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How to Trade Forex with IG?
You don’t need to have taken an economics class to know that one US dollar buys more goods than one AU dollar does.
Of course, that’s because the value of each country’s currency varies. The power of a currency rises and falls on a regular basis, and investors take advantage of fluctuations by trading on the “margins” (difference).
With proper preparation, knowledge, and practice, you can learn how to trade on the forex as well. In this article, we will introduce you to some basic principles of forex trading with IG.
Table of Contents:
- 💸 What is the Forex
- 💸 IG’s Fundamental vs Technical Analysis Tools
- 💸 Step-by-Step Platform Use
- 💸 Forex Strategies
- 💸 FAQs
- 🌞 Conclusion
Glance: IG Group and Forex
Established in 1987, IG Group was founded by a group of German currency traders who dreamed up a platform to help traders invest in the forex.
IG’s first Forex trading platform was launched in 1990. Seven years later, the company decided to sell their software to other brokers and accelerate their growth. In 2000, it was bought by Deutsche Börse AG, a German stock exchange and is today headquartered in Frankfurt, Germany.
IG offers you access into the forex markets. The forex is a very volatile market and fluctuations are not uncommon. Traders who trade on the forex must understand the rate of change and how to appropriate those fluctuations in order to avoid losing money or making serious mistakes.
At a glance:
- The forex market is the largest market in the world. It is a 24-hour marketplace where currency traders can buy and sell currencies 📈 .
- IG’s Forex Trading Platform is based on the same principles as other online trading platforms such as ForexTrade and eToro.
- For example, the platform will allow you to buy and sell assets, manage your portfolio, and view real-time data and historical data 🌐 .
- You can also set up an order book with predefined entries only for specific currency pairs or buy/sell positions based on specific technical indicators such as Bollinger Bands (Boll).
eToro AUS Capital Ltd ACN 612 791 803 AFSL 491139. OTC Derivatives are speculative and leveraged. Capital is at risk. See PDS.
What is the Forex? 🌏
The forex market is the global market that trades currencies. The acronym forex, indeed, stands for ‘foreign exchange’.
You can think of this market as a giant stock market that trades 24 hours a day, 5 days a week. Instead of stocks, it facilitates the exchange of one currency for another. It is the largest, most liquid market in the world with an average daily turnover of AUD$9.91 trillion, last we checked. Currencies are open to traders at all levels, from small individual traders to large financial institutions.
The forex market is decentralized, which means that there is no central exchange where all trading takes place. Instead, currency trading takes place on a network of online brokerage firms and banks. A few common currency pairs (we won’t mention the lack of being able to trade the Russian ruble, due to geopolitical tensions):
- 📊 USD/GBP
- 📊 EUR/USD
- 📊 USD/JPY
- 📊 GBP/USD
- 📊 AUD/USD
- 📊 USD/CHF
Overview: How to Forex Trade with IG
In order to trade on the forex, you will need to open an account with a forex broker, in this case, IG. Once you have an account, you can log in and begin trading with a forex trading platform.
The IG trading platform lets you place buy and sell orders, view real-time market data, and execute trades. There are two main types of trading platforms: web-based and desktop. Web-based trading platforms are accessible from any device with an internet connection.
IG offers all the necessary trading tools, such as economic data, charting, and order management. Desktop trading platforms are installed on your computer and are optimized for trading on a laptop or desktop computer.
Traders using desktop trading platforms often prefer to use technical analysis tools over charting tools used on web-based trading platforms, which we’ll discuss below…
IG’s Fundamental vs Technical Analysis Tools
All investors perform some sort of analysis when they are examining a potential investment. However, not all investors use the same techniques. If you are interested in trading on the forex, you will need to learn how fundamental analysis works.
The best way to understand fundamental analysis is to think of it as predicting the future value of a currency based on the strength of that country’s economy. Investors use economic indicators such as GDP, employment rates, interest rates, and inflation to predict if a country’s currency will rise or fall in value.
To successfully perform fundamental analysis, you need to become well-versed in economic indicators and how they affect currencies. You can easily find economic data on the internet, and most trading platforms offer this data as well.
Step 1: How to Trade Forex with IG – Basic Economics 📉
The first step in fundamental analysis is to understand how the economy works. For this, if you are a trader, you will need to learn how currencies work. A comprehensive forex course will give you a good foundation in forex and associated concepts. For example:
- Market capitalisation: It is the total value of all the securities in a market. The more liquid an asset class is, the more market capitalisation it has.
