8 Tips to Learn Forex for Beginners
Becoming an expert at trading on the Forex exchange market isn’t easy, and all traders need to start by learning the basics. Even if you feel you have already learned many Forex trading basics, it’s always a good idea to review what you know and search out new information. How confident are you in your mastery of Forex trading? Are you indeed ready to move on to the next step in your Forex education? Check out our top eight tips to learn Forex trading for beginners.
Become Familiar with Trading Software
Most Forex trading is done with MT4 or MT5 software, although there are dozens of other trading software options for you to consider. Most trading software is designed to be similar, so it should be easy to switch to new software if you would like. Look for software that you feel comfortable using and feel you’ll be able to master early on in your trading experience. Being successful in the Forex market sometimes requires making snap decisions, and you don’t want to miss out on golden opportunities because you aren’t sure what button to press.
Find a Service Provider You Can Rely On
Forex trading requires you to work with another person, usually a Forex broker. Before you choose one to work with, take the time to research their credentials. Look for proper licences and positive customer reviews. It should only take a few minutes to learn about each broker you are considering. Choosing a reliable service provider could make the difference between mediocre and high profits while trading.
Learn Currency Pairs
When you trade on the Forex market, you will always be trading your currency in pairs. In other words, you will be selling one in order to buy more of the other. Remember that Forex stands for foreign exchange. Instead of purchasing goods or services, you are trading one nation’s currency for another.
There are many different currency pairs because there are many types of currency around the world. Beginners and experienced Forex traders alike should choose to trade stable currency pairs. Examples of pairs that are highly stable include:
The EUR/USD currency pair is considered very stable. Because there are two large economies behind it, it is unlikely there will be dramatic changes overnight. This means you can usually trust that you will not lose significant amounts of money if you pay close attention to the trades you make.
When choosing the currency you wish to trade you should keep in mind that Forex trading isn’t just about the numbers. Forex trading also requires knowledge and timing. Remember these tips when trading on the market:
- When you trade on the Forex market, you are exchanging real money. While some loss is inevitable, there is no reason to set yourself up for higher losses. If you hope to profit by trading on the Forex market, then take the time to research before you start.
- Don’t spread yourself between too many currency pairs, especially pairs around the world. It is easiest to keep up with the latest economic developments that may affect the Forex market if you only focus your research on one or two countries and their economy at a time. If you regularly trade too many currency pairs, you may see more losses than you would if you only traded a few that you were able to research in more detail.
- Consider where you live in the world and if you will be available when each currency opens (i.e. becomes tradable for the day). If one of the currencies you wish to trade opens at 2 am in your time zone and you prefer to be asleep by then, you should take this into account before you invest in that currency pair. It may be wiser to invest in a currency pair that opens while you are awake, and you may make more profit by taking your daily schedule into account instead of relying on numbers alone.
- While learning Forex trading for beginners, we recommend committing to learning about a single currency pair until you are confident you know everything about it. Only then should you consider adding additional currency pairs to your trading life.
When to Trade
The Forex market is an international market, which means that no matter where you are in the world, no matter what time of day it is, you can always trade at least a small amount. The best time to trade on the Forex market is when the market is most active. There are four major trading sessions that you should know:
- New York
The market is busiest when more traders are present; in other words, when hours overlap between trading sessions in different parts of the world. The notable overlap windows are:
- 1 pm to 4 pm (GMT) – New York and London are open
- 12 am to 7 am (GMT) – Tokyo and Sydney are open
- 8 am to 9 am (GMT) – Tokyo and London are open
The market is usually quietest in the evening when activity in New York is decreasing and activity in Sydney hasn’t yet started. Keep in mind that daylight savings can also affect the hours of high activity in the Forex market and that certain currency pairs may be best traded at different times of the day. Research is key to navigating the Forex market like an expert.
Learn Forex Strategies
There are many Forex strategies that you can apply to better your trading experience. For example, one trading strategy is Full Price Action. In this trading strategy, you are watching the Forex market closely and making decisions based on the numbers you see on the screen in front of you. You make decisions based on your personal view of the market, and you don’t spend time running complex analyses to determine whether this is the best time to sell or if you should wait a few more days in the hopes of making an even higher profit.
