Forex trading is only learned by practicing, a lot of practicing. In this blog post I will show you how to open a FREE demo-account to practice and learn trading without risking $1.
Also, I will teach a simple strategy, so that you will trade professionally already. Trading like pro, the sooner the better.
At the end of this course I will give you links to the best FREE online Forex trading courses currently online.
Open a demo account
Many brokers offer demo accounts for traders. But not all these are the same.
Many brokers put an expiration date on their demo’s to push clients to real accounts. These demo’s can be used for a limited time only. Whatever how long this time is, it won’t be long enough to learn to trade, so it is recommended to get a demo without expiration date.
A good one is the demo from the Australian broker IC Markets. You only need to have a valid email address to open it, which is good too. I will continue below with this demo.
How to open an IC Markets demo account
1 Go to IC Markets and press the button ‘Try a Free Demo’ in the top of the screen.
2 Fill in the application form that follows. You can use dummy values for the name and telephone number entries, but the email address should be valid.
3 Press the ‘Register’ button. Now you have to fill in some details of the account you wish to open. I use below settings:
4 Press ‘Proceed’ . The broker will send you an email with login details.
Donwload & install MT4 platform
5 Download the trading platform (MT4). Go to Trading Tools in the top of the screen and next to Downloads. On the page that follows click ‘Download MT4‘.
6 Follow the instructions to install the MT4 platform. It’s a quick and easy installation.
Get MT4 ready for trading
7 After installation, open MT4. You will get the opening screen with a pop-up window ‘Open an Account’, like in below image.
8 Select the server name in the ‘Open an Account-window’. The server name can be found in the email with the login details you have received. Press ‘Next‘ to proceed.
9 On the following page, select ‘Existing trade account’ and fill in the Login and Password, both can be found in the email. Press ‘Finished’.
10 Wait a few seconds, then you will hear a welcoming sound, and you are ready to trade. Done!
Congrats, you have opened a demo account. The trading software has been installed as well. Below I will show you how to use it.
Make your first trade
Note: trading will only work when the Forex markets are open, which is from Sunday/Monday to Friday, depending on your timezone. The markets must be open if you want to continue.
Also, you can open an unlimited amount of demo accounts with IC Markets, so no worries if something goes wrong.
1 Maximize a chart by clicking on the square icon in the upper right corner.
2 If the quick trade buttons are not displayed (the big buttons that look like in the image), then press Alt+T to display them. The number in between the buttons is the lot size you are going to trade with. (0.01 = 1 microlot =$1,000, the smallest size possible).
3 Place the trade: Press either BUY or SELL. If a pop-up window with legal stuff shows up, then press OK, and press BUY or SELL again. The order will be executed and the trade is running now.
4 Check the current amount of profit of the running trade. It is displayed in the terminal-window in the bottom-right of the screen (red box in image below).
5 Close the trade after 15 minutes, by pressing the gray cross just next to the profit amount in the terminal-window. Well done! You have traded your first trade!
Hopefully you have made some (demo-)money with it. If not, don’t worry. You were just trading at random.
A simple strategy
Professional traders never trade on the fly. They trade a strategy. Below I will show you how to trade a simple starter strategy.
Strategy name: Bollinger Bands Strategy
Currency pair: EURUSD
Chart timeframe: M15
The strategy’s principle is a very simple one: ‘buy low, sell high’. We want to buy when the price is low, and we want to sell when the price is high.
The Bollinger Bands indicator is a very good indicator to help assess whether the currency is cheap or expensive, and so to buy or to sell.
Prepare the charts
1 Check if there are indicators on the chart.
2 If there are still indicators on it, remove them to get a clean chart: press Ctrl+i, select an indicator and press ‘delete‘.
3 Optional: Change the chart colors to your liking: Press F8.
4 Select the M15-timeframe (circle 1 in the image above).
5 Move the chart to the front (press both buttons indicated with circle 2).
6 Zoom in (place mouse pointer on the horizontal time axis, then press/hold/drag).
7 Re-scale vertically (place mouse pointer on the vertical price axis, then press/hold/drag).
8 Change the chart’s currency pair to EURUSD if the current one is a different one. Go to the Market Watch window and drag and drop the EURUSD symbol onto the chart (as shown in the image above)
9 Attach the Bollinger Band Indicator to the chart. Go to the navigator panel and drag and drop the indicator onto the chart, and press OK in the pop-up window.
