Key steps to getting started with Forex trading
Let's summarize the key factors on how to learn forex trading:
Finding a reliable service provider
Forex trading is done through broker companies. These companies come in various shapes and sizes, so the trading experience can be very different depending on which you choose. Great brokers have reasonable fee structure, are well regulated and have great product. Most Forex brokers offer MetaTrader platforms, along with mobile and web trading terminals. What's more, the vast majority of brokers offer free of charge demo accounts. When you are unsure on how to study Forex trading, it's important to pick a broker that provides clients with extensive educational material.
Start trading with the amount you can risk
Demo trading is essential in developing trading skills and strategies. In addition, Demo accounts help trade risk-free and gain confidence. However, there always comes time to deposit real funds. As already mentioned, live trading comes with certain challenges such as increased greed, fear, hope, boredom, etc. Even if you were successful in trading demo, it's unclear whether these factors will affect your trading or not. Therefore, it's recommended to only deposit the amount you can afford to lose.
Choosing a trading software
There are various trading software programs on the market. The most popular ones are MetaTrader platforms. MetaTrader 4 is generally used for trading currencies, whereas MetaTrader 5 is an all-in-one platform. While both may seem outdated, they offer all the necessary tools for technical analysis. The main reason why these platforms are still so popular is that both of them are highly reliable and capable. Your broker might be offering you some other platforms such as cTrader and others. At the end of the day, it's up to you as a trader which one to choose. Your platform of choice should be offering the trading instruments of your interest, be user-friendly and offer reliable execution.
Try new strategies
Every trader is different and has his/her own trading style. Which is why it's essential to try different strategies in order to find out what works for you. There are two ways to test trading strategies. You can either demo trade or backtest before going live. Demo trading uses live data to create trading simulation. Demo trading is similar to live trading, the only difference is that the funds are virtual, and trading psychology is different. When backtesting, the trader compares strategies to historic data and therefore, everything happens much faster.
Forex trading for beginners - FAQ
How do I learn Forex trading step by step?
There are many approaches to how to start trading Forex sustainably. You can learn from the educational material that is widely accessible on the internet, and you can also learn from your own mistakes. The first step in learning how to trade is to learn how trading works, what are the concepts, trading terminology and how to use trading platforms. Afterwards, it's important to learn about trading strategies, traders psychology and risk management.
How do I choose a service provider?
Service providers are typically selected based on taste and preferences. However, most people tend to pay a lot of attention to a company’s license. And rightfully so, well regulated brokers are safe for traders. When selecting a broker, it's also essential to pick the one that offers the assets for trading that you are interested. In addition, trading fees and trading platforms are also critical.
How do I do research?
Researching includes learning about political and economic developments that can influence the markets. Research is done by gathering information. Research takes most time for position traders, swing traders and investors. Intraday traders spend more time on technical. Most brokers offer economic calendars for such purpose.
What software should I pick?
Your software of choice should be easy to understand, easy to use, and have all the necessary features that your trading style needs. In addition, make sure the platform offers the trading instruments that you want to trade. Good trading platforms are usually free and offer demo accounts.
What types of Forex trading software is there?
There are Forex trading platforms that are solely built for FX pairs. And there are multi-asset platforms that offer various asset classes, including Forex, stocks, indices, cryptos, commodities, etc. What's more, most trading platforms come with mobile and web terminal versions as well.
Which currency pairs should I trade?
There are Major, Minor, and Exotic currency pairs. Majors are the most liquid and are the preferred choice by both professional and novice traders. Majors pairs have major world currencies, such as EUR, JPY, GBP, CHF, CAD, etc. coupled with USD. Major pairs have the best spreads and are the most attractive. Minor currencies are currency pairs of major world economies that do not include US Dollar in neither quote nor base currency. Exotic pairs have at least one currency from a developing country in a pair. Typically, exotic pairs have low liquidity, high spreads and most traders avoid trading them.
Why shouldn’t I use leverage?
Leverage is a very useful tool, especially in Forex, where exchange rates change very slowly and not too sharply. Leverage helps traders benefit from even small changes in currency valuation. Without leverage, CFD trading wouldn't be possible. However, it could be extremely dangerous too if overused. Leverage is a double-edged sward that can increase income and similarly increase losses.
What is the best way to learn forex trading?
The best way to learn Forex trading is to dedicate your time and energy. Read, watch and learn everything that you can get your hands on. Unfortunately, there's a lot of low quality information online. The more you learn, the better you'll be at telling the high quality content from the low quality one. Learning how to trade takes time. You should avoid risking more capital than you can afford to lose while still learning. In fact, Demo trading is ideal for beginner traders.
What to learn in Forex trading from the very beginning?
From the very beginning, it's important to learn how to use terminology and trading platforms. Learning terminology will increase the speed of your learning process. In addition, communication with other traders will become easier. Learning how to use a trading platforms, order types and trading indicators is also highly beneficial. After learning about technical details and develop trading strategies that fit your personality, it's essential to work on your psychology.
How to learn to trade Forex, and how long does it take?
Learning how to trade profitably and consistently can be a different journey for every trader. As already mentioned, beginners start with the basics such as terms and trading platforms and advance to developing trading strategies and trader's psychology. Learning period can take a couple of years. Learning any profession also takes time, and trading professionally is no any different. Developing a trading journal can speed up the process, as journals help traders learn from their own mistakes.