Full Price Action is a simple trading strategy for beginners to learn Forex trading, but there are many other trading strategies that may be more profitable for you and your style of trading. Research these strategies to determine what trading style may be best for you, and always keep a lookout for common pitfalls to avoid.
Use a Demo Account
A demo account allows you to learn Forex trading for beginners by making trades with imaginary funds. By using a demo account, you can learn about your trading software, make trades, and practice applying your daily research to the market. You can watch your imaginary funds grow (or shrink) as a result.
The Dangers of a Demo Account
Trading with fake currency on a demo account is an excellent way to learn the basics of Forex trading. However, we recommend you limit the amount of time you spend relying on your demo account. When you trade with a demo account, it can sometimes be challenging to remember that you should treat your false currency as though it’s real. It is easy to take big risks and not feel the sting of loss.
The danger of a demo account is that if you do not recognise the risks you are taking and the losses you are experiencing with your demo account, this mindset can carry over to a real Forex account when you are ready to start trading. You may take wild risks that you started taking with your demo account and its fake currency, and this risky trading behaviour can strain your real finances if you aren’t careful.
Guerrilla Trading recommends starting with a demo account to learn the basics of navigating a Forex market but switching to a real account early on in your learning experience so you can start trading currency pairs in small amounts. Using a live account where real money is at stake may be the best way to receive Forex training for beginners, outside of taking a Forex trading course or working with a Forex mentor.
Research Beginner Mistakes
There is so much to research about the Forex market, and it can be difficult to know when you have researched enough. After you feel you have read all you can think to research, it may be best to jump in, start trading, and learn through experience. When you do, however, don’t forget to keep in mind these common Forex trading beginner mistakes:
- Not researching consistently – Worldwide economies change regularly, and sometimes they can change in a single day. Research consistently to keep an edge while trading. If you are unsure what to research, try searching for simple phrases, such as “United States economy” or “Australian politics current news.” If you are part of a Forex community, you can also ask experienced traders in your community to share where they usually find reliable sources to read.
- Trading random currencies – If you are a new trader, you may be tempted to trade currency pairs you have seen in popular success stories. However, if you are a Forex beginner, starting with a currency you are familiar with is best. Many notable success stories result from taking large risks, which can be dangerous with an unknown currency.
- Ignoring trends – The Forex market relies on supply and demand. If enough people follow a trend, this trend will cause either supply to rise and demand to fall or supply to fall and demand to rise. Keeping up with the latest trends is an important part of Forex trading for beginners.
- Too much leverage – If you choose to use leverage in your trades, a broker can enable you to increase the amount of trading you can do. If your trade is successful, you must pay the broker a small percentage of your profits. If it is unsuccessful, you could lose a significant amount of money very quickly. We recommend you avoid relying on leverage for the first year of your Forex trading experience. When you do decide to use leverage in your trading, you should keep your leverage amounts low to limit the risk of high losses.
Know Your Limits
Trading on the Forex market requires maturity and self-restraint. For best results, it is best to trade only with money you can afford to lose. Staying within your budget will prevent you from experiencing large, devastating losses.
- Recognise how much money is “too much” to lose. Consider writing this amount on a sticky note near your desk. Keeping this number visible can help you keep your budget at the front of your mind.
Realise that it is perfectly okay to stop trading for the day even if you are “walking away while in the red.” Even experienced traders sometimes end their day in the red. If you continue pouring too much money into your trades in an attempt to claw your way out of the red, it can result in a considerable loss.
The most crucial step to learning Forex trading is simply budgeting out the time to set up your first account and learn about the ins and outs of the Forex market. If you dive straight into Forex trading without prior research, you will almost certainly lose your money. Luckily, with our variety of resources, you can learn about Forex trading for beginners.
We were once Forex beginners ourselves, and we know how intimidating it can be to start trading on the Forex market when real money is at stake. Fortunately, with a good Forex trading course, you can learn everything a beginner needs to know about Forex trading from the comfort of your office chair.
If you enjoy Guerilla Trading’s online resources, you may also be interested in downloading the free Forex trading app. When you join the Guerrilla Trading community, you will receive access to our Forex trading forums for beginners, which give you a place to talk with other Forex traders around the world.
Questions about Forex trading for beginners? Get in touch with us today.
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Do you want to learn more about Forex? Or would you like to understand how Forex experts achieve their trading goals? Speak with our team now and we will be more than happy to help.