10 Attach a Simple Moving Average with Period 50 to the chart. Go the to navigator panel once again and drag and drop the indicator onto the chart. In the pop-up window that follows change Period to 50 (circle 3 in image above), and press OK.
The strategy’s ruleset
1 Wait for the price to touch the lower Bollinger line for the first time, then open a buy order.
2 Next wait for the price to go beyond the upper Bollinger line: then close the buy order again (whether at profit or at loss) and open a sell order right after.
3 If the price touches the lower Bollinger line again, close the sell order again and open a buy order.
4 Repeat this 20 times.
An improved version
‘Buy low and sell high’ is one trading wisdom. Another one is ‘the trend is your friend’, which says that it is always better to trade in the direction of the trend.
We will implement that advice in our strategy. From now on we will trade in the direction of the trend only. As an indicator for trend we will use the simple moving average (period 50).
Also, we will improve the strategy even more by adding fixed profit targets and stop loss orders to it.
The new strategy rule set becomes as follows:
1 Place the sell order only if the trend is downwards (SMA50 line sloping downwards). Place the buy order only if the trend is upwards (SMA50 line is sloping upwards).
2 Add a 10 pip stop loss order to the trades (use the mouse to drag and drop it from the order open price).
3 Add a 20 pips take profit to the trades (use the mouse to drag and drop it from the order open price).
4 Trade a 20 times.
After executing 20 trades how much profit did you make now?
Why a strategy is important
No one, not even the best trader in the world, can be certain about what the price will be the next day, hour or minute. The markets are unpredictable, and so will the profits be by trading them.
On the other hand, what is predictable, at least to a certain degree, is the effect of a strategy
You cannot predict the outcome of a single trade, but you can predict the outcome of a set of 200 trades being executed following a same strategy. This outcome is called the ‘edge‘ of a strategy.
You cannot predict the outcome of a single trade. If a trade has a winning chance of 60%, does not automatically mean that the trade will be a winner. There is also a 40% chance that it will be a loser.
However, if you would trade a set of 100 of the same trades, then a good predication of the outcome can be made. The probable outcome will be that you will win 60 (60%) of the 100 trades, and lose 40 (40%). Your net win will then be 60-40=20 trades (20%). In Forex trading it is called that such a strategy has a profitable edge of 20%.
It can happen that the first 40 trades of this set will all be losers, and the rest winners. The outcome will be a net win of 20%. It can happen that the first 60 trades will be winners and the rest losers. The outcome will be a net win of 20%.
The profitable edge of this strategy does not change, it remains a 20%.
So the outcome can of 20% can be predicted, but that only work if you trade that strategy as strictly as possible. This is meant by consistently trading a strategy.
What is consistently trading?
Let’s have a look at the performance of 2 traders, trader A and trader B.
Trader A has purchased a proven profitable strategy, and A trades it consistently, exactly following the rule set.
Trader A wins a 9% in January, loses -1% in February, loses -1% in March. 2 losing months in a row! Too bad. But in April A does a bit better, and wins 13%. The average profit of A over 4 months becomes a nice 5% monthly.
Trader B trades the same strategy as A.
Trader B wins a 10% profit in January, a 10% in February, and a 20% in March. Trader B is up 40% in 3 months. This is awesome! B’s returns are more than 13% monthly on average, and he is one of the best traders in the world!
But then B starts to lose. And he starts to panic. He is used to 13% monthly and it doesn’t like that he is going to get that in April. B wants to get a 15%, so he ignores the strategy’s ruleset (‘Way too few trades!’) and starts trading at random. Sometimes he wins, but mostly he loses.
End result: B loses -60% in April. The average profit will now drop as a result of that and B ends up in red -5% monthly over 4 months.
What’s the moral of the story? Trader A trusted the strategy and its edge, and kept trading it consistently, despite the 2 months of losing, and so A receives a 5% monthly averaged, as predicted.
B went off the rails, after some losers and he traded off-strategy. Result: not getting that 5% monthly.
This is how edge and trading consistently work..But, trading like that is not as easy as it sounds.
