before finalising the execution. Let's guide you through each parameter individually: 


  • Account: If you have multiple accounts, you can seamlessly switch between them at this point. 

  • Side: Indicate whether your order is a buy or a sell order. 

  • Type: Select from the following order types: Market, Limit, Stop, or Stop Limit.  

    • Limit: This order triggers when the price reaches the specified limit or a better price. Note that in situations of imbalance between buyers and sellers, limit orders may not be immediately filled. 

    • Market: This order gets filled immediately at the best available current price. 

    • Stop: A stop order that converts into a market order once the specified price is reached. 

    • Stop Limit: Similar to a stop order, this type converts into a limit order after the specified price is hit. 

  • Duration: You have the flexibility to specify the duration of your order, and TradingView offers various options: 
  • GTC (Good Till Cancelled): The order persists and stays open until explicitly cancelled by the trader. 
  • GTD (Good Till Day): The order remains active until the specified date set by the trader.



time_in_force



  • Symbol: You can modify the symbol (market) at this point. 

  • Quantity: Adjust the quantity of contracts you wish to buy or sell. 





Managing Positions and Live Trades on TradingView



After executing a trade, the details of the trade become visible on your chart. TradingView displays the current Profit/Loss and the quantity of your position. 


Additionally, it provides options to reverse your trade, converting a buy trade into a sell trade, or to close your position with a single click. In the Trading Plan section at the bottom of the screen, you can monitor your current positions under "Positions" and access all your active trades with supplementary data. Closing positions can also be done conveniently using the X icon located on the right. 

 
When you enable the visualisation of past trades on TradingView, the platform will display red and green arrows directly on your charts, indicating the entry and exit points of previous positions. 


Moreover, you have the capability to view the number of contracts traded, accompanied by the execution date, providing a comprehensive overview of your trading history. 



TradingView_Strategies




One of the attractions for millions of retail traders to this platform is the assortment of specialised tools and user-generated strategies available for utilisation at any given time.  


Our immediate focus is on understanding how to employ strategies. Without delving into the intricacies of each strategy, let's elucidate how to leverage TradingView using a range of pre-established strategies conveniently accessible on the website. 


Follow this simplified step-by-step guide: 


  • Click on "Indicators" in the topmost menu of the TradingView terminal. 

  • Opt for "Strategies" from the tabs positioned above the list of indicators. 

  • Select the desired strategy from the new list provided. 


If you cannot find the strategy you're looking for, use the search bar for a quick and efficient search. 




TradingView_Strategies




It's as straightforward as that. As soon as you select a specific strategy, you will see its implementation on the price chart. Additionally, it's essential to understand how to employ multiple charts in TradingView. Some strategies may necessitate cross-comparisons with price data from other assets. 



To achieve this, simply click the plus icon next to the name of the primary viewed asset and choose the required asset from the list or use the search feature. This action will promptly overlay one chart over another, offering a more comprehensive view of the price in the context of its comparison against other assets. This feature proves particularly useful when dealing with futures and other derivatives. 

 

 


Conclusion 



Trading on TradingView is a dynamic and multifaceted process that combines technical analysis, strategy development, and community engagement. To succeed, you'll need to continually refine your skills, adapt to changing market conditions, and maintain a disciplined approach to risk management. 



Remember, no trading platform, no matter how sophisticated, can guarantee success. It's up to you to apply the knowledge and tools provided by TradingView to make informed decisions and build a profitable trading career. Whether you're a seasoned trader or just starting, TradingView can be a valuable resource on your journey to financial success in the world of trading. 



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Trading and Brokerage
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Inside the Mind of a Successful Trader: Understanding the Psychology Behind Forex Success
Fusion Markets

Forex trading, with its promise of financial freedom and independence, has captivated the minds of millions around the globe. Yet, beneath the surface of charts, indicators, and currency pairs lies a complex landscape shaped not just by market dynamics but by the intricate workings of the human mind.  

