How to start Forex trading for beginners - Step by Step

Forex trading appears very appealing for many beginner traders, who soon feel perplexed and confused, mostly because they often approach this endeavour with certain misconceptions and perhaps unrealistic expectations. What should be made clear to all novices from the start is that forex trading is not a chance game and that they do need knowledge in order to stand a chance to succeed.

Knowledge not only on what forex trading is and how it is done, but also knowledge on how to choose their broker, what options they have regarding their trading methods and approaches, what tools they should seek to explore and many more. Though daunting at first glance, it is entirely possible to come to grips with it all and learn all you need to know as a beginner forex trader, provided you turn to the right resources for this knowledge and information. Our guide to forex trading for beginners aims to serve exactly this purpose and equip and arm you with tips and insights to ease your forex trading journey.

Dedicated resources on Trading Forex for beginners

Beginner forex traders may benefit from multiple items on our educational resources section, since anything relevant they read and learn is bound to help their understanding of the overall forex trading landscape and illuminate several aspects of the process for them, allowing them to make the right decisions, decide on how to shape their trader profile and preferences and proceed on their trading endeavour with increased chances for success. The dedicated posts highlighted below, are of particular usage and importance for beginner and aspiring forex traders, offering them invaluable knowledge and insights.

Hugely popular in recent times, the forex market is a hot venue across the globe, where novice traders are trying to succeed in and make profits through the trading of currencies. Nowadays, the forex market is more accessible than ever thanks to the abundance of online platforms and brokers offering the chance to interested individuals to access the markets through trading accounts. Making money through forex is very much possible provided a trader takes his/her trading decisions carefully, wisely and knowingly. This requires and presupposes obtaining the necessary information and knowledge through independent research and learning as well as guided help. Armed with this knowledge, beginner traders can then define their own trader profile and seek service providers that best meet their specific needs and requirements and better serve their predetermined strategies and risk tolerance levels.

Long term success in forex trading is possible, even for beginner traders, provided they show the necessary patience, dedication and commitment to learn as much as possible and improve their strategies and skills, choosing the right service providers and making the best use of available resources and tools.

The 10 vital steps for effectively trading forex

Becoming a great forex trader is neither easy, quick or simple, but it is attainable if you are determined and resolved to succeed and take the whole endeavor seriously. To make the process more comprehensible, our team of experts has put together a ten-step guide, which illustrates the steps to be followed when embarking on your forex trading journey. These ten steps are as follows:

1. Commit to learning everything you can about forex trading

If this is your first attempt at trading in general or forex trading in particular, then chances are that you lack the necessary knowledge of even the basics pertaining to this particular endeavor. Once you have decided that you want to start trading and that forex is your preferred instrument, then your first step towards success must be a sincere commitment to understand everything you can about how forex trading works, learn the exact meaning of the relevant terminology and equip yourself with a very clear and accurate viewpoint and perspective.

Your initial commitment to learning however is not enough. What you must also be aware of is that the learning process must be continuous, as there will always more to learn for and about if your forex trading journey is to be a viable and successful one in the long term. The learning process may be slow at first, since you might be unaccustomed with the type of information you come by, and it is thus important to show the necessary patience and commitment, as it would be greatly unwise to the making trades without fully understanding the actual probabilities of your chances to make a profit and loss. Education and learning, as a committed, long-term process is thus the cornerstone of your forex trading efforts and will help you to always be on the know and up-to-date and not slip into bad habits or taking poor trading decisions based on wrong assumptions or bad impressions.

2. Choose the right forex broker

Forex trading was propelled to unprecedented heights when, through online retail forex brokerages, the forex market became accessible to all people. As a result, there are today literally millions of brokerages around the world that facilitate forex trading and choosing the most suitable for your own trading needs requires extensive research, so that you have a clear view of what each one offers and how they compare against each other.

Especially if you are a novice trader, it is advisable that you choose a reputable broker, that is already used and trusted by many other traders. A good way to go about finding this out is by reading the reviews of other users about each broker. Less well-known brokers are likely not to offer the same quality in terms of their quality and service, while some may even be fraudsters and scammers. National watchdogs usually regulate the forex service providers and checking what applies in your own country of residence is also important. Finally, as a newbie, don’t get lured by special offers for new traders, as these are often mere tricks. Usually brokers that already offer an excellent level of service don’t need to run such offer schemes to attract new customers.

3. Opening your first trading account

Most forex brokerages offer more than one trading accounts to their customers, each attached with different limitations and conditions and often each more suitable for different trading styles. As a newcomer you will most probably won’t be sure from the start about your preferred trading style and strategy and thus, it would be advisable to set up your first trading account by paying more attention to whether you will be able to trade with little money and in small quantities. How much leverage or how many different forex pairs are available for trading are important considerations, but those are best left for a later stage, when you become a more seasoned trader. If your trading endeavor is successful, then your first trading account will not be the last you open and you can always make a different choice as you perfect your trading skills.

Another useful option for novice forex traders are demo accounts, which are offered by most brokers, since they allow you to learn how to trade under real conditions, but without risking any real funds.