Tip for a starter strategy
Trading is an emotional business, and emotions cause traders to trade off-strategy. If you don’t have a strong enough mindset, you can neglect the strategy’s ruleset, and start trading more randomly. This way the strategy’s edge will never play out, and you your future profits become uncertain.
To trade a strategy consistently and correctly, a strong trading mindset is important, so that you are able to stay above these emotions.
A strategy needs to be learned, but a mindset needs to be build. And this is done by trading itself. A lot of trading.
The more setups a strategy provides, the more trade opportunities there are and the quicker that mindset will be built.
That will bring us to the tip: Better go for a scalping strategy as your first strategy than a 1-trade-per-month-type-of strategy. A strategy with 2-3 setups per day or more is fine.
Free or Paid strategies
There are many free trading strategies you can choose from on the internet. Many of them are crap, but some of them do work, and something even very well.
There are also a lot of paid courses and strategies. Although they may be expensive, they do have valuable benefits over free strategies.
Often paid courses have live strategy demonstration included.
Live strategy demonstration is when the educators demonstrate the strategy on live or recent charts. This can be in the form of live trading rooms, in which the strategy is traded in a live setting, or in the form of videos with trade reviews that are published regularly.
Live strategy demonstration gives a big boost to the learning process. By just watching how a professional trader/educator is trading, taking the winners and especially taking the losers, you will learn to take these winners and losers yourself as well, very quickly.
Keep a trading journal
Professional traders keep a journal, and they write down the details of every trade they take. All for a later review. Journals are important for self-coaching, self-reflection a self-improvement.
Especially in the beginning it is not easy to stick with your strategy. Fear of losing, greed and panic all tempt you to trade ‘off-plan’.
Not sticking with a strategy is the same as not trading a strategy at all, which does not work. Bad trading styles need to be corrected otherwise you will never realize the potential profit of your strategy’s edge.
Before you can correct your own bad trading style, you first need to be aware that you are trading badly. That’s what the journal is for.
But you can also make your own simple journal with spreadsheet software. An example is shown below. It is a created with MS Excel.
Things to put into it are:
- Date of the trade.
- Currency pair.
- If the trade has been executed correctly (per the strategy’s rule set).
- The profit if the trade would have been executed correctly, if no mistake had been made.
- Comments, such as the reasons why the trade was not well executed, etc.
When to go over from ‘demo’ to ‘live’?
The majority of traders lose money. If you start trading with all of your trading money too soon, then it’s probably going to be a very costly business.
On the other hand trading on a demo for a too long is not recommended either. That is because demo-trading is not a good representation for live trading.
Emotions like greed, panic and fear will come much more into play if you are trading live with real money. And on demo you will never learn to deal with these emotions.
So what is the best time to transit from demo live? You can use a rule to determine. For example the 3-consecutive-months-of-profit-rule. This rule means that you only go live after having at least 3 profitable months in a row on demo.
Even then you don’t have to start live trading with your full capital immediately, as there is another phase in between: demo-live trading.
Demo-live trading is live trading with the smallest position sizes, 1 or 2 microlots. Demo-live trading is not meant to make money, but to getting used to the live trading environment.
Get another 3 months of profit on demo-live, and you know that you are ready for going live for real.
Congrats, you managed to reach the end of this lesson! As a bonus I will give you some links to the best FREE online Forex trading courses I can recommend.
The days that you have to pay for good Forex books and courses are over. Now the best courses can be found for free online. Some of them cover Forex trading in a very in-depth way, and it is really amazing that they are free of charge.
The first course is the big and popular BabyPips Course, which teaches Forex trading from the ground up.
It may take a couple of days to go through this course, but it is worth it. It covers the entire spectrum of Forex trading, it is written in an easy and entertaining writing style and it includes quizzes to test your knowledge as well.
The second course I recommend is a free course about technical analysis of price action.
Forex trading is all about this kind of chart analysis, and you need to know all about it if you want to continue with trading.
The most comprehensivet technical analysis that I have come across is Tradimo’s Technical analysis course.
It’s a very big course, and it covers all details of technical analysis. From double tops to Gartley-patterns, you will all find it here. It teaches strategies to trade these pattern as well. It’s a very professionally composed course, and you only need to provide a valid email address to enroll. All free.
After doing this course there is really not much to learn about technical analysis anymore!
Final tip is this blog post: How to win in Forex.