- Liquidity: On that note, liquid assets such as stocks, bonds, and private equity can be bought and sold at any time without having to wait for market conditions to change before making a purchase or sale. As long as there is enough liquidity in an asset class at any given time, markets will automatically trade according to its price movements instead of waiting for a specific set of factors like supply and demand from investors before trading.
The basic idea of currency is that everyone has a fixed amount of resources and assets to offer one another based on a variety of factors: skills, land, productivity and other measurements of material value. People in different countries have different weighting of their money and the relationships between countries determine the strength of different currencies.
If a country’s currency suddenly loses 50% of its value due to an economic crisis, then so will that portion of a trader’s portfolio overnight. If there is a severe economic downturn or recession in one country, then another could suffer as well.
In order to comprehend when one country is experiencing an economic crisis or recession and what this means for other countries that depend on it, you need to know how currency works and how each currency affects them.
Step 2: How to Trade Forex with IG – Basic Indicators 🎛️
There is so much noise in the markets today that it may be best to focus on the basic technical indicators rather than overcomplicating things. The 7 technical indicators for Forex are mathematical tools that analyze one or more of the following values:
- ✅ Open price (OPEN)
- ✅ High point (HIGH)
- ✅ Low point (LOW)
- ✅ Closing value (CLOSE)
- ✅ Volume
- ✅ Volatility
When trading forex markets, you need to be able to identify different trends or patterns based on technical analysis. You’re not necessarily trading based on an understanding of economic principles, but rather the ebb and flow of the market itself. In other words, it’s pattern recognition.
This approach will help you identify when it is likely that there will be a significant change in the market, which will make your trades more profitable.
When trading forex markets you need to have an understanding of what is going on with each specific indicator and what the market is looking for. If you do not understand the trends behind these indicators, then trading will be very difficult.
This will help you identify when it is likely that there will be a significant change in the market, which will make your trades more profitable. When using technical analysis, it’s perhaps best to use technical analysis because it will help you better understand what is happening with this particular trend and how it should be used in your trading strategy.
IG Forex Technical indicator 1 – Simple Moving Average (SMA):
An SMA is a moving average that tells you how close to the top of a random or moving average you are. It is calculated by taking the mean of all the previous moves and dividing it by the total moves in that direction. The lower the number, the closer to 0.1 (or “1”) and the higher it goes to 0.5 (“2”). A moving average is an important indicator because it tells you how close to zero (0) you are.
IG Forex Technical indicator 2 – The Exponential Moving Average (EMA):
The EMA is a technical indicator that tells you whether the price of an asset – such as a stock or currency – has been going up or down in the past year. However, if you don’t know what to look for, the EMA can be an easy way to get a quick feel for whether something is rising or falling. It’s also useful if you’re following a trend like a stock that’s been trending down in recent months but which has recently trended higher. The EMA is calculated by taking the last 30 trading days’ moving average of all time moving averages and then dividing this by 30. It will tell you how much better (or worse) your stock has performed relative to its last trading day (this is similar to how momentum works).
IG Forex Technical indicator 3 – The Stochastic Oscillator (SO):
The Stochastic Oscillator (SO) is a Moving Average (MA) indicator that measures the volatility of a stock’s price. It is calculated by taking the mean of all previous moves and dividing it by the total moves in that direction.
IG Forex Technical indicator 4 – Relative Strength Index (RSI):
An RSI has two components: mean and standard deviation. The mean tells you how much better or worse a stock performs relative to its peers on an annual basis as well as how often it makes recent moves compared to other months or years prior. When looking at stocks that have strong momentum but are still trading below their highs, but with similar past performance variance, this measure can be used as a way of evaluating whether there should be any influence from short-term factors like market volatility on these trends.
IG Forex Technical indicator 5 – Bollinger Bands (BB):
A Bollinger Band is the technical indicator that measures the volatility of stocks or other financial instruments. The Bollinger bands are highly correlated with the MACD, so if you look at two stocks with similar past histories, you will see that there will be slight differences in how long it takes to reach the same amount of volatility over time.
IG Forex Technical indicator 6 – Support & Resistance Lines:
The Support/Resistance Lines will tell you how strong or weak a stock is relative to its peers on an annual basis. A Support/Resistance Line has two components: mean and standard deviation. The mean tells you how strong or weak a stock is relative to its peers on an annual basis as well as how often it makes recent moves compared to other months or years prior. When looking at stocks that have strong momentum but are still trading below their highs, but with similar past performance variance, this measure can be used as a way of evaluating whether there should be any influence from short-term factors like market volatility on these trends.
