Comprehensive guide to how to start currency trading for beginners

Understanding currency trading and everything that goes into this market might be a little confusing. Beginners, in most cases, have to dedicate a lot of time to educate themselves about Forex trading.

First, you have to understand what currency pairs are and how they work. Also, what influences the movements in their prices and what can you do to better predict the future movements, among many other things.

But, Forex trading is more than just an exchange rate of a currency. After you have understood how the market works, now it is time for you to master the ways to generate payouts in it. Whether you are a complete beginner or already have some experience in Forex, our 101 to Forex trading will help you to better understand the way Forex trading works.

How to start Forex trading?

Before you start trading Forex, it is very important to get enough knowledge about the way the market works. The more you know about Forex trading, the easier it gets to trade. There are many sources of information that you could find.

You can learn more about Forex by following guides on different types of online forums, use the educational material offered by Forex brokers, or get yourself a Forex trading book. Which one you choose largely depends on your needs and wants.

Forex trading for beginners might be a little confusing, this is why there are so many people using different types of sources to learn more about trading.

Forex Trading for the Dummies

Forex Trading for Dummies is one of the most popular books in the market. There are thousands of people who have used to learn more about Forex trading in this market.

If you are one of those people who are having a hard time deciding how to start Forex trading, this book might be a perfect choice for you. The best part of this book is that the information is provided in a very simple manner, ensuring that everyone can understand the basic concepts that the book is talking about.

The first edition of the book, written by Brian Dolan, was published 14 years ago, in 2007. Since then, it has been updated many times to keep up with the ever-changing world of Forex trading. Currency Trading for Dummies Latest Edition is a perfect book for this market because it offers traders a completely different, up-to-date view of the Forex trading market.

The book covers every little detail about how to start Forex trading and offers a very good insight into this market. You can check out the currency trading for dummies review to learn more about the book which has been used by thousands of traders globally.

You can also download online Forex Trading for Dummies and use it that way.

Major concepts in Forex trading

There are several concepts that traders should understand before they start Forex trading. This includes Forex leverage, trading accounts, currency pairs, and other very important concepts. Below, we will talk about some of the most important things that a trader should know.

Guide to Forex trading – Most popular currency pairs

We have already talked a little about currency pairs in the world of Forex trading, but there is a lot more that you should know about them. Before we go any further, let’s discuss the three types of currency pairs that are available in Forex.

There are three types of currency pairs in Forex, Majors, Minors, and Exotic currency pairs.

One of the biggest reasons for the popularity of this currency is the fact that it is very liquid. While working on this currency trading guide, we found that the absolute majority of traders love this market for its high liquidity, and it should not come as a surprise that the currency pair that is known for its liquidity is so much popular in the market.

Among the most popular major currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, etc. These are known to be the most heavily traded currency pairs on the market. Around the world, the US dollar, Euro, Japanese Yen, British Pound, and Swiss franc are the most traded currencies.

As for the most traded currency pair, it is the EUR/USD, it actually represents as much as 20% of all Forex transactions around the world.

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Trading with minor and exotic currency pairs

Minor currency pairs in Forex trading are made up of the major currencies, excluding the USD. They are also sometimes called cross-currency pairs. These pairs are known for having wider spreads, and they are not as liquid as major currency pairs.

Cross-currency pairs include GBP/JPY, EUR/CHF, and EUR/GBP among many others. The exotic currency pairs in Forex are from emerging markets. These pairs have the widest spreads, and they are not that liquid either.

Trading accounts in Forex

Online trading accounts are a vital part of Forex trading, without them, you will not be able to access the Forex trading market. The availability of a certain type of account largely depends on the Forex broker that you are using.

Although these accounts are in some cases very different from one another, the major idea behind them is still the same.

As we have already said, every broker has different types of accounts. One thing that these brokers have in common is that most of them have a special account for beginners, intermediate, and advanced traders.

