Forex trading hero
More than 700 thousand people, just like you, are using this app to learn the basics and secrets of finance and trading.
Traditionally, learning just the basics of trading takes months of studying piles of hard-to-understand theory books. Instead, we wanted to offer something that will teach you the essentials 10X faster.
You can save a couple of months and hundreds of dollars it would take to go through countless trading books and courses. We have done the work for you and distilled the most valuable information, and incorporated it into this app.
Our aim in developing this app was to make it the resource that would boost your skills in the most engaging way possible without sacrificing effectiveness.
We looked into the research, and studies show that gamification elements help to learn a subject in less time than traditional approaches ( Majuri, Koivisto, & Hamari, 2019).
Students who take a moment to pause and think about their learning (known as metacognition) tend to perform better and retain more information.
For best results, we recommend starting with this School section and then gradually incorporating the interactive Quiz and Trend Predictor sections, which are designed to activate this metacognition effect.
Next up is a short story about a businessman who lost a lot of money because he didn’t know one critical rule of the forex market.
What was this important rule?
Read on!
How Erik Failed
Let me tell you a real story about a forex failure.
I met a guy at a birthday party who told me about his bitter experience with Swiss francs. I guess he must have drunk a few glasses of wine, or he wouldn't have opened up about it. It was a humbling experience for him, as he believed himself to be proficient in finance.
The guy's name is Erik, and he has a successful seafood production company in Germany.
It all started when he took a loan worth 1.5 million euros for a new production facility. He took the loan in Swiss francs from a Swiss bank because they offered low interest rates, and he believed that Swiss banks are the most stable in the world.
Unfortunately, not long after receiving the credit, the Swiss franc catapulted by 30% due to the Swiss National Bank's decision to remove the cap on the franc's value against the euro.
Because Erik's income was in euros, his debt to the Swiss bank increased from €1.5 million to €1.95 million in a single day.
Pretty painful, right?
And it was not just him. Hundreds of businesses were significantly impacted by that single event.
Could Erik have foreseen such a scenario?
Yes - if he knew about the intrinsic upward pressure on the Swiss franc and understood how to interpret the financial news about the struggles of the Swiss National Bank to keep the franc artificially down.
Many traders who understood these principles and followed the markets made a fortune from this event.
Why did I share this story with you?
Because after carefully studying with this app, you will learn such principles, and you'll be able to detect profitable opportunities and threats as they form.
As you see, mastering the fundamental drivers of currency prices is essential not only for making successful trades but also for every business person.
So let's start and enjoy the ride
How to Become a Good Trader
Trading is not a get-rich-quick scheme.
If you are looking for something that will make you rich quickly, then you should NOT even think about trading.
To become a decent trader, you need to master fundamental analysis, technical analysis, and risk management. It usually takes years.
Also, you need to learn how to handle the psychological aspects of having painful losses... regularly.
Paul Tudor Jones, one of the most successful traders, put it simply:
“You have to be able to handle getting your butt kicked. No matter how you cut it, there are enormous emotional ups and downs involved."
Paul Tudor Jones
But here's the good news.
You don't need to be right 100% of the time when trading.
Do the best traders win 80% of their trades?
Not even close. Even a professional trading strategy may, in fact, suffer a 5-trade losing streak, or worse, at some point.
The difference between successful and unsuccessful traders is that successful ones win more on their winning trades than they lose on their losing trades.
Trading success does NOT depend on just being right more than 50% of the time. Success depends on controlling and cutting the losses quickly AND letting the profitable trades run their course.
If you follow smart money management rules, you can set up your target profits and stop-loss orders on every trade so that your potential profit is higher than the risk.
Smart traders always place a stop-loss order when opening a trade. That way, they don't risk more than they can afford to lose.
Notice that the potential reward is 2 times bigger than the maximum potential risk if the trade goes against them.
Many traders think that an ideal risk/reward ratio is 1:3. A risk/reward ratio of 1:3 means that a trader is ready to risk with $1 for the prospect of earning $3.
Seasoned traders mostly decide on and set their target profits and emergency stops before they enter a trade.
As our old friend Paul Tudor Jones (trader & hedge fund manager worth ~$7 billion) said:
"The most important rule in trading is: Play great defense, not great offense."
Some traders win on less than half their trades, but because their winning trades are 2-3 times bigger than their losing trades, they can still stay above break-even.
How much money do you need to start trading?
There are four recommended steps before starting to trade with serious money:
- Learning from books, courses, and apps like Forex Hero.
- Practicing trading with a simulator game.
- Trading in a demo account.
- Opening a real account and trading with small amounts.
Let's take a closer look at these steps.
1. Learning from books, courses & apps
Apps like Forex Hero (the one you're using now) and Three Investeers are great for learning the basics quicker, thanks to the interactive lessons grounded in learning science and the fact that we have distilled dozens of books into bite-sized snippets in these apps.
However, it's also necessary to invest some money and read as many of the best books about financial markets and trading as you can.
You'll find a curated selection of the best trading books in the final chapters of the school.
2. First steps with a simulator game
As you begin your trading journey, we suggest using a simulator game to practice the very basics in a safe environment. This will complement your reading and learning through our app.
A good trading simulator game allows you to dip your toes in trading without risking a penny.
Unlike regular paper trading accounts, the best trading simulator games are beginner friendly and let you learn and compete together with other traders.
Starting with a demo account at the very beginning can be overwhelming for beginners. That's why a simulator with simplified functionality is a good first step.
In a simulator game, you'll receive $100,000 of virtual game money, and you can buy and sell forex, stocks, crypto, oil, and other assets at real-time prices.