Success is not solely dictated by market knowledge or technical prowess but by the ability to master one's own trading psychology. This article delves deep into the psyche of successful forex traders, exploring the mindset, habits, and strategies that set them apart from the rest.  

Whether you're a novice trader taking your first steps into the world of forex or an experienced investor seeking to enhance your trading performance, understanding the psychological aspects of trading is paramount to achieving lasting success. Join us as we unravel the mysteries of the human mind and discover the keys to unlocking your full potential in the forex market. 



Contents 


Defining Success in Forex Trading

The Role of Psychology in Trading

Characteristics of Successful Traders

Embracing Emotional Intelligence

Developing a Winning Mindset

The Psychology of Risk Management

Learning from Mistakes

Conclusion




Defining Success in Forex Trading


The concept of "success" in forex trading is a bit of a hot topic. Some see it as being all about the money, while others argue it's more about staying consistent, managing risks, and growing as a trader. Plus, success means different things to different people, so what floats one trader's boat might not do it for another.

A “successful” forex trader possesses discipline, focus, determination and emotional resilience. This enables them to take a calculated approach to their trading, ultimately producing a consistent performance over the long-term.

Every trader will encounter losses. It’s how you manage your risk that will determine your outcome from these losses. In addition to managing your risk, having a psychological plan in place to prevent your emotions from taking control is also important. For example, some day traders have a daily loss limit that, if reached, results in them walking away for the day and trading the next day. Others might have a psychological limit of 4 losing trades in a row and so forth.

A successful trader is ‘successful’ over the long-term. Making profits is only one piece of the puzzle. You cannot be successful in profiting over the long-term without being successful in risk management and psychological behaviour.

 

The Role of Psychology in Trading


At the heart of successful forex trading lies the understanding of one's own trading psychology and the ability to manage emotions effectively. 

The psychology of trading encompasses a range of factors, including emotional intelligence, mindset, and behaviour. Successful traders understand the importance of emotional regulation and employ strategies to remain calm and focused during times of market volatility. By developing self-awareness and cultivating a positive mindset, traders can overcome psychological barriers and make rational decisions based on analysis rather than emotion.

Characteristics of Successful Trader


Successful forex traders share common traits that set them apart from the rest. These include discipline, patience, adaptability, and a willingness to accept losses as part of the trading process. They approach the market with a clear plan, stick to their strategies, and remain unphased by short-term fluctuations.

Discipline is the most critical characteristic of successful traders. It involves following a trading plan meticulously, adhering to risk management principles, and avoiding impulsive decisions. Patience is also essential, as successful traders understand that success in forex trading is a marathon, not a sprint. They wait for high-probability trading opportunities and avoid chasing after quick profits.

Adaptability is another hallmark of successful traders. They recognise that the forex market is constantly evolving, and they adjust their strategies accordingly to stay ahead of the curve. Whether it's adapting to changing market conditions or refining their trading approach based on new information, successful traders remain flexible and open-minded.

In addition to the above, there are other catalysts outside of trading that contribute to the success of a trader. On, of which, is maintaining a good sleeping habit. With the forex market trading 24/5, it’s impractical for most traders to stay away all day and night. Sleep deprivation can cause many issues in all forms of life, and trading is no different.

Embracing Emotional Intelligence 


Emotional intelligence plays a pivotal role in forex trading, enabling traders to recognise and manage their emotions effectively. Successful traders cultivate self-awareness, self-regulation, and empathy, allowing them to make rational decisions even in high-pressure situations. By understanding their emotional triggers, they can maintain composure and avoid impulsive actions. 


Self-awareness involves recognising one's emotions and their impact on trading decisions. Successful traders are attuned to their emotional state and take proactive steps to prevent emotions from clouding their judgment. Self-regulation is the ability to control impulses and maintain discipline in the face of temptation. Successful traders develop strategies to manage stress, anxiety, and other negative emotions that can interfere with trading performance. 


Empathy is also important in forex trading, as it allows traders to understand the perspectives and motivations of other market participants. By putting themselves in the shoes of other traders, successful traders can anticipate market movements and react accordingly. Empathy also helps traders build relationships with other market participants, fostering collaboration and mutual respect. 


