Learn Forex Trading: The four time zones are often divided into three forex trading sessions

Every day, many people start trading forex for the first time without having sufficient insight. They are all interested in starting forex trading because they think forex is an easy way to get multiple profits. Maybe, you are one of them.

Unfortunately, most beginners actually experience losses. Why is that? Because they just deposit capital, but don’t know how the forex market works. In fact, any business will only produce results when the perpetrator understands the field in which he is working. Likewise with forex trading . Therefore, every beginner needs to learn forex first.

Professional traders always try to improve their knowledge by reading books, attending seminars, or sharing with fellow traders. How can novice traders expect to make profits straight away without any knowledge!? At least, novice traders must learn forex and get to know the basics first before depositing capital.

What basics do beginner traders need to learn? At a minimum, traders must understand the meaning of forex trading, the benefits and risks, the opening hours of the forex market, how to start forex trading, and how to analyze the market.

What is Forex Trading?

Literally, the term “Forex Trading” means the same as foreign exchange (forex) trading. However, forex trading here is different from exchanging money which is usually done in banks or money changers. Forex trading is done online without involving direct transfer of foreign currency notes.

In the forex market, we trade currencies in pairs. There are three types of currency pairs that traders must know, namely:

  1. Major currency pairs (Major Pairs) , include seven (7) major currencies paired with USD. There are only seven major pairs, namely USD/JPY (US Dollar-Yen), EUR/USD (Euro-US Dollar), GBP/USD (Pound-US Dollar), AUD/USD (Australian Dollar-US Dollar), USD/ CAD (Canadian Dollar-US Dollar), NZD/USD (New Zealand Dollar-US Dollar), and USD/CHF (US Dollar-Swiss Franc).
  2. Cross currency pairs (Cross Pairs) , include the seven major non-USD currencies that are paired with each other. For example, EUR/GBP (Euro-Pound), AUD/JPY (Australian Dollar-Yen), and so on.
  3. Exotic currency pairs include all non-major currencies paired with USD or major currencies. For example USD/TRY (US Dollar-Turkish Lira), USD/IDR (US Dollar-Rupiah), and so on.

The forex market is the largest and most liquid financial market in the world. Daily trading volume reaches more than 5 Trillion US Dollars. Market players include governments, central banks, commercial banks, multinational and export-import companies, financial institutions, as well as individual traders and speculators like us.

The forex market is not located in a specific place, but is over-the-counter (OTC). Foreign exchange buying and selling transactions take place in the global banking network electronically. So, sellers and buyers do not meet face to face.

We can participate in forex trading through a broker. Forex brokers connect traders with global banking networks where these transactions occur. Brokers provide the software traders need to carry out market analysis and send buy-sell orders. Brokers also provide the leverage we need to start trading with low capital, as well as various other superior facilities so that online transactions run smoothly.

What is leverage ? Leverage is the “lever” of the purchasing power of our capital. For example, if we only have capital of 100 US Dollars, while the broker provides leverage of 1:100, then we will be able to make transactions as if we had funds of 10,000 US Dollars. With larger leveraged funds, of course we will be able to buy and sell more foreign exchange too.

Traders do not enjoy all these facilities for free. There are several fees that traders must pay, namely:

  1. Spread : Spread is the difference between the selling rate and the buying rate. Forex trading naturally contains spreads. Brokers can increase (mark up) the spread to make a profit.
  2. Trading commission : This trading fee must be paid by the trader for each transaction volume (lot). Brokers can charge high commissions or make them free.
  3. Swap (rollover) : This is interest that arises because forex trading involves interbank transactions. Brokers can also provide special accounts without swaps (usually called Islamic accounts or Sharia accounts).
  4. Deposit and Withdrawal Fees : Brokers may ask traders to pay a few dollars when depositing or withdrawing funds in a trading account. Brokers can also make it free, if they feel the income from other fee structures is sufficient.

Some of the income from these fees will be used by the broker to pay other parties for their operations, while the remainder will become the broker’s profit.