These accounts will give you access to different services. Every trader is different, and while one account might work for other traders, it might not work for you. So, it is vital for you to understand your needs and before you choose which account to trade with.

Currency trading tips – Best accounts for beginners

Almost every single broker online offers some type of account for beginner traders. One of the most popular trading account that you will come across on almost every online Forex broker is the demo trading account.

Using a demo account is one of the best ways to learn more about Forex. While using a demo account, you will be able to trade Forex without opening yourself up to any risks. The demo account is one of the best ways you can start trading. Demo accounts are a great option for those who are looking for ways of training in the Forex trading market.

Forex brokers that offer demo trading account will give you a certain amount of virtual cash, which you will be able to use for trading. Once you are out of the virtual cash, you can contact the customer support team of the Forex broker and ask for more.

A very great thing is that using this account can be very beneficial for even the most experienced Forex traders because it offers them the ability to test out different types of strategies, try out different tactics, and see which ones work for them the best. In short, demo currency trading can be very helpful for traders of any type.

Another great advantage of using a demo trading account is that it gives you the ability to test out how the broker works. You can see the trading platform that it offers, how it works, what are the differences from other brokers, and decide if you want to continue trading with the broker or not.

However, Forex trading beginners should keep in mind that Forex trading with a demo account is a little different from actual trading. The thing is that when you are trading Forex with your own funds, you are dealing with a lot of emotions.

This is not the case for the demo account at all, which can make transitioning to a live trading account a little harder for beginner traders.

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Forex trading lessons – Cent account

A great way to move to real-life Forex trading is to use a cent account. Although not that many Forex brokers this account, it is still is very popular among traders. Cent account was first created in 2006, to offer newcomers the ability to trade Forex without huge risks.

Unlike other trading accounts, with this one, you will be trading with cents. In most cases, the cent account is available in major currencies, such as the US dollar, Euro, and GBP. If you deposit $5 on your cent account, you will see 500 cents on your account.

The biggest advantage of this account is that you are trading with your actual money. Thus, you will experience how it feels to face the risks of Forex trading, without losing a lot of money.

What is an Islamic account and who should use it?

Forex trading has something for everyone, which is one of the reasons why there are so many Forex traders. To make sure that everyone around the world has the ability to invest in this market, Forex brokers are coming up with new ideas.

Islamic account is one of the things that guarantee the diversity of Forex trading. It gives traders who are following the beliefs of Islam the ability to trade Forex without paying any amount of money swaps. Because of this, it is also known as the swap-free account.

As it is known, Sharia law prohibits people from paying or receiving any amount of interest, with the help of swap-free accounts, those who follow the beliefs of Islam are able to invest in this market without any problems.

Currency trading education – Opening an account

The process of creating a trading account should not be much of a challenge, however, it largely depends on the Forex broker that you are using. All of the brokers have different types of processes that you might have to go through to create a live trading account.

One thing that most Forex brokers have in common is following the KYC guidelines. Know Your Customer policy requires companies to know who exactly owns the account. Because of this, with most of the Forex brokers, you might have to provide different types of documentation to verify your identity.

Guide to Forex trading – basics

Forex trading has become increasingly popular in recent decades. As the official data from 2019 showed, the average daily turnover of the market was as much as $5.1 trillion. The number is constantly increasing, and it shows exactly how popular this market is.

Traders, especially newcomers, should try to focus on the details to make sure that they understand how the market really works. Before we go any further, we should discuss the basics of Forex trading. You might already know that when you are trading Forex, you are dealing with currency pairs.

There are three types of currency pairs available in Forex, Majors, Minors, and Exotics. These currency pairs are different from one another and need different dedication. We will talk about this more later, but to give you a general idea, major currency pairs are the ones that are made up of USD and another major currency, like EUR, GBP, JPY, or others.

Minor currency pairs are made up of the major currencies, excluding the US dollar. There also are exotic currency pairs, and they are the ones that are made up of the national currencies of developing economies.