4. Picking the right trading platform

Though nowadays a plethora of forex trading platforms have been developed by service providers, the truth remains that the MetaTrader 4, widely known as MT4, is still the platform that is used by most traders around the world. Although it has been around for almost two decades, its popularity has meant that it has established itself as the industry standard when it comes to trading platforms.

Many other platforms do exist, but the MT4 is perhaps the wisest choice for novice traders, as it is reliable and easy to use, while you can access a plethora of information, advice and guidance on line about how to use the MT4, posted by brokerages operating on this platform or other users, who have been using it for a long time. Even if you decide to choose another platform, as perhaps your chosen broker offers a different one and you decide it suits, learning how the trading platform works and how you can best and most effectively use it, is vital for the success of your forex trading endeavor.

5. Decide your risk management strategy

Once you have opened a trading account through your chosen broker and platform, theoretically you could start trading right away. However, you should not jump right in before you have decided what risk management strategy you will be following when trading. Forex trading is risky and if losing all your funds in one go is not your aim, which we are certain is not, then you must devise your own personal set of rules to be applied by you while trading in order to minimize the damage and effects of any potential losses you might incur.

A popular risk management strategy that is easy to understand and implement even for complete novice traders, is to only trade a specific, low percentage, say 1% or 2%, of your trading account balance on each trade you place. This will ensure that even if you lose a trade, you will still get many other chances to get it right and you will be able to learn more through each trade you perform. Recognizing and learning to manage risk when trading is of paramount importance.

6. Learn forex market analysis

Your ability to trade effectively and to recognize trading risks accurately depends on whether you will be able to learn how to analyze the forex market, as such analysis will indicate which trading opportunities you should be pursuing and which should be avoided.

Though there are several ways and methods used to analyze the forex market, these can be mainly categorized into fundamental analysis and technical analysis. Through fundamental analysis, forex trends and price predictions, are estimated based on relevant news events and announcements, such as the figures of a country’s GDP, as well as unemployment and inflation rates, to cite but a few examples. There are several forex economic calendars available, which you can consult to obtain this kind of information.

Technical analysis on the other hand, bases its predictions on several market indicators and many traders feel that since accurate measurement is possible, the technical analysis leads to smarter conclusions, than fundamental analysis, which is partly based on sentiment. In reality however, you cannot really learn forex trading well unless you are able to perform both a fundamental analysis as well as a technical analysis of the forex market.

7. Making your first real trades

Once you are equipped with the basic risk management and analysis skills, would be the right time to perform your first real trades, as unless you actually turn theory to practice yourself you will never really know how everything works and be able to discern what works for you and what doesn’t. It is different to make plans on paper or in theory and quite different to be trading under real conditions.

Every new trader may react mentally different to the pressure and stress that real trading conditions bring to the equation, so it is important to remember to stay coolheaded and trade with reason, logic and caution and not based on emotions and sentiments. Don’t be disappointed if your initial trades fail, as this is completely natural. On the other hand, don’t get over-excited if you start by winning and don’t be carried away to deviate from your own risk management strategy. Your initial trading efforts will also help you pinpoint which aspects of forex trading you would like to explore further and learn more about in order to improve both your trading experience as well as your trading performance and outcome.

8. Learn forex trading styles and find the one for you

You will not be ready to define and refine your own trading style, unless you’ve actually started trading, so with a few trades under your belt you will be able to start this process. As a novice trader you should be aware that your trading style decision is a process, one that never really ends in fact, as you should always be trying out new things and approaches.

Though there are several trading styles is forex, the most common differentiation is that between day traders and swing traders. As implied by the name, day traders usually open trading positions each morning and close them each evening. Day trading in this sense is much similar to a full-time job as it requires the active and hands-on involvement and attention of a trader throughout the day and being up to date will all developments and indicators at any given point in time.

Swing trading on the other hand, is a long-term style of trading and swing traders open trades that they usually take days, weeks or even months to close. Obviously then, swing trading is a style that requires less time and involvement. On the question of which trading style is more potentially lucrative there is a great deal of disagreement, but the truth is that both styles do offer ample potential for profit. Usually, occasional, novice traders adopt swing trading as they often have less time to trade, while seasoned, professional traders tend to prefer day trading.

9. Keep a trading journal

The penultimate step to success in forex trading for beginners may sound mundane but it is in fact crucially important. Learning to trade better and improving your own trading style requires you to be keeping an accurate record of all your trading activity through a trading log or journal, where you will be detailing all your trades, including why you entered each one, the size of your position and the final outcome.

This is a very effective way of knowing what has worked and what hasn’t in each case. Don’t rely on your memory to keep track of your trading decisions. It is best if you write them down and study them so as to be in position to avoid any mistakes or wrong moves in the future. Your past experience, will be your best teacher. Keeping an accurate and detailed trading journal will help you notice all your shortcomings and show you the way towards change and improvement.

10. Stay on the learning path

The final step takes back at the beginning and it is all about re-affirming your dedication and devotion to keep learning about, on and for forex trading for as long as you wish to remain an active trader.

The learning process is unending, as there will always be new market developments, new trading tools, new styles, strategies and theories to learn about and try out. Moreover, at times it will also be useful to even revisit topics and knowledge if you have already acquired in the past, to keep your mind sharp and your mind alert, thus maximizing your chances for success with each new trade you place.