Benefits and Risks of Forex Trading Business

Advances in financial technology (fintech) and information (IT) have triggered rapid growth in the forex market. Technology allows small traders like us to access the market online with minimal capital. The popularity of the forex trading business is also increasing rapidly because it has several main advantages:

  1. Easy access, can be done by anyone who has a laptop or cellphone and an internet connection.
  2. The initial capital for forex trading is very low, it can start from just 100 US Dollars.
  3. Trading opportunities are endless, as the trading scale of the forex market reaches more than 5 Trillion Dollars per day.
  4. Two-way trading, that is, traders can make a profit when prices rise (buy) or when prices fall (sell).
  5. High liquidity, so traders will always find it easy to buy or sell every currency pair.
  6. Trading costs are low, because many brokers only charge the spread or spread+commission.
  7. Anyone can start forex trading, whether they are high school graduates, students, housewives, employees, whatever their profession.

So, after knowing the series of advantages above, are you interested in starting forex trading immediately? Wait a minute. Every business in this world contains certain risks.

The risks of the forex trading business should not be underestimated. There has been a lot of news about people who suffered big losses because of forex. We need to be aware of these five risks so as not to fall into the same abyss:

  1. Exchange Rate Risk : Foreign exchange rates always change from time to time. Traders will gain profits if they succeed in predicting whether the exchange rate will strengthen or weaken. But, if the prediction is wrong, the trader will experience a loss.
  2. Liquidity Risk : The forex market has an extremely large daily trading volume, so traders can usually find suitable buy/sell order responses quickly. However, there are also certain situations where the market may stall or there are not enough buyers/sellers who will respond to traders’ orders. Such problems are very rare in major pairs, but appear quite often in exotic pairs.
  3. Leverage Risk : After reading the description of the leverage feature above, you may feel that this is a very profitable facility. However, leverage is actually only suitable for moderate use. Traders who use too high leverage will experience difficulty in accumulating profits and controlling their own trading risks.
  4. Transaction Risk : Forex trading is carried out via online platforms which may experience technical problems, such as freezes, requotes, slippage, etc. Brokers usually do their best to avoid such obstacles, but traders still need to be aware of them.
  5. Broker Risk : The role of the broker is very vital in forex trading. If the broker is honest, traders can trade comfortably and safely. But if the broker often acts out and manipulates, it will be very difficult for traders to withdraw profits. Therefore, prospective traders need to choose a broker carefully.

These five risks can actually be overcome from the start. Importantly, traders must carry out the following things:

  1. Choose a forex broker that has an official license (regulated broker) and has a good reputation among traders.
  2. Don’t immediately use all your capital for forex trading. Only use around 2-5 percent of the account balance to open trading positions.
  3. Understand how to use Metatrader or the trading platform that will be used for transactions. Don’t let yourself suffer losses just because of the wrong click.
  4. Practice with a forex trading simulation first on a demo account to understand how to trade and use the platform correctly.
  5. Create a trading plan before starting to open positions. Learn how to create a trading plan with a demo account first if you don’t already know.
  6. Trading on major pairs only, or cross pairs. It’s best to avoid exotic pairs.
  7. Use leverage moderately, or a maximum of 1:100. Avoid leverage that is too high such as 1:500, 1:1000, or greater than that.
  8. Understand that anything can happen in the market. No market analysis is 100% accurate. Even veteran trader George Soros once lost money. So, you must always be alert to anticipate the possibility of wrong predictions by placing Stop Loss (SL) on all trading positions.
  9. If you have mastered trading on a demo account, try learning more about Money Management, then apply it to a real account with small capital. If you fail to make a profit with small capital, then you may also fail when managing large capital.
  10. Use “cold money” as forex trading capital. This cold money is leftover funds that will not be needed in the near future. If you use your house rental budget or other needs for forex trading, the results could actually be fatal. Forex trading is a long process, so you can’t expect instant profits just by walking around.