Successful traders also have an understanding of cognitive and confirmation biases. We recommend all traders read our two-part series on the 10 hidden biases here: 



Developing a Winning Mindset


A winning mindset is essential for success in forex trading. Successful traders maintain a positive attitude, focus on continuous improvement, and view challenges as opportunities for growth. They approach each trade with confidence, knowing that setbacks are temporary and part of the learning curve.

A winning mindset is characterised by several key traits, including optimism, determination, resilience, and good habits. Optimism involves maintaining a positive outlook, even in the face of adversity. Successful traders believe in their ability to succeed and remain confident in their trading approach, regardless of short-term setbacks.

Determination is the drive to succeed despite obstacles and setbacks. Successful traders are tenacious in pursuit of their goals and refuse to be deterred by temporary failures. They view challenges as opportunities for growth and approach them with a sense of determination and perseverance.

Resilience is the ability to bounce back from setbacks and adapt to changing circumstances. Successful traders understand that losses are inevitable in forex trading and view them as learning experiences rather than failures. They remain resilient in the face of adversity, quickly recovering from losses and maintaining their focus on long-term success.

And finally, building good habits is paramount to becoming a successful trader. “It takes 21 days to form a habit and 90 days to form a lifestyle”. Understand what your identity-based habits are and how to build them to your arsenal of tools to conquer the market.

The Psychology of Risk Management


Risk management is a cornerstone of successful forex trading, and mastering it requires a deep understanding of one's risk tolerance and the ability to make calculated decisions. Successful traders prioritise capital preservation and employ risk management strategies such as setting stop-loss orders, diversifying their portfolios, and sizing their positions appropriately. By limiting their exposure to risk, they can protect their capital and avoid catastrophic losses.

Effective risk management involves several key principles, including diversification, position sizing, and risk-reward ratio. Diversification involves spreading risk across multiple assets or currency pairs to reduce the impact of any single trade or market event. Successful traders diversify their portfolios to minimise risk and maximise returns over the long term.

Position sizing is the process of determining the appropriate amount of capital to allocate to each trade based on risk tolerance and market conditions. Successful traders carefully assess the potential risks and rewards of each trade and adjust their position sizes accordingly. By sizing their positions appropriately, they can minimise losses and maximise profits while preserving capital.

Risk-reward ratio is the ratio of potential profit to potential loss on a trade. Successful traders seek to maintain a favourable risk-reward ratio on each trade, typically aiming for a ratio of at least 2:1 or higher. By consistently seeking trades with a positive risk-reward ratio, they can achieve consistent profits over time while minimising losses.

Learning from Mistakes


Mistakes are inevitable in forex trading, but successful traders view them as valuable learning opportunities rather than failures. They analyse their trades objectively, identify areas for improvement, and adjust their strategies accordingly. By embracing a growth mindset, they continuously refine their skills and adapt to changing market conditions. Every mistake becomes a stepping stone towards greater proficiency and success.

Learning from mistakes involves several key steps, including reflection, analysis, and adaptation. Successful traders take the time to reflect on their trades and identify any patterns or recurring mistakes. They analyse their trading journals and performance metrics to gain insights into their strengths and weaknesses.

Based on their analysis, successful traders adapt their strategies and techniques to address any areas for improvement. They may seek out additional education or training, refine their trading approach, or implement new risk management strategies. By learning from their mistakes and making adjustments, they can improve their trading performance over time and achieve greater success in the forex market.

Conclusion


In the dynamic world of forex trading, success is not solely determined by market knowledge or technical prowess but by the ability to master one's own trading psychology. By understanding the psychological factors that influence trading behaviour, traders can develop the mindset, habits, and strategies necessary for long-term success.  

Remember, that everyone faces the same challenges in the markets. Only those who can overcome the psychological barriers in trading end up succeeding over the long-term. Sometimes in bizarre market conditions, or on an off day, it’s better to take a step back and examine why we’ve been behaving and thinking as we have. 