Step 3: How to Trade Forex with IG – Geopolitics 💹
Today, it’s impossible to separate financial investments from politics because world events are having such a powerful effect on world economies. This has been happening for some time now but has revved up in the last few years. Geopolitics are now a major factor in the recent downfalls and economic turmoil that has hit the world’s markets.
The world seems to be constantly shaken by global events that affect every country on the planet. Some of these events have included:
Disinformation online: The financial markets have been affected by the internet more than perhaps any other factor. The internet has been used to spread misinformation, especially when it comes to the financial markets.
The Great Financial Crisis of 2008-2009, when the world’s economies were in a state of crisis because of the collapse of Lehman Brothers. It led to a lot of economic depression and economic turmoil that affected every country on earth. This was due to a lot of people buying and selling securities online and not having access to proper information from their banks.
The Bitcoin revolution, which is a virtual currency that has gained popularity amongst people across the globe due to its security features. In order for Bitcoin to be accepted by banks around the world, it needs an address that can be linked back into your bank account as well as your credit or debit card account. This allows you to use it on any transaction you want or need without having any restrictions or fees attached to your money transfer or purchase. Many governments view cryptocurrency as an enormous threat.
Tensions between ‘BRICS nations’ versus the ‘Collective West’, due to the fact that the BRICS nations have a combined population of over 1 billion people and enormous resources, and the collective West has a combined population of over 2.7 billion people but dwindling resources. It is also being speculated by many that these emerging nations might be willing to look at using their financial power to gain strength as well as influence in the world.
Step-by-Step Platform Use, How to Trade Forex on IG
Now onto the practical side of executing trades. Every forex trader needs a forex trading platform. IG’s forex trading platforms can be used for both individual traders and large financial institutions. The basic steps are:
- Selecting a trading currency pair
- Choosing to ‘buy’ or ‘sell’
- Configuring your stops and limits
- Starting your first trade
- Monitoring trades
- Closing trades and taking your profit or loss
Step 1 – Signing up
The first step to start trading on an online forex platform is to register a forex account. This is the easiest way to create an account, but it also requires some preparation. You will need two things: a secure password and an online account with a verified email address. If you do not have an online account, you can sign up for one through your bank or through the website of your broker (in most cases, this is the same as using your bank).
Once registered, you will need to complete various registration processes. Once you have completed all these steps, you can sign up for the Forex Trading Platform by clicking on the “Get started” button at the top of the page.
Step 2 – Selecting a trading currency pair
Perhaps your broker offers over 70 currency pairs – including majors like AUD/USD, to exotics like EUR/HUF. By trading on these pairs, you’re speculating on the rises and falls of your forex pairs either directly, or through spread betting and CFDs.
Be warned that the latter two use leverage, which is another word for debt. This lets you perform a bigger forex trade than you can actually outright afford. Your upfront deposit is smaller (we call this a margin). Both your profits and losses can be much larger than your margin size as they are based on the full position, not just the margin.
Before carrying out a FX pair transaction, you should understand how to perform fundamental analysis and technical analysis on both currencies in your pair. This process should include evaluating how the ‘base’ (the left-hand currency) and ‘quote’ (right) change relative to one other.
Step 3 – Choosing to ‘buy’ or ‘sell’
Now that you’ve landed on a currency pair to trade, it’s time to choose whether to ‘buy’ or ‘sell’, according to your analysis.
It’s prudent to buy a pair if you think the base currency will rise in value relative to the quote. Otherwise, you would only make a profit by selling if the opposite happened. That’s because a currency pair’s value is measured according to many units of the quote currency would be needed to buy one unit of the base currency.
For instance, suppose that value of GBP/USD is 1.45000, it means you’d have to spend $1.45 to buy £1 – which is the same thing as saying the pound has more strength than the USD. (Which is increasingly becoming untrue.)
Step 4 – Configuring your stops and limits
The forex market is notoriously volatile, and this is why it’s key to know your way into your entry and exit points for each trade. There are numerous stops and limits available for mitigating the risk involved in a forex trade:
The normal stops end a position automatically whenever the market moves against your favour to a particular degree. There aren’t any fail safes against slippage.
Guaranteed stops end a position automatically whenever the market moves against your favour to a particular degree. There are fail-safes against slippage; they will always close you at a specific price even if the market races down. You’ll pay a small fee for this pleasure.
Trailing stops happen when positive price changes happen but only trigger when the market then moves against you
Limit orders are important for helping you reach your earnings goal, and your position closes whenever the price reaches your chosen target.
Step 5 – Starting your first trade
Be careful of trading in forex pairs through either spread bets or CFDs. Brokers that offer this will apply leverage to your moves which will amplify how things go.