Finally, forex trading requires a strong psychological mentality. You must be prepared to witness market upheavals that rise and fall quickly, as well as manage the funds in your account so that they don’t quickly run out amidst this turmoil. If you are not mentally strong enough to face it, then forex trading may not be suitable for you.

Forex Market Opening Hours

Have you ever heard people say the forex market is open 24 hours? This does not necessarily mean there is a certain place where forex trading takes place continuously. In fact, forex trading follows the opening hours of banks around the world, alternating from one time zone to the next.

Based on West Indonesia Time (WIB), the following is the order of opening and closing of the forex market based on time zone:

  1. Banks in Australia open at 5am and close at 2pm.
  2. Banks in Asia (Tokyo, Hong Kong, etc.) open at 7 am and close at 4 pm.
  3. Banks in Europe (London, Frankfurt, etc.) open at 1pm and close at 10pm.
  4. Banks in America (New York) open at 8 pm and close at 5 am.

The four time zones are often divided into three forex trading sessions, namely the Asian session (Australia and Asia), the London session (Europe), and the New York session (America) .

Many Indonesian forex traders choose to trade between the London and New York sessions, for several reasons:

  1. The London and New York sessions are the busiest forex trading hours, so many trading opportunities appear.
  2. The fastest movements in forex rates occur in the London and New York sessions, so that trading positions will achieve profit/loss realization more quickly.
  3. The London and New York sessions coincide with the end of employee working hours in Indonesia.

Apart from these reasons, we can actually choose to trade at any time during the forex market opening hours starting from 5 am Monday to 5 am Saturday (WIB).

How to Start Forex Trading

Trading should start by learning forex first. Once you are proficient and master trading on a demo account, then switch to a real account with the following ten (10) easy steps:

  1. Choose a trusted forex broker who has official permission and a good reputation.
  2. Visit the broker’s website, then click the registration or account opening button.
  3. Fill out the account registration form available on the broker’s website.
  4. Once the form is submitted, you will get an email containing your username and password to enter your personal area on the broker’s website.
  5. Enter your personal area by clicking “login” on the broker’s website. In this area, you will be able to continue the data verification process.
  6. Submit verification documents requested by the broker. These documents include: one copy of e-KTP, passport, or driver’s license; one copy of a bank passbook or utility bill containing name and address; as well as other documents required according to applicable regulations.
  7. The broker will review your registration application and documents. If everything meets the requirements, the broker will send you an approval notification via email. The review period by the broker can last between a few minutes to several days, depending on the procedures followed by the broker concerned.
  8. In your personal area, you can continue opening an account and downloading the Metatrader trading platform via the link provided. Metatrader username and password access will also be sent by the broker via email after your account opening is approved.
  9. After downloading Metatrader, you cannot start trading yet. You must first deposit capital into your account. Visit the “Funding” or “Deposit” menu available in the personal area to find out the procedures for depositing capital.
  10. Once the capital has been entered into your account, then you can start forex trading on Metatrader.

The process of starting forex trading can be done completely online. The time required is between a few minutes to a maximum of 2×24 hours. If there are problems or you don’t get a broker notification email for more than a week, immediately contact CS Broker via live chat or telephone. CS Broker will guide and answer all your questions.

How to Analyze the Forex Market

There are many things that influence the rise and fall of foreign exchange rates in the forex market. These things can be grouped into three, namely:

  1. Short Term Influence : interest rates, volatility, market sentiment, and technical factors.
  2. Medium Term Influence : geopolitical risks, economic growth, unemployment data, and government policy.
  3. Long Term Influence : balance of payments, people’s purchasing power, etc.

Forex traders usually only need to analyze the forex market in the short and medium term.

How to? There are four ways to analyze the forex market, namely monitoring price charts, understanding market sentiment, checking the forex calendar, and following world economic news . The following is a complete explanation.

  1. How to Monitor Price Charts

The forex trading platform has a graphic display (chart) that depicts the movement of forex rates from time to time. The graph is also equipped with a number of technical analysis tools in the form of indicators or certain patterns and lines.