Whether you're a novice trader or an experienced investor, cultivating emotional intelligence, embracing risk management, and maintaining a winning mindset are key to thriving in the competitive forex market. As you embark on your trading journey, remember that success is not just about profits but about the journey of self-discovery and growth. 


12.04.2024
Trading and Brokerage
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A Beginner’s Guide to Trading Forex
Fusion Markets


Embarking on your forex trading journey might seem daunting at first, but fret not! We’ve put together all the information you need to get started. 


This guide is your friendly companion, packed with real-world examples, easy-to-grasp basics, newbie-friendly strategies, handy tips, and a step-by-step roadmap to kickstart your forex adventures.



Contents 


Introduction to Forex Trading

How the Forex Market Works

Getting started in Forex Trading

Developing a Strategy 

Practical Tips for Beginners

Resources for Further Learning



Introduction to Forex Trading


Foreign exchange trading, or forex trading, is the process of buying and selling currencies in the global financial markets. It is one of the largest and most liquid markets in the world, with an average daily trading volume estimated to exceed USD$7 trillion. Unlike traditional stock markets, forex trading operates 24 hours a day, five days a week, allowing traders to participate in the market at any time.


Understanding currency pairs


Forex trading involves the exchange of one currency for another at an agreed-upon price. This is done with the aim of profiting from fluctuations in exchange rates. Currencies are traded in pairs, where one currency is bought while the other is sold. The most commonly traded currency pairs, or ‘the majors’ as they’re more commonly referred to, include EUR/USD (Euro/US Dollar), GBP/USD (British Pound/US Dollar), AUD/USD (Australian Dollar/US Dollar), NZD/USD (New Zealand Dollar/US Dollar), USD/JPY (US Dollar/Japanese Yen), USD/CAD (US Dollar/Canadian Dollar), and USD/CHF (US Dollar/Swiss Franc).


Examples of other currency pairs, most often referred to as “crosses”, are AUD/JPY (Australian Dollar/Japanese Yen), GBP/NZD (British Pound/New Zealand Dollar), EUR/CAD (Euro/Canadian Dollar) and so forth.


And finally, less-traded currency pairs are referred to as “exotics”. Examples of these include USD/TRY (US Dollar/Turkish Lira), USD/HUF (US Dollar/Hungarian Forint). It’s important to note that exotic pairs tend to have wider spreads and higher volatility compared to major and minor pairs.


Uses of the forex market


The forex market is used by many players, for many different reasons. Retail traders aim at buying or selling a currency to take advantage of short-term fluctuations in price, whereas corporates who conduct regular international trade often use the forex market to hedge against their local currency weakening.


Large-scale players such as hedge funds or investment firms, will use the foreign exchange market to take advantage of divergences in interest rates between two nations in the form of a carry trade.


For more information on the types of forex trading, head to Part Four.


Reading Currency Pair Quotes


Currency pair quotes consist of two prices: the bid price and the ask price. The bid price represents the price at which you can sell the base currency, while the ask price represents the price at which you can buy the base currency. The difference between the bid and ask prices is known as the spread, which represents the broker's profit margin.


In forex trading, currency pairs are quoted in pips, short for "price interest point," representing the smallest possible price movement. For most major currency pairs, prices are quoted with four decimal points, indicating a change of 1/100 of one percent or 1 basis point. However, the Japanese Yen is an exception, trading with only two decimal points.


For instance, if the bid price for the EUR/USD pair is quoted as 1.19040, this breakdown refers to the five decimal places displayed on the market watch.


Pips EURUSD

How the Forex Market Works


In order to trade the foreign exchange market effectively, you need to understand the nuts and bolts of how it works.


The forex market is decentralised, meaning that there is no central exchange where all transactions take place. Instead, trading occurs over-the-counter (OTC) through a global network of banks, financial institutions, and individual traders. Some of the larger players in the forex market are Deutsche Bank, UBS, Citi Bank, RBS and more.