Forex 101 – Liquidity

Liquidity in Forex refers to how active a market is. It is determined by how many traders are actively trading and the total volume of their trades. One of the major reasons for the liquidity of Forex trading is that it is open 24 hours a day.

High liquidity also means that even if there is a very high demand, it does not really affect the prices that much. The most liquid currency pairs are the major currency pairs, which means that they can be traded in very large quantities without altering the price of the currency pair.

Forex trading education – What is a lot?

A standard lot in Forex is an equivalent of 100,000 units of the base currency. In most cases, there are three lot sizes available in Forex. A regular lot, mini-lot, and micro-lot. Historically, Forex was only traded in particular lots, 100, 1,000, 10,000, and 100,000 units.

Recently, however, it has changed a lot and in most cases, Forex traders are able to trade with non-standard lot sizes. One of the major reasons for this is the increased competition among Forex brokers.

In Forex, 1 lot equals 100,000 units of a currency, mini lot equals 10,000 units of a currency, and 0.01 lot equals 1,000 units of a currency. Some brokers also offer traders nano lots, which equal 100 units of a currency

Learn Forex trading – Swaps

A foreign currency swap stands for the currency exchange arrangement between two foreign parties. There are two types of swaps in Forex, one known as the fixed-for-fixed currency swap, and another as the fixed-for-floating swap. Not every trader should worry about swaps, however.

It largely depends on the trading strategy that you are using. If you are not leaving your positions open overnight, you will not have to pay or receive swaps. But, if you are using a long-term trading strategy or swing trading strategy, you will have to keep swaps in mind, because your positions will be open overnight.

What are spreads in Forex?

Spreads in Forex are the differences between bid and ask prices. In Forex, all of the trades are conducted thanks to the brokers, and these companies are changing some money for the services offered.
There are several factors that might influence the amount of spread that you pay. The first thing is the currency pair that you are trading. If you decide to trade major currency pairs, the amount of spread will be much lower than it would be with exotic or minor currency pairs.

Although there are several types of spreads in Forex, the most common one is the bid/ask spread. Bid in Forex is the buying price, while ask is the selling price. The difference between these two is the spread that you might have to pay.

Learn currency trading – What is a pip?

Pip in Forex stands for the Percentage in Point. It measures the minimum price change of the currency pair that you are trading. As you might already know, when you are trading Forex, the cost of the currency is shown in five digits.

Pip in Forex is the change in the last digit that you see in the currency price. For the majority of the currency pairs, one pip equals 0.0001, whereas, in JPY pairs, the pip is 0.01. There also are nano pips, for the majority of pairs, 1 nano pip equals 0.00001, and for JPY pairs, it is 0.001.

Forex trading explained – Leverage

Leverage is a very important part of Forex trading. Leverage can increase your profits in Forex, but it should be used with a lot of care. If you don’t use it right, it might cost you a huge amount of money.

Leverage is known for increasing profits but also increases the risks of Forex trading. So, say that you are trading with a leverage of 1:100, it means that for every $10 dollar on your account, you will be able to trade $1,000 worth of positions.

You will find in the best currency trading books that leverage should be used very carefully. There have been many cases when people lost more money than they even had on their Forex trading accounts. This has led to a lot of problems in many cases.

To avoid it, some FX brokers have come up with the idea of offering their clients a service called Negative Balance Protection. Thanks to this, no matter what goes wrong, you will not be able to lose more money than you have. What it does is that it cancels all of your positions automatically when your balance nears zero.

Who and why should use leverage in Forex?

Although leverage comes with many risks, for many, using it is vital. The thing is, if you are trading with strategies such as scalping, for example, you will not be able to generate any profits whatsoever without using moderately high leverage.

If you are a complete beginner, however, it would be better to use very little leverage, or not use it at all. Once you have gained enough experience in trading, you can slowly move to use higher leverage to increase your profits. As we have already said, a lot depends on the trading strategy as well.

