Learn How to Trade Forex and Earn Profit

Forex Trading

Interested in learning how to trade Forex? Learn what it takes to trade in the world’s biggest, most liquid market. Once you master Forex trading, you’ll understand why it’s such a popular market. You’ll discover that you can choose between many different currency pairs – from majors to exotics – and trade 24 hours a day. This forex trading​​ guide covers real-life Forex examples, basic principles, beginner strategies, tips for success and a step-by-step guide to getting started.

 

What is Forex trading?

Forex trading is the process of speculating on currency price movements, with the aim of making a profit. Many currency conversions on the Forex market are for practical use, and not for creating profit. However, traders can speculate on Forex market price movements, with the aim of capitalizing on correctly forecasting these movements.

Step-by-Step Guide to Learn How to Trade Forex

Learning to trade forex can be a tough topic for some beginners, but this guide will help you get started trading Forex. Here’s a to-do list to get you started:

Step 1: Choose a currency pair to trade

We offer more than 80 currency pairs – from majors like GBP/USD, to exotics like HUF/EUR. When you trade with us, you’ll be predicting on these forex pairs rising or falling in value with CFDs. These make use of leverage, which enables you to open a larger forex trade with a small upfront deposit (called margin). However, this means your losses as well as profits can far outweigh your margin amount as they are calculated based on the full position size, not just your margin.

Before choosing an FX pair to trade, you should carry out fundamental analysis and technical analysis on the two currencies in the pair. This means you should assess how the ‘base’ (the currency on the left) and the ‘quote’ (the currency on the right) move in relation to each other.

Step 2: Decide whether to ‘buy’ or ‘sell’

Once you’ve chosen a currency pair to trade, you need to decide whether you want to ‘buy’ or ‘sell’, based on your analysis.

You would buy the pair if you expected the base currency to rise in value against the quote currency. Or, you would sell if you expected it to do the opposite. That’s because a currency pair’s price represents how many of the quote currency you’d have to spend to buy a single unit of the base currency.

For example if the price quoted for GBP/USD is 1.28000, it means you’d have to spend $1.28 to buy £1 – so the pound is stronger than the US dollar.

 

Step 3: Set your stops and limits

The forex market is particularly volatile, which is why it’s important to have a plan to guide the entry and exit points of your trades. There are various stops and limits you can set to manage your risk when trading forex:

Normal stops will close your position automatically if the market moves against you. Note that normal stops do not protect against slippage.

Guaranteed stops will always be closed out at exactly the price you specified – even if the market moves quickly or ‘gaps’. You’ll pay a small premium if a guaranteed stop is triggered.

Trailing stops will follow positive price movements and close your position if the market moves against you.

Limit orders can help you to achieve your profit target, and your position will be closed when the price hits your chosen level.

 

Step 4: Open your first trade

If you want to trade on the value of forex pairs rising or falling with CFDs, why not open an account with us? Once you’ve done that, simply go to our award-winning trading platform,1 search for the forex pair you want to trade, enter your position size and choose ‘buy’ or ‘sell’.

 

Step 5: Monitor your position

Once you’ve opened your position, you can monitor your FX trade in the ‘open positions’ section of the dealing platform. You can also set price alerts to receive email, SMS or push notifications when a specified buy or sell percentage or point is reached. Even with these alerts set, it’s still important to keep up to date with the latest news and political events that could move the forex market.

 

Step 6: Close your trade and reflect

By following your trading plan, exit the market at your forecasted limits. Think about how you performed, so that you can improve after each trade you make. For instance, once you’ve decided it’s time to close your position, simply navigate to the ‘positions’ tab, select your position and click on ‘close’. Alternatively, just make the opposite trade to the one you opened. In other words, if you went long on GBP/USD, go short by an equivalent amount to close the position – assuming you’ve selected the ‘net-off’ option on our platform, rather than ‘force open’.

 

Forex trading examples

When placing trades on the forex market, you are trading the strength of one currency against another. For example, if you go long and ‘buy’ USD/GBP, you are speculating that the US dollar price will increase, relative to the price of the pound. Alternatively, if you go short and ‘sell’ EUR/AUD, you are speculating that the euro will weaken in comparison to the Australian dollar.

Example trades are a useful way to learn the process of forex trading. Our forex trading examples show the opening and closing of a trade position, and how to calculate the accompanied profit associated with the trade.

 

Frequently Asked Questions

 

How much money do I need to start trading forex?

You only need to put down a small deposit (as low as 0.5% of the total position size) when you trade forex with derivatives, because you’ll be trading with leverage. But, while that’s all you need to start trading, remember that profits and losses will be calculated using the full size of the position – so you should ensure that you can cover the downside if the market moves against you.

What do I need to start trading forex?

Once you have established how much capital you have available, you will then need to start preparing the rest of your forex trading plan – this should include what you want to get out of trading forex, the time you are willing to commit to trading, researching which markets you want to trade, your risk management strategy and your trading strategy.

Can anyone trade forex?

Anyone can trade forex if they develop their trading knowledge, build a forex trading strategy and gain experience trading the market. But, the volatility of the forex market is a unique environment that takes time to understand.

What is a good forex trading strategy?

A forex trading strategy should consider the trading style that best suits your goals and time commitments. For example, a day trading strategy involves opening and closing positions within a single trading day, taking advantage of small intraday movements in a currency pair’s price.

What currency pairs move the most?

The forex market is extremely volatile, so a currency pair that moves up one week might go down the next. But, the majority of forex trading volume is concentrated in a handful of forex pairs like EUR/USD, USD/JPY, GBP/USD, AUD/USD and USD/CHF. That’s because these pairs represent some of the most widely-circulated currencies and so they attract the most traders. This results in a greater amount of price movement as the balance between buyers and sellers constantly shifts.

Choose the Best Forex trading platform

When learning how to trade forex, many beginners struggle with the overload of information on trading platforms, and their lack of usability. When trading forex on a chosen online trading platform, it’s worthwhile opening a demo account, which allows you to get accustomed to opening and closing trades, and practising your trading strategy. You can personalise your trading platform based on your preferences.

 

Explore these next

  • Learn more about CFD trading
  • Be aware of the risks associated with forex trading
  • Discover the best platforms to trade forex
  • Forex trading tips for beginners
  • Forex trading strategies

 

 

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