✅ Pros: the best part about such a simulator game is that you can learn the ropes without any risk, and you are not doing it alone. Instead, you can compete against other traders in weekly leaderboards and occasionally win Amazon gift cards as a motivation booster.
❌ Cons: trading simulator games offer a simplified functionality so that it's easier to learn the basics of trading. As a result, they don't have all the advanced features like trailing stops, limit orders, etc. You'll need to eventually practice with a demo account to get used to a full-fledged trading platform.
3. Practicing in a demo account
The next step after a trading simulator game is a demo account with a broker, where you can learn how to use an advanced trading platform without depositing real money.
All the brokers in our Top Broker's section also provide demo accounts.
Compared with a simulator game, demo accounts are usually slightly more complicated as they have a wider set of features to suit more experienced traders.
✅ Pros: demo accounts are great for getting used to a real trading platform and testing various strategies without any risk.
❌ Cons: if you are doing great in a trading simulator, don't expect to get identical results immediately when you open a real trading account. Trading with real money involves different psychology, so your performance and actions will differ. Also, order execution in a real account is different, as demo accounts get instantaneous execution, while in real life, there can often be delays, which also influence profitability.
Main takeaway
Trading with a simulator game and/or a demo account is a crucial part of the learning process. Even professional trading firms train their traders using simulators.
Richard Bargh is one of the most successful traders of our time, and he managed to achieve a return of an astounding 280% per year for more than six years in a row.
Here's what he says about his learning process at a big trading firm at the beginning of his career:
"Typically, trainees spent the first six months on a simulator. The trading firm monitored your profit/loss. They wanted to see that you were consistent before they let you trade with real money. The first two weeks were an intensive training course. They taught us how to use the trading software. They also taught us about fundamentals, such as understanding how critical central banks were to moving the markets."
4. Opening a real account and trading with small amounts
Simulators are great, but trading only with virtual money can give you a false sense of your skills.
Trading with small amounts of money is critical for getting the experience needed to trade significant amounts of money. Before risking bigger amounts of money, you need to trade with an amount that you can afford to lose to undergo human errors, witness the effects of brokerage costs, spread widening on post-earnings open, slippages in turnaround & slippages that stop you out ahead of your stop-loss order, etc.
Thus, after getting consistent results in a simulator, it is recommended to open a real account and start trading with small amounts that won't break your bank in case it goes wrong.
Most brokers allow opening real accounts with $100 - $250.
As you progress, you can gradually increase your account and trade sizes.
But keep in mind that the average daily movements in currency pairs are around 1%-3%, so obviously, you won't make very significant gains with $100 in your account.
The optimal deposit amount depends on how much you are willing to risk. An optimal starting capital is usually around $500 - $1,000.
The account size threshold that separates beginner traders from more advanced ones is $25,000. The $25,000 limit is the average industry minimum for active day traders.
Most brokers don't allow more than three trades in a five-day period for accounts with less than this limit.
Reaching this $25k limit also enables traders to use higher leverages.
How much money can you make from trading?
Before you start dreaming about any potential gains, it's important to remember that, on average, more than 80% of traders lose their money.
Furthermore, you should understand a popular mistake that most beginners make.
Many beginner traders try to get rich from one grand trade or a few lucky trades.
But that's not how trading works. And that's one of the reasons why the majority of beginner traders lose their money.
A more realistic daily gain goal is around 1% of your account size.
So, if you put $1,000 in your account, you could aim to gain around $10 per day.
If you have a $10,000 account, then you could try to aim for a profit of $100 per day.
... and so on.
Remember that these are realistic numbers only for traders who know what they're doing.
Also, remember that if you make multiple trades per day, a big part of your profits might get eaten by the spread commissions.
Thus it's very important to choose a broker with low spreads. According to the latest comparisons, one of the regulated brokers with the lowest spreads in the USA and other countries is IG trading. They offer up to 20% lower spreads on EUR/USD vs other top USA brokers like Forex.com, Oanda, or TDAmeritrade.
Hmm.... $10 profit per day with a $1,000 investment?
You might be thinking that it's not much.
Actually, it's a LOT if you understand the power of COMPOUND INTEREST.
The secret formula to trading success
If there is a secret formula to trading (besides learning and practicing hard), it's this:
SUCCESS = COMPOUND INTEREST + DISCIPLINE.
1% daily earnings might sound small at first, but it adds up over time if you keep compounding the profits and growing your account.
For example, let's imagine that you deposit $1,000 in your account.
As you can see in the visualization below, 1% daily compound interest from $1,000 would result in total earnings of $12,290.99 in one year.
Of course, this is just to illustrate the idea of compound interest. You would have to trade consistently every working day to achieve such a result, which is not very realistic for most people.
But you can always increase your account size if you're doing good and also go full-time into trading, so it's not impossible to reach and even beat this hypothetical target.
Theoretically, if you'd start with $30k, then the 1% daily compound interest could result in total earnings of more than $368k in a year. However, if you are expecting much bigger and faster gains, you will put too much in a single trade and most likely quickly blow your account.
Even if you traded every day, aiming for 1% daily will never go smoothly, of course. You’ll have +3% days and -2% days, etc.
But! This approach provides a more structured and sustainable perspective to trading.
It also gives you a target to strive for.
"Compound interest is the eighth wonder of the world. He who understands it - earns it.
He who doesn't - pays it."
Albert Einstein
Intermediate traders often make bigger gains at the beginning of a trading session when the markets are more active and then lose a big part or all their profits later in the day due to lower trading volume or overtrading.
Best traders try to hit their daily goal and then shut down their computers and go outside to clear their minds and reset for the next day.
