Learning to trade forex can be a tough topic for beginners, but this article will help you get started trading forex. 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.
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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 capitalising on correctly forecasting these movements.
For a more detailed definition of forex, visit our page on 'what is forex'.
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.
As a forex trading beginner, it’s important to understand the basics of the forex market. These fundamentals will help your understanding of the key aspects of the foreign exchange market and ultimately help you to make informed decisions when currency trading.
Forex, foreign exchange, or simply FX, is the marketplace where companies, banks, individuals and governments exchange currencies. It’s the most actively traded market in the world, with over $5 trillion traded on average per day. When trading currencies on the foreign exchange market, currency pairs are often split into major, minor and exotic (or emerging) currency pairs.
The US dollar is considered the most popular currency in the world, and constitutes around 60% of all central bank foreign exchange reserves. So it’s no surprise the US dollar is evident in many of the ‘majors’ (major currency pairs), which make up 75% of all forex market trades. As a beginner, it may be wise to trade the majors, as they’re known to be the most liquid and least volatile of the currency pairs.
We offer trading on over 300 FX pairs through both spot prices and forward contracts.
When you trade forex with a spread betting or CFD trading account, you trade with leverage. This means you only need to put up a portion of the full trade value to open a position, known as trading on margin. However, your exposure in the market will be based on the position's full trade value. It’s important to understand that both profits and losses are magnified when trading on leverage. Find out more about leverage in forex here.
When trading forex with us, a holding cost is applied which is either credited or debited to your account depending on the direction you’re trading, and the applicable holding rate. Holding costs are evident when you hold a position open past the end of each trading day (5pm EST). Generally, when you hold a buy position, a holding cost is credited to your account. If you hold a sell position, the holding cost is debited from your account. Find out more about CFD holding costs.
Forex trading strategies are usually differentiated by timeframe and market-specific variables. Strategies include trading market movements in minutes, or over several days. As a beginner you can test different forex strategies with a forex demo account and measure their relative success rate and suitability. You may also wish to try out and choose your preferred technical indicators for entry and exit points, and blend different aspects from several strategies. Some of the most common forex strategies include:
To find out more about the types of strategies you can adopt when trading forex as a beginner, visit our forex trading strategies guide.
You can trade forex via a spread betting or CFD trading account via desktop or mobile devices. Besides forex, you can access to thousands of financial instruments, including indices, cryptocurrencies, commodities, shares, ETFs and treasuries. Learn about our range of markets.
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 our 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 our trading platform based on your preferences.
Whatever your level of trading experience, it’s crucial to have access to your open positions. With our award-winning mobile trading app, you can access all of your positions, open and close trades with full order ticketing, use our fully functional charting software, and access many more features.
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Once you’ve understood the basics of forex, try putting your new-found knowledge into practice with a demo account below. You can test forex strategies and tips, and start to create a trading plan to follow. Once you’re comfortable with a strategy using the demo account, including managing your risk, and are familiar with the trading platform, you can open a live account to trade on forex for real.