Beginners Guide to Start Trading Forex Today and Become a Pro Tomorrow

The journey of a thousand miles is said to begin with a step. And today, you might just be kick starting your Forex trading journey even as a complete novice.

Today, we will be starting you up on the necessary basics of Forex trading, some things you need to know about Forex and some Forex terminologies as a beginner and/or Forex enthusiast.

Forex Trading stands for Foreign Exchange Trading or the Currency Exchange Market, and it sometimes simply abbreviated as FX.

Long before now, Forex trading was left out solely for International banks, and government regulations in most countries prevented individuals from taking part in Forex trading.

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But now, things have changed and individuals with the required knowledge can now trade Forex on their own after being decentralized.

Forex in a nut shell has to do with buying and selling of foreign currencies.

A typical example of Forex trading or traders are those Bureau De Change personnel out there that you do exchange your local currency to a foreign currency with or from one foreign currency to another. You can refer to them as offline Forex traders.

But these days, when you mention Forex, it is often viewed from the online perspective. Though very similar to that of the offline example given above, online Forex trading has proving to be more technical and require more expertise to in order to succeed.

Forex is a decentralized financial market, often with little or no government or other institution interference. The brokers and the investors are the major players in Forex.

Today, Forex is being seen as the most traded and highest capitalized market in the world with over $billion being traded on daily basis.

The main aims and objectives of trading Forex are to minimize loss and maximize profit.

The volatility of Forex market has made the business slogan “In business you gain or lose” stood firm.

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I believe at this juncture, you now know what Forex is and why individuals and institutions trade Forex. Let’s continue to the other basics of Forex trading which you need to know.

What currencies are used in Forex trading?

Basically, there are 8 major foreign currencies used in Forex trading  and they are; Euro (EUR), Pounds Sterling (GBP), Australian Dollar (AUD), New Zealand Dollar (NZD), United State Dollar (USD), Canadian Dollar (CAD), Swiss Franc (CHF) and Japanese Yen (JPY).

More on Forex Currencies

Forex currencies are often traded in pairs and the major pairs from the listed currencies above are; EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD.

Now looking at each of the currency pair, the currency by the left before the slash (/) is regarded as the Major currency, while the other by the right after the slash is regarded as Minor currency.

Remember that we said that Forex is all about buying and selling of currencies, and you should understand that this buying and selling is a simultaneous process in each currency pair, for example, in the EUR/USD pair, buying simply means that you are using the major currency (which in this case is the EUR) to buy the minor currency (USD) and at the same time you are automatically selling the USD to the EUR and vice versa.

And that is the reason why in Forex trading, you can profit in either way the Market (Exchange rate) moves, whether the Market is rising (EUR gaining more value than the USD) or the Market is falling (EUR losing value to USD).

At every particular point in time, each currency pair exchanges at different rate, which might not necessarily be seen as a whole number but in fractions or decimals, and so it is this small fractional change that Forex traders or brokers now capitalize on to profit.

Though as time goes, the changes can gradually jump from decimals to whole number implying that more gains or more losses can be recoded at such high change.

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The whole idea of trading to make profit, is when a Market (Exchange rate) is rising (for example In EUR/USD currency pair, you say a market is rising when the EUR is gaining value against the USD) you enter the market by buying and in the other way round, when the said market is falling, you sell to also make profit.

How can one now start trading Forex?

To start trading Forex, you first of all need a Forex trading platform. And there are thousands of platforms available out there to choose from and you actually need only one to start up your trading.

Examples of Forex platforms includes; Marketiva, InstaForex, Etoro, Forex.com etc.

Choosing a platform to start with can sometimes prove difficult and the platform that you finally settle with should then serve as your best platform if it features the available options that suit your trading needs.

A logical idea of making a good platform selection is by testing some of the platform you come across through their Demo trading sections, because by so doing you can then easily see the features and options available on them and know if the suits your trading pattern.

Note that you don’t need to try out every platform you happen to come across because they are truly inexhaustible, so trying out just 2 or 3 before making your selection might just suffice.

When you have succeeded in choosing a Forex trading platform, the next thing is that you need to register free with them for a live account and then look for the funding means available over there to fund your account.

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Now, trading on your chosen platform involves constant and witty study of market trends which you can be assisted on with good knowledge of the available tools on the platforms.

You need to know when to enter the market and when to withdraw in order to maximize profits.

You can decide to trade on autopilot by setting up all the necessary marketing limits with the features on the platform.

For example you can monitor the market trend and set up a Take Profit Limit that triggers when to automatically withdraw from the market even without your consent on certain amount of profit already made.

Another type of limit that you can set on autopilot is the Stop Loss Limit; this triggers a withdrawal from the market at the set limit to prevent further loss.

Some common Forex terminologies you will always come across while trading Forex

1.      PIPS – this is the Percentage Increase in Profits i.e. your profits expressed in percentage, which will be shown to you on your platform in the cause of trading.

2.      SPREADS – this is the PIPS between the bidding price and the asking market price. It is the spread that actually determines the amount the broker will make through their platform.

3.      Indicators – These are things that actually determine market trends. For example, we have the Natural Indicators like natural disaster, conflicts/crises, etc. and we also have the Technical Indicators which are human developed tools that uses mathematical formulas to forecast market trends. Examples of Technical Indicators are Normal Moving Averages, Stochastic Flow etc.

4.      Bulls and Bears – Literally, when a market is rising it is regarded as Bullish market and when the market is falling it is known as Bearish

Finally, we will be stopping here for now, and you should understand that what you have just read are basics of Forex trading and it is advised that you acquire more expertise knowledge before you should consider venturing into Forex trading.

Such knowledge can be acquired through constant researches and practices or further reading and training. But this piece was craftily drafted to serve as stepping stone in your Forex trading quest.