Introduction

Forex Trading is a world filled with unlimited potential that inspires both excitement and intrigue. However, the question for many is: How to Start Trading Forex as a Complete Beginner?

In this article, we will explain how to go from a complete beginner to a profitable Forex Trader.

Understanding the Forex Market

The first step to moving from a complete beginner in the Forex Market to an active trader is understanding what the Forex Market is and how it works.

Simply put, the Forex Market is a global financial market where different currencies are traded.

These currencies are traded in pairs – known as currency pairs, each having a base currency and a quote currency.

The basic premise of Forex Trading is that traders make money when their predictions are correct, and the currency pairs move as expected.

The Forex Market affords the opportunity to trade many different currency pairs, which include major, minor, and exotic currency pairs.

• Major Currency Pairs

These currency pairs are the most commonly traded and are considered the most stable and liquid. These include the US Dollar (USD), British Pound (GBP), and The Euro (EUR).

• Minor Currencies

Minor currencies include some of the major currency pairs, but not the US Dollar. Some examples include GBP/JPY and AUD/CAD.

• Exotic Currencies

These currency pairs include at least one currency from an emerging or smaller economy, such as The Indian Rupee, Mexican Peso, or Russian Ruble.

Beginner traders who are starting their journey need to familiarise themselves with different currency pairs and understand what causes price action. It is recommended to trade the same currency pairs to master their patterns, movements and how they respond to news.

Forex Trading Basics

It’s important for newcomers to the Forex Market to learn the basic concepts of Forex Trading. This includes concepts such as the bid and ask price, spreads, and leverage.

• Bid Price

The bid price is the price at which you can sell the currency pair. In other words, it represents the price the market – or your broker is willing to buy a currency pair for.

• Ask Price

The ask price is the price at which you can buy a currency pair. In other words, it’s the price the market – or your broker is willing to sell a currency pair to you.

• Spread

The spread is the difference between the bid and ask price, which represents the cost of a trade. The narrower the spread, the lower the cost of a trade (excluding commission costs).

• Leverage

Leverage is a powerful tool in Forex Trading that allows traders to control a much larger position than their available capital. For example, 100:1 leverage would allow a trader to control a $100,000 position with just $1,000.

Setting Up Your Trading Account

Once you have a basic understanding of the Forex Market and the fundamental concepts of Forex Trading, the next step is to choose a Forex Trading broker.

An important consideration is to find an account that allows you to create a demo account and begin practicing. This allows you to trade without losing real money.

Once you have opened an account with a Forex Trading broker, you are ready to take your Forex Trading journey to the next level.

Learning Forex Analysis

Before trading the Forex Market with real money, or even before testing a trading strategy using a demo account, beginner traders need to familiarise themselves with both technical and fundamental analysis and how to incorporate these into Forex Trading.

• Technical Analysis.

In summary, technical analysis involves analyzing historical market data to forecast future price movements. It involves studying charts, volume, and prior price action.

• Fundamental Analysis

At its core, fundamental analysis focuses on ‘real world’ events rather than simply analyzing market data. Fundamental analysis will incorporate things such as central bank policy decisions, economic indicators such as unemployment rates, and the political stability of a nation.

Developing a Trading Strategy

Once you have equipped yourself with the basic knowledge of the Forex Market and key Forex Trading concepts and understand how to use technical analysis to find trades, it’s time to begin developing your Forex Trading strategy.

A forex trading strategy should include the following components:

• How Will You Incorporate Fundamental and Technical Analysis?

• What is Your Trade Entry and Exit Criteria for Trades?

• How Will You Manage Risk?

• How Will You Track Your Profit and Loss?

• What Type of Trader will You be? IE: Day Trader / Swing Trader / Position Trader

Having a clearly defined trading plan and strategy is crucial to managing your emotions.

This is especially crucial when transitioning from paper trading to trading with real money, as the mental pressure and stress can be intense.

Practicing with a Demo Account

Once you have a clearly documented Forex Trading plan, it’s time to put it to the test.

The best way to ‘stress test’ your Trading plan is to use a demo account. This allows you to place active trades without losing real money. You can then fine-tune what works and disregard what doesn’t.

Furthermore, you will be able to practically understand how fundamental and technical analysis impact different currency pairs.

Start Slow and Never Stop Learning

Once you are comfortable trading with a demo account, you can begin trading with real money. However, it is essential to start slowly.

The biggest difference between trading using a demo account and a real account is the physiological aspect – the real possibility of losing money.

Therefore, it’s essential to ‘acclimatize’ to live trading and ensure your risk management protocols are in place.

Furthermore, Forex Trading is about continually learning and growing.

Try to take lessons from each trade – even if it is a winning trade. Also, join trading communities for support and knowledge sharing, and make use of any other resources such as books, online courses, and forums to continue your Forex Trading journey and development.

Conclusion

The journey from complete beginner to consistently profitable trader is an exciting one. However, it can be a rocky road. It’s highly advisable to equip yourself with the right knowledge and tools before embarking on the journey.

Furthermore, take your time to develop a trading strategy that works for you and fits into your lifestyle.

Practice and ‘stress test’ your trading plan thoroughly using a demo account first.

When you eventually risk real money in a live account, don’t underestimate the psychological impact of this, and start small. Lastly, adopt a mindset of continual learning and improvement.

By doing these things, you will easily be able to start trading Forex as a complete beginner and eventually master the art of trading.