Step 6 – Monitoring trades
After you’ve opened a position, you can track your FX positions in the ‘open positions’ area of your chosen broker. This lets you set price alerts to get email, SMS or push notifications in the event that a specific target or metric is achieved.
Nonetheless, even with alerts, you need to keep ahead of things. This includes geopolitical happenings, the latest news and other key events that could influence the forex markets.
Step 7 – Closing trades and taking your profit or loss
Now that you’ve reached your goal, or hit a key metric, simply head to the ‘orders’ tab, choose your position and click in order to end it.
The term “forex trading strategy” is often used interchangeably with “forex trading method.” A strategy is a method of trading that incorporates certain technical indicators and exit points.
It is important to note that not all strategies are successful, so you should not just jump into trading with the first strategy you read about. You should test out a few different strategies before settling on one. It is important to choose a strategy that is both profitable and fits your trading style.
Also keep in mind that although a strategy may have worked in the past, it may not work in the future. To find a successful approach, you should perform your own analysis and educate yourself over time. As with stock trading courses, find a resource and study carefully until you’ve mastered things.
Risk management is an extremely important aspect of trading that many traders fail to consider. You need to fully understand how to manage your risk so that you do not lose your trading capital. This might seem like an unnecessary step; after all, how do you know how much you will lose before you even begin trading?
Well, it is important to know how to manage your risk regardless of your financial situation. Every trader will experience losing trades. The key is to know how to cut your losses short and manage the amount of money you lose when a trade goes south. There are several methods to managing risk in trading.
- Stop losses: One method is to set stop losses. A stop loss is a price at which you automatically sell a trade in order to avoid further losses. Another method is to use leverage. Leverage is borrowing money from your broker to increase your investment.
- Diversification: Many people believe that in order for them to make money trading forex markets they need some kind of diversification strategy in place before they start trading them. In order for you to make money trading forex markets, this strategy must be built into your trading strategy so that you can make money without having anything tied up in any specific currency market or market index at all! This is where investing into foreign exchange (FX)
How to Trade Forex with IG — FAQs 📙
Are forex CFDs and spread bets the same thing?
No and yes. Both don’t actually give you direct ownership of currencies, but:
- Forex CFDs are an agreement to the difference in the value of a forex pair according to the time that you opened the CFD, against the value when it’s closed.
- Meanwhile, spread betting does the same thing but measures it according to the price change per point of movement of the currency pair’s value.
There are a few more differences between spread bets and CFDs but both are generally something you should take seriously and study.
What capital do you need to start forex trading?
This depends. If you’re talking leverage like CFDs, you need a small fraction (under 4% of the sum position price). This is due to the fact that you’ll be betting using debt (borrowing money). Nonetheless, despite only needing a fraction to begin trading, your profits and losses will be measured according to the full weighting of the position – which means you need to be sure you have enough to cover the total loss should the market turn against you.
What is needed being forex trading?
An education is the best start. After deciding how much capital you have to allot, you need to work on a strategy based on study and practice perhaps in demo markets – aspects you should address include your goals for trading forex, how much time you can put into it, researching the markets that most suit your strategy and more.
Who should trade forex?
Professionals and risk takers. Though anyone can trade forex not everyone has the personality for trading forex. Great patience is needed to become one of the small per cent of traders who reliably profit. This is gained through experience of trading the markets. Especially with the immense volatility of the forex market today, it’s both a unique opportunity and uncertain.
Can you name a good forex trading strategy?
Not really. Each trading strategy will be according to the individual or organisation and system. Each trader will decide their approach based on many factors including time commitment. For instance, the day trading approach is starting and ending positions inside of a single trading day, and even profiting from tiny intraday changes of currencies.
What currency pairs are the most volatile?
Keep in mind that the forex market is extremely volatile. One currency pair that rises for days might go down the following week. Nevertheless, most of the forex trading volume is centred on a small number of majors such as GBP/USD, AUD/USD, EUR/USD, USD/JPY, and USD/CHF.
As of now, those above pairs are the most traded and most used internationally, which attracts more traders into the fold.
The forex is the largest, most liquid market in the world. It is open to traders at all levels, from small individual traders to large financial institutions. To trade on the forex, you need to open an account with a forex broker and log into a trading platform.
There are two main types of trading platforms: web-based and desktop. Web-based trading platforms are accessible from any device with an internet connection. Desktop trading platforms are installed on your computer and are optimized for trading on a laptop or PC.
To successfully trade on the forex, you need to understand fundamental analysis and how to apply it to predict changes in currency values. You also need to choose a profitable strategy that fits your trading style and manage your risk by setting stop losses and using leverage wisely.
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