Currency trading beginners guide – Safety

In Forex, one thing that can really make a difference is the safety of you and your hard-earned money. In recent years, Forex trading has become very popular online. Although the market had the opportunity to grow further and attract more people, a lot of problems came as well.

One thing that is affecting this market very much is a large number of scam companies. To avoid those, traders will need to focus a lot on the brokers that they choose to trade with.

One way to safeguard your funds is to only trust authorized Forex brokers. There are many regulatory agencies around the world that give out licenses to safe Forex brokers. Trusting these companies might be a better choice for traders. Regulations vary country by country and can be very different from one another.

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Top Forex regulators globally

Our guide to Forex trading shows that there are many regulatory bodies worldwide. There are some regulators that are very strict, and there are also others that have very light regulatory frameworks.

For example, in the United States, there are two agencies that oversee the financial markets. The regulations are very strict, and only locally registered Forex brokers are able to offer services to the citizens of the country. In Europe, regulations are also very strict.

On the other hand, Asian regulators are not as strict in general. Although China and Japan control the market very strictly, in other Asian countries, the financial market is not that well-regulated. Regulatory bodies are very likely to change their framework frequently.

Recently, the regulatory agency of Australia has adopted new regulations, making the market safer for traders.

Ways to learn more about Forex

There are many things that you can use to learn more about Forex trading. Beginners can find many online sources to learn Forex trading. Even some of the best Forex brokers online offer traders educational material to grow as traders and learn more about this market.

One of the best ways that you can learn about Forex is by using books. There are hundreds of books available in the market that you can use. We have already discussed one of the best books that you can use, Forex Trading for Dummies.

Understanding Forex trading for dummies is very easy because this book is written in a very simple language. You can learn everything about Forex trading in greater detail with this book. There actually are several different versions of it available online.

Another great way to learn more about Forex trading is through internet courses. There are many of them available on different online platforms and websites, such as YouTube. In most cases, these courses are led by professional Forex traders, who have years’ worth of experience in Forex.

By watching experienced and professional traders make decisions, you can learn more about the thinking process, and see how professional traders are making their decisions.

Forex trading tutorial – Best trading platforms

One of the most important parts of Forex trading is the trading platform. While trading Forex, you will be dealing with the trading platforms to open and close positions and make moves. Trading platforms give you access to the trading market, lets you do some research, charting, and many other things.

There are dozens of different trading platforms available in Forex, and each of them is very different from one another. The most popular trading platform in Forex is the MetaTrader 4, also known as the MT4. It was created by a famous Russian company called MetaQuotes, which is a very famous company globally.

It was created 16 years ago, in 2005, and since then, it has become a game-changer in Forex. According to some data, more than 90 percent of all Forex brokers offer this trading platform to their clients, making it one of the most used platforms in Forex.

MetaQuotes is also responsible for creating MetaTrader 5, which is a newer version. This trading platform is also very popular among traders and is very similar to MetaTrader 4.

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Charting solutions about currency trading

There are different types of Forex trading platforms available in the market. Some of them offer traders to trade and do charting at the same time, while others are intended for only charting or trading.

TradingView is one of the most famous charting solutions in the market. Thanks to this program, you get the ability to not only work on your charting but also connect with other Forex traders.

This way, you will be able to learn more about Forex trading, find new trading indicators, and see how others are trading Forex. There are many other charting solutions and trading platforms available in the market. You should choose the one that fits your needs the best.

Mobile currency trading tips

Over the years, Forex trading has become more accessible for traders than ever before. Thanks to the fast pace of development of modern technology, Forex trading is available on mobile devices.

You can trade Forex with your smartphone, whether it is an Android or iOS device. Most of the best FX brokers online will offer you the mobile version of their trading platforms. This way, you will be able to keep in touch with the trading market even when you are on the move.

Forex trading explained for dummies – Best strategies

One of the best parts of trading Forex is that you can choose one of the trading strategies and follow it. This way, you will have a plan that you can follow and make sure that you are not gambling instead of trading.

