Educational

Forex Trading: A Guide for Beginners

Forex trading for starters can be particularly hard. This is mostly because of unrealistic expectations that are common among beginners. What you need to know is that currency trading is by no means a get-rich-quick scheme. This article is our ultimate guide to Forex trading for beginners.

FOREX TRADING word and hand of man holding a pen.

To help everyone who has an interest in becoming a Forex trader who have put together a series of guides that will walk you through the whole process. You maybe now have a basic understanding of how currency exchange rates can and do fluctuate however the way in which you are going to be able to profit from being a Forex trader will differ completely from how you may think you may be trading currencies!

What is Forex?

Basically, the foreign exchange refers to the worldwide, over-the-counter market (OTC) where banks, businesses, governments, investors and traders come to exchange and risk on, buy and sell world currencies. The Forex exchange is also known as the Fx market, Currency market, Foreign exchange currency market or Foreign currency market.

Forex Trading

Trading is conducted over the ‘interbank market’, an online channel through which currencies are traded 24 hours a day, five days a week. Forex is one of the biggest trading markets, with a worldwide daily turnover estimated to exceed US$5 trillion.

See also: The Basics of Forex Trading

Forex Market

Rather than you being forced to buy one currency and then hold onto that currency until its value moves and then having to sell on that currency and then exchange it back to your original currency, the way the online and mobile Forex trading environments who is totally different.

You are simply faced with having to make a prediction in regards to the way that two different currencies when paired up together will move.

For instance, the EURUSD currency pair measures the value of the Euro against the US dollar. When the value of the pair increases, this means the value of the Euro has increased versus the value of the US dollar. When the value of the pair decreases, this means the value of the US dollar has increased (or the value of the Euro has decreased).

By trading Forex and CFDs, traders can make a profit off of these currency movements.

See also: Forex Definition and Basic Terms

Currencies buttons closeup.

Understanding Currency Pairs

All transactions made on the forex market involve the simultaneous buying and selling of two currencies. These are called ‘currency pairs’, and include a base currency and a quote currency.

See also: Best Currency Pairs to Trade

Why is the Forex market so popular?

Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen. Here’s a quick list of skills you will need to reach your goals in the Forex market:

Ability – to take a loss without becoming emotional

Confidence – to believe in yourself and your trading strategy, and to have no fear

Dedication – to becoming the best Forex trader you can be

Discipline – to stay calm and unemotional in a realm of constant temptation (the market)

Flexibility – to trade changing market conditions successfully

Focus – to stay focused on your trading plan and to not lost off course

Logic – to look at the market from an objective and straight forward perspective

Organization – to forge and strengthen positive trading habits

Patience – to wait for only the highest-probability trading strategies according to your plan

Realism – to not think you are going to get rich fast and understand the reality of the market and trading

Savvy – to take advantage of your trading edge when it rises and be aware of what is happening in the market at all times

Self-control – to not over-trade and over-leverage your trading account

As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is important here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast.

Jargon word.

Trades & Key Terminology

The Forex market comes with its very own set of terms and jargon. So, before you go any deeper into learning how to trade the Fx market, it’s significant to know them in order to properly understand what is going on. There so many Forex terminologies that you will encounter on your trading journey.

See also: Forex Definition and Basic Terms

What Currency Pairings Should I Select?

Once you have found an ideal Forex Broker that is going to offer you the type of account and deposit options then you will of course need to decide just which currency pairing that you pair up together and trade against.

This is probably going to be the most significant choice you might as a Forex Broker and this guide is going to give you a few ideas and pointers in regards to just which currency pairings you do decide to trade against each other, as the profits are always going to be there if you make the right decisions.

Trading Strategies on two adjacent pale blue buttons

Forex Trading Strategies

Much like when you are investing in anything, you will always need to have in place some type of trading strategy. It can be way too easy for traders to simply guess which parings to use and also the amount they should place one each trade and that is when things can go pear shaped when trading Forex.

With that in mind please do take a look through our Forex trading strategies guides which will show you how to put into place a perfect trading strategy based on several unique aspects, including budget, risk and experience.

See also: Forex Trading Strategies

Forex Trading Tools

At the same time as you can make some very large and instant profits when you are trading Forex online, the way in which you are going to be able to make ongoing and continued profits is by you making use of some of the many different trading tools that you will have free access to at any of our featured Forex Brokers websites and via their trading platforms.

You will maybe surprise at some of those Forex trading tools and as such please do ensure this specific guide is one you pay careful attention to, as you will always want as much help in spotting potentially profitable trades as is possible.

See also: What You Need to Know About Online Brokers 

Risk concept in business presented by crossword.

Forex Trading Risks

Trading currencies can be risky and complex. The interbank market has variable degrees of regulation, and forex instruments are not standardized. In some parts of the world, forex trading is almost totally unregulated.

See also: 9 Forex Trading Risks You Need to Consider

What Are the Benefits of Forex Trading?

There are a number of reasons why people choose to begin day trading. Several of these reasons might include the potential to earn extra money on the side from the comfort of their own home, the chance to learn a new skill in their own time, or even the dream of achieving financial freedom, and having more control over their financial future. When it comes to Forex specifically though, there are a number of profits that make this financial instrument a very enticing one to trade.

Pros and Challenges of Trading Forex

Pro: The forex markets are the biggest in terms of daily trading volume in the world and therefore offer the most liquidity. This makes it easy to enter and exit a position in any of the major currencies within a fraction of a second for a small spread in most market conditions.

Challenge: Banks, brokers and dealers in the forex markets enable a high amount of leverage, which means that traders can control large positions with relatively little money of their own. Leverage in the range of 100:1 is a high ratio but not uncommon in forex. A trader must understand the use of leverage and the risks that leverage introduces in an account. Extreme amounts of leverage have led to many dealers becoming insolvent unexpectedly.

See also: How to Avoid Losing Money in Forex Trading

Forex Trader Bonuses and Promotions

The final guide that will hopefully help you become a much more experience and hopefully profitable Forex trader is our guide to Forex trader bonuses and promotions.

You are always going to be showered with a range of different promotional offers and bonuses not matter at which Forex Brokers you decide to sign up to and as such to make sense of them all and to discover whether they are offering you true value we would suggest you use this specific trading guide as we will explain which bonuses and promotions are worth using and which ones are not.

Conclusion

For traders – particularly those with limited funds – day trading or swing trading in small amounts is easier in the forex market than other markets. For those with longer-term horizons and larger funds, long-term fundamentals-based trading or a carry trade can be profitable. A focus on understanding the macroeconomic fundamentals driving currency values and experience with technical analysis will help new forex traders to become more profitable.

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