Step by Step Guide to Get Started with Forex Trading

Step by Step Guide to Get Started with Forex Trading

Forex trading, also known as currency trading (or FX trading for short) refers to the foreign exchange trading on the market. The currencies are usually traded against one another, such as USD and EUR and forex traders be it bigger players such as corporations and big banks, or simple investors aim to profit off of the fluctuations of the market. Here are step-by-step guides to get you started with forex trading.

What is forex trading?

Forex is short for the foreign exchange market. Forex trading is also known as FX trading in the financial world, also as foreign exchange trading and currency trading, which all can be used interchangeably. Contrary to stocks, which are traded on the stock exchange, the global Forex market is decentralized. Most of these transactions are carried off-exchange (or over the counter). In simpler terms, Forex currencies have no physical location, unlike stock markets or housing markets that are listed on physical public exchanges. Some of the most serious players that operate in the FX market are governments, major corporations, big banks, and hedge funds. These organizations have the means to cause significant forex price swings. Furthermore, they are also referred to as institutional market players. But, there are also additional players involved in the market called the retail crowd which is a diverse group of consumers who want to buy goods from another country, businesses conducting trade abroad, investors, and traders who want to take advantage of the many price fluctuations in the Forex market.

Learn how the currencies are traded

One of the first things you should familiarize yourself with is how the currencies are traded in the Forex market. The way it usually goes down is that currencies are traded against each other as forex pairs, also known as exchange rate pairs, take EUR and USD for example. Most of the currency trading is facilitated, as we’ve previously noted, by big corporations and central banks, but what we didn’t tell you is that central banks are the most important, core element for forex markets. As a currency trader, you will buy or sell currencies to make a profit (obviously). Your losses or profits are the difference between the buy and sell rates of the aforementioned currency pairs you traded. Forex markets exist as sort of spot cash markets, as well as other assists, where they are known as derivatives markets, options, forwards, offer futures, and currency swaps. Traders who are a part of the market usually use Forex to help them in hedging against international currency and changes in interest rate risks. 

Pick the right broker and trading platform

Picking the right broker and trading platform for your specific style and needs will not only guarantee that you’ll have an advantage, but it can also mitigate any losses because risk management can be on a higher level. Furthermore, many beginner traders just get stuck with the first broker that they stumble on and never even think about if it affects their trading outcome. Finding the best brokers around the world can be quite hard, especially finding regulated and trustworthy brokers who allow traders to invest in their currency. As the creators of ForexSuggest.com advise, it’s highly important to consult the experts in the field, and trust their judgment on the list of best brokers. They argue that professional traders who frame these lists have plenty of experience and resources behind them to make a claim on which forex brokers and forex trading platforms are the best fit generally, and which ones would specifically suit you best. 

Find your strategy

Forex trading strategies are usually divided by market-specific variables and time frames. These strategies include trading market movements over several days or several minutes. As a beginner trader, you should do your best to test different forex trading strategies with your forex demo account and see which ones you are most successful at. Furthermore, you might want to try and choose your preferred technical indicators for entry and exit points, as well as to blend aspects from a few different strategies. Some of the most commonly used forex trading strategies are forex scalping, day trading, swing training, and position trading. Position trading involves holding your position over long-term periods and it ignoring short-term price fluctuations. Swing trading forex is best suited for forex traders who prefer a balance between technical analysis and fundamental analysis. The positions are open for a few days, and the aim is to buy at “lowes” and sell at “highs”. Forex day trading is all about predicting daily market movements, and forex scalping refers to the strategy where many short-term trades are held and profit is built based on small, frequent winning trades.

Keep learning

It’s extremely important to never stop learning as a forex trader. The market is constantly changing and evolving and with it come many new platforms, and tools to make trading more successful and ultimately easier. What many don’t realize is that learning forex trading for free is a definite possibility and by many a recommendation. With many expensive courses online on how to learn the simplest tasks, you will be looking at huge losses on top of the trading losses that are hard to miss when you’re first starting in this market. Many experts suggest that a demo account is a life and money saver for new forex traders. A demo account is essentially a real account where you get to place a trade, exchange currencies, and have some sort of a payout. It’s a simulation of real forex trading, only on a “training wheels” account. Many platforms offer these options and some even give you some money for starters to help you practice.

We hope that by now you’ve gotten the bigger picture of what makes up the forex market, how it works, and what it takes to make it. Remember to never stop learning, and to find reputable sources that can guide you towards reputable and trustworthy brokers and trading platforms. Furthermore, don’t forget to pick a good strategy and practice with your demo account until you get the hang of it. Good luck!