Prices are determined by supply and demand dynamics, with exchange rates fluctuating based on economic indicators, geopolitical events, and market sentiment.


How the system works


Market makers are key players in the forex world. They establish both the buying (bid) and selling (ask) prices, which are visible to everyone on their platforms. Their role extends to facilitating transactions with a diverse clientele, including banks and individual traders. By consistently quoting prices, they inject liquidity into the market. As counterparties, market makers engage in every trade, ensuring a seamless flow: when you sell, they buy, and vice versa.


Electronic Communications Networks (ECNs) play a crucial role in forex trading by aggregating prices from various market participants like banks, market makers, and fellow traders. They showcase the most competitive bid and ask quotes on their platforms, drawing from this pool of prices. While ECN brokers also act as counterparts in trades, they differ from market makers in their settlement approach rather than fixed pricing. Unlike fixed spreads, ECN spreads fluctuate based on market activity, sometimes even hitting zero during peak trading times, especially with highly liquid currency pairs like the majors.


Direct Market Access (DMA) empowers buy-side firms to directly access liquidity for securities they aim to buy or sell through electronic platforms offered by third-party providers. These firms, clients of sell-side entities like brokerages and banks, maintain control over trade execution while leveraging the infrastructure of sell-side firms, which may also function as market makers.


Straight Through Processing (STP) represents a significant leap in trading efficiency, transitioning from the traditional T+3 settlement to same-day settlement. One of its notable advantages is the reduction of settlement risk. By expediting transaction processing, STP enhances the likelihood of timely contract settlement. Its core objective is to streamline transaction processing by electronically transmitting information, eliminating redundant data entry and enabling simultaneous dissemination to multiple parties when necessary.


Market Makers Forex


Getting Started in Forex Trading


Choosing a Broker


When selecting a forex broker, it's essential to not only consider the fees, but also regulatory compliance, trading platform, and customer support. Look for brokers regulated by reputable authorities such as the Financial Conduct Authority (FCA) in the UK or the Commodity Futures Trading Commission (CFTC) in the US.


Here at Fusion Markets we’re dedicated to offering a quality service with an affordable fee structure. You can learn more about trading forex or view our licences


Setting Up Your Trading Account


Once you've chosen a broker, the next step is to open a trading account. This typically involves completing an online application, submitting identification documents, and funding your account. Forex brokers offer various account types to suit different trading preferences, including standard accounts, mini accounts, and demo accounts for practice trading.


Before risking real money, practice trading with a demo account to familiarise yourself with the trading platform and test your trading strategy in a simulated environment. Demo accounts allow you to gain valuable experience without the risk of financial loss. We also offer demo trading for those who want to test the water first.


Developing a Strategy


Identify Your Trading Style


Before developing a trading strategy, it's essential to identify your trading style, whether it's day trading, swing trading, or position trading. Your trading style will dictate the timeframe you trade on and the types of setups you look for in the market.


Below are the types of pros and cons of each trading style:


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Types of Analysis


Fundamental Analysis


Unlike technical analysis, which primarily relies on historical price data, fundamental analysis examines economic indicators, monetary policies, geopolitical events, and other macroeconomic factors to gauge the strength and direction of a currency's movement.


Central to fundamental analysis is the understanding that currency prices are ultimately driven by supply and demand dynamics, which in turn are influenced by broader economic conditions. For example, factors such as interest rates, inflation rates, GDP growth, unemployment levels, and trade balances can all impact a currency's value.


One of the key concepts in fundamental analysis is interest rate differentials. Central banks use interest rates as a tool to control inflation and stimulate economic growth. Currencies with higher interest rates tend to attract more investors seeking higher returns on their investments, leading to an appreciation in their value relative to currencies with lower interest rates. Traders closely monitor central bank announcements and economic reports to anticipate changes in interest rates and adjust their trading strategies accordingly.


