What is the best way to start forex?

Studying and learning about forex-handel can be confusing and the many terms highly complex, not to mention the huge size of the forex market with its endless opportunities and risks. This can be both exciting and overwhelming.

Starting out in forex trading requires traders to have a good grasp of currency dynamics so they can speculate with confidence rather than make random market transactions.

Understanding the various factors that move currencies, from global economic events to geopolitics, market sentiment and macroeconomic indicators can also be quite stressful for beginners. Knowing where to start and what to learn step by step can be very helpful as many traders make the mistake of jumping right in and incurring unnecessary losses. 

Our article hopes to provide traders with the basic information to start their forex trading journey. The introduction provides the basics about forex trading while explaining the different markets before presenting an easy start-up plan.

What is forex trading?

Brokerages around the world handle foreign exchange trading which includes buying and selling currencies in global markets. Currency exchange involves buying and selling currencies in pairs such as EUR/USD, where euros are traded against US dollars. The value of these currencies can change due to central bank interest rate decisions, macroeconomic releases from the two countries or global and geopolitical events.  

Key points about forex trading:

Decentralised market

The forex trading market operates in an over-the-counter (OTC) system without any central authority. The parties involved execute transactions through electronic means worldwide.

Market hours

The forex market is open 24 hours daily five days a week, starting with the Asian trading sessions on Monday and ending with the New York markets on Friday.

Common currencies

Among the most traded currencies are the US dollar (USD), Euro (EUR), Japanese yen (JPY), and British pound (GBP) which fall under the category of major currency pairs.

Types of forex markets

The spot market

The simplest and most popular kind of forex trading is the spot market. Based on the current market price, currencies are bought and sold here for instant delivery. Because transactions are completed quickly—typically within two business days—it is a favourite among traders who want results right away.

The forward market

In the forward market, traders commit to purchase or sell currencies at a predetermined price that is decided today to be delivered in the future. Usually, this kind of market is used to protect against unpredictable price swings. Forward market contracts are tailored to each party, enabling companies to efficiently manage currency risk.

Futures market

With standardised contracts that are traded on regulated exchanges, the futures market is comparable to the forward market. In contrast to the forward market, these contracts offer a more structured environment by locking in the price of a currency at a specific future date.

Options market

The options market gives traders the option—but not the responsibility—to purchase or sell currencies before a given date at a given price. More seasoned traders frequently utilise this market’s flexibility to control possible risks while maintaining an open range of options.

A step-by-step guide to trade forex as a beginner

Select a trustworthy forex broker

Choose a popular and well-respected broker that has a user-friendly platform and offers a variety of educational materials to help you get started. Make sure the available spreads, fees, and currency pairs fit your trading objectives.

Create and open a trading account

You must open a trading account after selecting a broker. The majority of brokers provide a variety of account types based on your initial investment and level of experience. It’s best for beginners to begin with a demo account, which lets you practise trading without having to risk real money.

Understand the fundamentals of forex

It’s important to grasp the fundamentals analysis before you begin trading. Learn the fundamental terms used in forex, the workings of the market, and the variables that affect currency values. You will gain a better understanding of the market if you comprehend ideas like pips, spreads, leverage, and margins.

Create a trading strategy for forex

Success in forex requires a well-thought-out forex trading strategy. Your preferred trading strategies, risk tolerance and financial objectives should all be included in this plan. Even when your emotions are running high, stay true to your plan and decide how much you are willing to risk on each trade.

Select your currency pairs

It’s a good idea for novices to begin with major currency pairs like EUR/USD or GBP/USD. These pairs typically have lower spreads and are more liquid, making it simpler to buy and sell them quickly. To prevent overloading yourself, start by concentrating on a small number of pairs.

Conduct market analysis

This includes both technical analysis, which forecasts price movements using charts and indicators, and fundamental analysis, which examines news events and economic factors that may have an impact on currency values. You can get a more thorough understanding of the market by combining the two forms of analysis.

STARTEN MET HANDELEN in forex

When you’re prepared, begin making trades using your trading strategy and analysis. Depending on your expectations for the currency pair’s price movement, choose to buy (go long) or sell (go short). To control risk and lock in profits, use limit orders, stop-loss orders, and take-profit orders.

Keep an eye on your trades

It’s critical to keep a close eye on your trades after they go live. Because markets can be erratic, be ready to adjust as needed. Keep up with the most recent developments in the market and be prepared to modify your plan of action should the circumstances change.

Learn from past mistakes or successes

Spend some time analysing the results of a trade after you close it. Examine your strengths and areas for improvement. Maintaining a trading journal can help you monitor your development and advance as a beginner.

Leverage (Hefboom)

Another thing to think about is leverage, which enables you to manage bigger positions with less money. For example, a $1,000 investment could control $50,000 in currency with 50:1 leverage. Leverage, however, also raises risk, so as a beginner, it’s best to stay away from it, or use it wisely, starting with very little.

It’s also best to start with money you can afford to lose. Beginners should use micro accounts, which let you begin trading with as little as $100. Your overall trading budget may be impacted by extra expenses such as spreads, commissions, and swap fees for holding positions overnight.

Forex strategies for beginners

Trend trading

Particularly for beginners, this is one of the most straightforward and widely used strategies in forex trading. It entails determining the market’s direction and trading in line with it. In order to open positions that follow a trend, traders search for upward (bullish) or downward (bearish) trends.

For instance, a trend trader would purchase the EUR/USD if the exchange rate is continuously rising in anticipation of additional upward movement.

Breakout trading in forex

Entering the market when a currency pair breaks out of a predetermined range or pattern, like a triangle or horizontal channel, is the main goal of breakout trading. Early detection of a new trend is the goal. Although this approach can be very profitable and necessitates accurate timing, it also carries a higher risk in the event that the breakout is a false signal.

Range trading

In range trading, a trader finds price points known as support and resistance levels where a currency pair frequently oscillates between a high and a low point. The objective is to sell at the resistance level (the highest price) and purchase at the support level (the lowest price). When there are no notable price breakouts and the market is stable, this strategy performs best.

Scalping

Scalping is a short-term trading strategy used by traders who hope to make money quickly from slight price fluctuations. Minutes or even seconds are spent in a position. Scalping can be very intense and attention-demanding because of the high frequency of trades. Beginners are advised to begin slowly before attempting this technique.

Swing trading

Swing trading lies in the middle of long-term investing and day trading. Traders are able to profit from medium-term price movements because positions are held for a few days to weeks. This method looks for possible market swings by combining technical and fundamental analysis.

Position trading

Positiehandel using this long-term strategy may hold positions for weeks, months, or even years. These traders usually steer clear of daily market swings in favour of long-term trends. This approach is better suited for novices with a long-term focus because it calls for patience and a thorough comprehension of market fundamentals.

Ready to get started?

If you are ready to get started, then learning the fundamentals is crucial, including the various markets, the most traded pairs, and some of the most common trading strategies.

It’s a good idea to start small or to trade on a demo account without risking any real money. You can determine how to move forward and what your long-term objectives are once you have gained some experience and feel more secure. Regardless of where you are in your journey, it is critical to continue learning as you go along and to remember that patience and discipline are key components of forex trading.

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.