Technical indicators are created by experts based on mathematical and statistical principles, so they are quite reliable tools for forex market analysis. Some popular technical indicators that are often used by traders include Moving Averages, Pivot Points, Relative Strength Index (RSI), Stochastic Oscillator, Bollinger Bands, Fibonacci Retracements, and so on. There are also traders who only analyze candlestick charts without any indicators.

Every trader is free to choose which technical analysis tool to use. However, each technical indicator has different rules for how to use it. You should find out how to use the indicators, then practice using them on a demo account. Learn first before applying it to a real account.

  1. How to Understand Market Sentiment

There are many ways to understand market sentiment. Beginner traders usually only understand it after interacting with the market for a long time. However, you can learn the basics first.

Market sentiment is generally divided into two, namely risk-on sentiment and risk-off sentiment. During risk-off sentiment, market players will tend to buy USD, JPY and CHF currencies. Conversely, when sentiment is risk-on, market players will tend to buy AUD, GBP, NZD and CAD currencies.

There are also market players who understand market sentiment in three categories, namely bullish, bearish and sideways (ranging). Bullish sentiment is the market’s tendency to buy with the expectation that prices will continue to increase. Bearish sentiment is the market’s tendency to sell with the expectation that prices will continue to decline. Meanwhile, sideways indicates doubt or market conditions that have not yet decided on a particular direction of movement.

To monitor buy/sell sentiment, traders usually look for trader sentiment indicators as shown below.

The term long indicates a buy transaction, while short is a sell transaction. The graph above shows how many traders tend to sell/buy each currency pair.

  1. Checking the Forex Calendar

The Forex Calendar is a calendar that records the most important and influential scheduled events in the forex market. The events in question include speeches by central bank governors, publication of unemployment data, release of inflation reports, etc.

Every economic data release will be included in the forex calendar along with the impact scale, previous data, current data forecasts (consensus/forecast), and current data (actual). The impact scale is usually indicated by certain colors or symbols that represent three categories: high, medium and low.

Market players will wait for the publication of actual data, then compare it with previous data and forecast figures. If the actual data is better than the forecast, the related currency will strengthen. If the actual data matches expectations or has a low impact, then the currency will not react much. If the actual data is worse than the forecast, the related currency will weaken.

  1. Following World Economic News

The forex calendar includes events from various countries in the world, from the United States and Japan to Indonesia. However, the calendar can only summarize things that are regularly scheduled.

There are many important events that will not be listed in the forex calendar. For example, wars, ministerial press conferences, presidential comments on social media, buying or selling actions of large investors, and so on. Traders can only find out about things like this through economic news.

This is why forex traders need to monitor world economic news. Apart from having to check news related to the United States economy, traders also need to follow developments in the countries whose currencies are usually traded. For example, if you like trading GBP/USD and USD/CAD, then you also need to monitor news from the UK and Canada. This way, you can respond more quickly to market upheavals.

The many ways of analyzing the forex market have given rise to several “schools” among traders. There are traders who focus on technical analysis only (technicalists), there are also traders who focus only on fundamental factors such as the calendar and news (fundamentalists). After learning about these two schools, many beginner traders think it is enough to learn just one method of market analysis. However, that is a mistake.

Each type of market analysis has its own function. Technical analysis functions to find precise buy/sell signals. Meanwhile, fundamental analysis functions to find out the background that causes exchange rate movements to rise/fall. Therefore, the two must be combined so that they support each other.

If a trader only uses technical analysis, he will easily be trapped by the upheaval that often occurs before or after the release of important economic data. Meanwhile, fundamentalist traders who are technically illiterate will definitely be confused about determining buying/selling price levels. Many novice traders have experienced losses because they ignored one of them.

There are so many things you need to learn if you want to start trading forex. Even after having a lot of experience, you will definitely feel that there are still many things you don’t know. Like any business, we need to learn continuously according to developments in order to achieve and maintain success. So, start learning forex with the orientation of consistent profits in the long term, not instant profits. The results will not betray the efforts. Good luck!

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