Another important aspect of fundamental analysis is the assessment of economic indicators. These indicators provide insights into the health of an economy and can influence currency prices. For example, strong GDP growth and low unemployment rates are typically associated with a robust economy and may lead to appreciation in the currency. Conversely, high inflation or rising unemployment may weaken a currency.


Geopolitical events can also have a significant impact on currency prices. Political instability, conflicts, trade tensions, and other geopolitical factors can create uncertainty in the market and cause fluctuations in currency prices. Traders must stay informed about geopolitical developments and assess their potential impact on currency markets.


While fundamental analysis provides valuable insights into the long-term trends and direction of currency markets, it is important to note that currency prices can also be influenced by short-term factors and market sentiment. Therefore, traders often use a combination of fundamental and technical analysis to make informed trading decisions.



Technical Analysis


Technical analysis involves studying historical price data and using various charting tools and indicators to identify patterns and trends. Common technical analysis tools include moving averages, trendlines, and oscillators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). Traders use technical analysis to make short-term trading decisions based on price action and market momentum.


Technical analysis is a cornerstone of forex trading, offering traders a systematic approach to interpreting market dynamics and making informed trading decisions based on historical price movements and market statistics. Unlike fundamental analysis, which focuses on economic indicators and macroeconomic factors, technical analysis relies solely on price data and trading volume to forecast future price movements.


At its core, technical analysis is based on the efficient market hypothesis, which posits that all relevant information is already reflected in an asset's price. Therefore, by analysing past price movements, traders believe they can identify recurring patterns and trends that may indicate potential future price directions.


One of the fundamental concepts in technical analysis is that of support and resistance levels. Support represents a price level where buying interest is sufficiently strong to prevent the price from falling further, while resistance is a level where selling pressure is sufficient to halt an upward price movement. Traders use these levels to identify potential entry and exit points for their trades.


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Example of support and resistance areas on EURUSD Daily chart


Another key tool in technical analysis is chart patterns, which are formed by the recurring movements of prices over time. Common chart patterns include triangles, flags, and head and shoulders formations. By recognising these patterns, traders attempt to predict future price movements and adjust their trading strategies accordingly.


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In addition to chart patterns, technical analysts also utilise technical indicators to aid in their analysis. These indicators are mathematical calculations based on price and volume data and are used to identify trends, momentum, volatility, and other aspects of market behavior. Popular technical indicators include moving averages, oscillators like the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), and trend-following indicators such as the Average Directional Index (ADX).


While technical analysis is a powerful tool for forex traders, it is not without its limitations. Critics argue that technical analysis is subjective and prone to interpretation bias, as different analysts may draw different conclusions from the same set of data. Moreover, technical analysis does not account for fundamental factors such as economic news and geopolitical events, which can have a significant impact on currency prices.


Despite these limitations, technical analysis remains an indispensable tool for forex traders worldwide. By understanding and applying technical analysis principles, traders can gain valuable insights into market trends and dynamics, allowing them to make more informed trading decisions and improve their overall trading performance.

 


Risk Management


Setting Stop-Loss and Take-Profit Orders


Stop-loss orders are used to limit losses by automatically closing a trade at a predetermined price level. Take-profit orders, on the other hand, are used to lock in profits by closing a trade when the price reaches a specified target. By using stop-loss and take-profit orders, traders can manage risk and control their downside exposure.


Position Sizing


Position sizing involves determining the appropriate amount of capital to risk on each trade based on factors such as account size, risk tolerance, and the probability of success. A common rule of thumb is to risk no more than 1-2% of your trading capital on any single trade to preserve capital and avoid significant drawdowns.

 

Your Strategy


Once you’ve determine what style of trading would suit you best, you now need to develop a strategy. There are thousands of different strategies out there so you have the choice of learning one from someone else, or developing your own.


Regardless, some common strategies include:


Trend Following Strategies


Trend following strategies in forex trading involve identifying and capitalising on established market trends. Traders employing this approach aim to enter positions in the direction of the prevailing trend, whether it's upward (bullish) or downward (bearish), and ride the momentum for as long as possible. These strategies typically utilise technical indicators, such as moving averages and trendlines, to confirm the direction of the trend and determine optimal entry and exit points. The goal of trend following strategies is to capture significant portions of a trend's movement while minimising losses during market reversals.