That said, you can also come up with your own trading strategy that works perfectly for you, or choose an already existing one. Whether you are someone who wants to use Forex trading as a full-time job, or you are looking for something for short-term investments, there is something that you can find in the Forex market.

One of the most popular trading strategies in Forex is scalping, which takes a lot of dedication and time from traders. While trading Forex with a scalping strategy, you will be opening and closing multiple positions during the trading day.

On the other hand, there also are long-term trading strategies, such as swing trading strategy for example, where you will buy and hold certain assets for a longer period of time.

Forex day trading 101

Day trading is another very popular short-term trading strategy. Day traders are known to open their position at the beginning of the trading day and close it before the trading day ends. While using this strategy, traders are able to avoid paying overnight swaps and risks.

But, Forex day traders look at this market as a full-time job. Day traders spend a lot of their time in front of their computers, working on their plans, charts, and positions. If you want to have more free time for yourself, you can use some of the long-term trading strategies.

Although you will have to still dedicate a lot of time to researching the market, you will not have to sit in front of your computer the whole day with long-term trading strategies.

Understanding Forex trading – Making payments

Once you have found a trustworthy Forex broker, decided which currency pair to trade, and created a live account, it is time for you to make your first deposits. There are several ways of doing so. Depending on the Forex broker that you are using, you will have access to several deposit methods.

Most of the Forex brokers will offer you direct bank transfers, credit/debit card payments, and online wallet payments. In most cases, card payments and bank transfers are the ones that might take a longer time, while online payments are faster and cost less. If you want to make huge deposits, it might be a better idea to use direct bank transfers.

How to start Forex trading?

Before you start Forex trading, there might be a few steps that you will have to take. First of all, you will have to get something that will help you to learn more about FX trading. One thing to do is to get a book, for example, download Forex Trading for Dummies, or find an online course for beginners.

After that, the next step is to find a trustworthy and safe Forex broker that can offer you well-developed services. One way to do that is to only trust well-regulated, licensed Forex brokers.

There are many regulatory agencies around the world, and depending on your location, you should trade with one of them. Forex trading has not always been this accessible. The development of the internet helped this market a lot, but it has brought many challenges as well.

As of today, Forex trading is accessible for traders globally thanks to these regulatory agencies. Trading with brokers that are controlled under the guidelines of top regulatory bodies will make trading much safer for you.

After you find a well-regulated Forex broker, you will be able to create a live trading account. This will give you access to everything that the Forex broker has to offer. After this, you can make your first deposits, choose which trading platform you want to use, and start trading Forex.

What are the costs of Forex trading?

While trading Forex, you will be faced with several costs that you might have to pay. First of all, when you are making deposits, in most cases, you will have to pay a certain amount of money in form of fees and commissions.

The amount of money that you might have to pay in commissions largely depends on the Forex broker that you are using. While there are some Forex brokers who do not charge any amount of fees at all, there are others that do charge a certain amount of fees.

Also, the number of fees that you might have to pay largely depends on the payment issuer. It is always a good idea to contact the issuer and understand how the fees work for the best outcome.

Also, as we have already said in our guide to understanding currency trading, one of the costs that you will most probably have to pay is the spreads. The thing is, when you are trading Forex, you are enjoying the services of the Forex broker, which means that you will have to pay a certain amount of money for the services.

The number of money that you might have to pay in the form of spread largely depends on the assets that you are trading and on the Forex broker as well.

Final thoughts on currency trading basics

Millions of traders globally participate in this market every day. If you want to become part of this market, there are certain things that you will have to keep in mind. Forex trading is a very popular market, and because of its diversity, it has something for everyone.

It is not easy to become a Forex trader, but there are several things that might help you out. One of the most important things for becoming a successful Forex trader is your education and knowledge in Forex.

The more you know, the easier it will be for you to start trading Forex. So, if you want to get started in Forex, make sure to find ways to diversify your knowledge and look for a well-regulated, licensed Forex broker.

Frequently Asked Questions on Forex trading for beginners