Forex Trading Tutorial – How to Trade Forex
In this section of tradingonlineguide.com, we’ll be looking at how to trade forex for beginners with a tutorial.
Forex, which stands for foreign exchange trading, is one of the most popular assets in the trading markets.
That’s why we want to look at some of the main things you need to know about Forex trading. In this article, we’ll also explain what the main points to consider are when starting trading.
All the forex key features such as financial leverage, pips, and long position or short position will be explained.
You’ll also learn how to set up a forex pending order in your trades and how they really work.
Let’s begin with the first steps on trading in Forex and CFDs that you must read if you are a beginner.
Tutorial on How To Open a Forex Trade
Now that everything is set, you’re ready to go and open your trades.
How do I open a position? Let’s take a look now:
- Select the market (asset) you want to trade. For instance, this can be a currency such as EUR/USD, or a commodity such as Gold. As we’ve previously said, with foreign exchange and CFD trading everything is available.
- Then you must decide if you want to buy or sell.
- You need to decide the amount of money to invest, which can be set in lots.
- Open a position with the support of the take profit and stop loss. These represent the price level your investment will automatically close with. This can either be in profit- (take profit), or with what price the trade will be stopped at- (stop loss).
- The final step consists of monitoring and keeping under control the opened trades.
This is important because it’s possible to close trades manually if they don’t reach any take profit or stop loss prices. Usually, there is an “X” symbol featured at the end of every opened position. Clicking on this will close the open trade.
Most online brokers will provide you with an overview of what trades are open and closed directly from your trading account.
Today, many brokers also offer forex signals to help you to trade.
Tutorial on Trading with the Metatrader
It’s possible to invest in forex with the Metatrader 4 and 5 platform. This is a popular platform that’s offered by the majority of forex brokers in the market.
To trade forex with Metatrader, the first thing to do is connect your trading account with the MT4 platform. You can find all the information on the broker dashboard.
After, to open a position from a computer just follow these steps:
- Select an asset (i.e. EUR/USD, GOLD, GBPUSD)
- Click on “open new trade” on the top bar
- Select the trading volume in lots
- Select the take profit and stop loss
- Click on Sell or Buy
If you are trading from the mobile app, the only difference to the computer version is that to open the trading window, you need to hold your finger on the desired asset and then click on “open a new trade”.
To close a position that didn’t reach the take profit or stop loss, just click on the “x” at the end of that trade from your computer. From the app, you need to select the trade and then click on “close trade”.
Is Forex Trading Good For Beginners?
Forex trading is suitable for all experience levels, including beginners.
However, if you’re new to the forex market we’d recommend learning the terms below, as this will help you get started the right way.
For trading Forex as a beginner, make sure to consider these important points.
Where do I get started?
Why is it so important to choose and use the best forex platform? Mainly because the broker’s platform is where you’ll be access the forex market, so it’s vital that you choose one that suits your trading style.
So when you create your forex account, there are many things for you to consider.
The most important point is probably regulation. To be sure you are not depositing your money with an illegal broker, always check that the broker is fully licensed and regulated by an official trading authority.
All the forex trading platforms listed below are trusted and regulated brokers. They all allow the option to create a free account with them.
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What Is A Pip In Forex?
When talking about forex trading there’s another popular term you’ll hear a lot. We are talking about Pips. (If you are a beginner this is a very important topic to learn).
What is a pip in forex?
A pip (percentage of a point) measures the smallest change in an asset price and it’s the Forex unit of measure.
In Forex the prices are represented by 4 units after the unit figure. These units are called pips.
For instance, if the price of EUR/USD changes from 1,2201 to 1,2209, it has moved a total of 8 pips. You have to count the difference between the unit figures.
For this example, the unit figures are highlighted in bold: 1,2201 to 1,2209.
The bigger the movement is, the larger the number of pips used.
Long Position And Short Position
When learning about the trading of forex, there are some important terms that every beginner should know.
The most common ones are a short position and a long position.
We have already mentioned that in trading there are just 2 different possible actions to do: buy or sell.
Because of this, a buy position is known as a long position.
Whereas a sell position takes the name of a short position.
For example, if a position has been opened in a sell position, it’s because of an expected drop in that asset’s price.
They are both two potentially profitable trades, but only if the prediction matches against the trading strategy, and the expectation also aligns.
Trading Forex Tutorial: Pending Orders
When trading a common question a lot of beginners ask themselves is:
Do I need to spend the whole day in front of my computer to open a position at that certain price?
The answer is: NO!
In every forex platform, there is the chance to use the so-called pending orders.
A pending order is an option that allows you to set up a trade which will be automatically opened once it reaches the set price.
Let’s make an example:
The price of oil is $60.00 at the moment, and we only want to sell when it reaches $61,00.
In this situation, we’d need to set up a pending order called sell limit. This will automatically sell the oil only when the price meets $61,00.
If the price doesn’t reach $61,00 the trade order will never enter the market so you won’t be risking anything.
There are 4 different pending orders:
- Buy limit: in this case, it’s necessary to set up a lower price than the actual price. The expectation is that the price will drop down to the selected level to suddenly grow again.
- Sell limit: in this situation, the aim is to sell at a higher price than the actual one to suddenly see the price drop down again.
- Buy stop: the price keeps on growing after it passes a certain level higher than the actual one. It’s necessary to select a price higher than the actual one in this case.
- Sell stop: here the goal is to see if the price keeps falling once it has gone lower than a certain level. In this last case, it’s necessary to select a lower price than the actual one.
Conclusion
To conclude this tutorial, hopefully, you’ll feel more confident now when it comes to trading forex. Once you’re aware of what the terms mean and the various analyses available you’re in a good position to start trading.
If you’re fairly new to forex, currency pairs and CFDs world, we’d always recommend trying the various trading strategies to see which one suits you best.
These can always be tested in your real trading account or a broker’s demo account.
It’s worth noting that demo accounts usually have all the same features as a regular ‘live’ account. They are a good way for you to test a forex strategy out first without risking money.
A lot of professional traders will also test a strategy out in the demo version first before opening it as a real position.
With so many options available you are free to start trading exactly how you want.
Author of this article and founder of Tradingonlineguide.com
My aim is to help you increase your trading knowledge with helpful content. I come from an economic background and have a strong passion for forex trading. With more than 6 years in the online trading world, I want to share my financial knowledge so that anyone can develop their investment skills.
In my spare time I enjoy cooking and travelling.
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Although forex is open to all experience levels, including beginners, don’t dismiss it as easy to do. Like all things, it takes time and practice to develop trading strategies and to get used to the market.
However, once you’re used to the setup, you’ll see that forex trading is not too difficult, which is why it’s one of the most popular financial markets.
That’s why we’d recommend that you find a regulated broker that you feel confident in using, and study the market and currency pairs. This is the best way to develop your skills.
Also make use of the free tools that many brokers offer to help you start trading, this includes demo accounts as well as analysis tools.
Most importantly, remember that forex and CFDs are complex instruments, and there’s always the risk of losing money. So when placing a trade, always keep a business mindset and invest only what you can afford. This is vital when trading on forex.