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NZDUSD Daily Chart showing optimal entry points to go short during a bearish trend.



Range-bound strategies


Range-bound strategies in forex trading focus on exploiting price movements within defined ranges or boundaries. Traders employing this approach identify periods when a currency pair is trading within a relatively narrow price range, bounded by support and resistance levels. Instead of following a trend, range-bound traders seek to buy near support and sell near resistance, aiming to profit from the price being restricted to the range highs and lows.


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USDJPY 15min chart with optimal buy and sell signals for a range-bound strategy



Breakout Strategies


Breakout trading strategies in forex involve capitalising on significant price movements that occur when an asset's price breaks through predefined support or resistance levels. Traders employing this approach wait for a clear breakout from the established range and then enter positions in the direction of the breakout, anticipating continued momentum in that direction. Breakout traders typically use technical indicators, such as trendlines, moving averages, and volatility measures, to identify potential breakout opportunities and confirm the strength of the breakout. The goal of breakout trading strategies is to capture rapid price movements and profit from the subsequent price trend.


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Example of an opportune entry for a bullish breakout trade on EURUSD 4-hour chart


The key to developing a strategy that works for you is by studying the charts and thinking about what makes sense to you. If you think patterns make sense as they identify areas of consolidation which can lead to a breakout, then pattern trading could be a good fit for you.


It’s important for any trader to stick with their chosen strategy and not switch strategies every time they encounter a losing streak.


Practical Tips for Beginners


 

Maintain a Trading Journal


Keeping a trading journal allows traders to track their performance, analyse their trades, and identify areas for improvement. A trading journal should include details such as entry and exit points, trade rationale, risk-reward ratio, and emotional state. By reviewing past trades, traders can learn from their mistakes and refine their trading strategies over time.

 

Avoid Overleveraging


While leverage can amplify profits, it also increases the risk of significant losses. Avoid overleveraging by using leverage cautiously and only trading with capital you can afford to lose. A general rule is to keep leverage levels below 10:1 to mitigate risk effectively. The best position is cash. You should ensure you’re only taking the most high-probability set-ups that are in-line with your strategy.


Stay Disciplined


Maintain discipline in your trading approach by sticking to your trading plan and avoiding emotional decision-making. Avoid chasing losses or deviating from your strategy based on fear or greed. Consistency and discipline are key to long-term success in forex trading. Sometimes it’s best to walk away from the charts and come back the next day with a clearer head.


Manage Emotions Effectively


Trading can be emotionally challenging, with the potential for both euphoria and despair. Learn to manage your emotions effectively by practicing mindfulness techniques, maintaining a positive mindset, and taking regular breaks from the market. Remember that losses are a natural part of trading, and it's essential to stay resilient and focused on your long-term goals.


We highly recommend reading our article on the Top 10 Hidden Biases here.



Be realistic with your expectations


Trading can be very lucrative, but it can also be very costly. Traders should be realistic in their expectations – what % will you aim for each month? How much are you going to risk? Risking 20% of your equity per trade will be great on winning trades, but it won’t take long for you to eradicate your entire balance on a handful of losses. Whereas risking 1% equity per trade will allow you to conserve as much capital as possible, whilst still gaining 1%+ per winning trade.



Resources for Further Learning


To continue your forex trading education, consider exploring the following resources:


  • Books: "Currency Trading for Dummies" by Brian Dolan, "Japanese Candlestick Charting Techniques" by Steve Nison, and "Market Wizards" by Jack D. Schwager.
  • Online Courses: Investopedia Academy, Udemy, and Coursera offer a variety of forex trading courses for beginners and advanced traders.
  • Forums and Communities: Join online forums and communities such as Forex Factory, BabyPips and TradingView to connect with other traders, share ideas, and learn from experienced professionals.

 

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06.03.2024
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