There are so many people out there who don’t know what and how forex trading works. In this article, as a beginner, you will learn more about how to get started with online forex trading as a beginner. The goal of this article is to give you enough information forex trading basics and how to trade by yourself. Forex also includes so many terms such as pip, tick, margin and many more. You will learn everything in this guide.
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Understanding forex trading
As a beginner, when you want to buy or sell stock, you select how many stock you want to sell or buy. You then choose a currency, whether USD, AUD or EURO. When buying a stock, you need to know your starting point. 1 lot is equivalent to 100,000 units of base currency. For example, 1 lot for EUR/USD equals to 100,000 Euros while 0.1 lot is equivalent to 10,000 Euros.
Knowing these forex trading terms, you will be able to decide how much base currency you would wish to invest. However, all this money won’t be available in your forex account, which is why you only have to split.
Losing money in forex trading
Most traders who don’t know leverage tend to lose lots of money. Some beginners jump into things without understanding what is going on or what is really happening on the forex market. For example, if you have USD 10,000 you can open a position and make good money. However, if you close your position when the currency or the market is not doing well, you will lose lots of money or even your whole money.
With that being said, it is important for new forex traders to start trading with lower amounts. Forex is not different from stock market, you cannot expect to trade with huge amounts because it’s too risky and you will lose your money. For beginners, it is advisable to start learning on smaller capital.
Getting started with forex trading
For all the beginners out there, it is now the time to put into practice what you have learnt about forex trading. Unlike back in the day, today it’s easier to start online forex trading. As long as you have a good internet connection, a trust worthy broker, and a personal computer, you can open a forex account. Below are the steps that you need to follow in order to start forex trade:
- Forex Broker – in order to start trading, you need to have a forex broker. You will need to select a forex broker since there are so many brokers out there. If you are still new, it is difficult to choose the best one. However, you don’t have to worry because most forex brokers offer demo accounts so that you can test and practice your trading skills before you start using real money. To get a demo account, you need to register with a forex trading company. A real forex broker should give you an option to trade with lower amounts such as micro and nano amounts.
- Forex trading software – after registering your trading account, you will then need to install forex trading software into your computer or laptop. Popular trading software include MetaTrader4 platform or eTorro. Others offer you custom platform which best suits your needs.
- Trading using Mac – MetaTrader is a Windows application. Meaning it won’t work on your Mac. You will then need to install Wine software in order to run MetaTrader4. Whichever works for you, choose it or do an intensive research about different types of forex trading software for a better trading experience.
- Add funds – after registering an account, you then need to deposit money. It is easy to get started and you can start with as little as $100, but different traders require different minimum amounts.
- Testing the platform on demo account – after installing MetaTrader4, you can now test it on your demo account. Test how forex trading works, how to open and close a position or how to stop loss.
Trading on forex demo accounts
Now that you understand what it takes to start forex trading. You need test trading on a demo account. Demo accounts are funded with virtual money and they simulate real money forex trading accounts. This way, it is better because you will learn more about how to close a trade before losing money.
Advantages of forex demo trading
- You trade with fake money. You won’t lose real money and there are risks involved
- You can test your trading skills
- You can come up with forex trading strategies
- Forex demo accounts give you an opportunity to make mistakes
Disadvantages of forex demo trading
- You can gain more money but unfortunately, it’s not your real money since it’s fake account
- Your reaction is not sincere when losing money because you know it’s not real money
Learning to trade forex
There are a few steps that you need to follow as a forex trading beginner. Even though we’ve explained about demo accounts, there are lots of questions that are not answered. Below are the steps that you can take to learn more about trading forex.
- Mentor – you need to find a mentor. Finding a mentor is easy, just follow other traders and ask them to mentor you. However, most people don’t want to do things for free, you will need to fund him/her so that they teach you trading tips and strategies more faster. Don’t approach a mentor if you have no basic knowledge about trading forex. The mentor is there to guide you and not to teach you a basic understanding.
- Learn to trade on demo – before you start trading using real money, you need to practice your trading skills on a demo trading account. Test different currencies and come up with different strategies.
- Trading books- read forex trading books to learn more information. There are so many books out there which will help you understand forex trading even more. You can search on the internet or visit your nearest library.
- Articles and blogs – use search engines such as Google to research more information about trading.
- Forums – you can join online forums where fellow traders share their forex trading experiences, their skills and how to better themselves.
- Social media – use social media to connect with other traders. Follow them on Twitter and add them on Facebook so that you will stay in touch and learn more.
Trading with real money
Now that you know a little bit about forex trading, it’s time to start trading with real money. After practicing using your demo forex account, you need to fund your account. Most of you might be wondering how much do you need to start forex trading. Well, trading can start as little as $100 depending on the broker. Even though your start price is not enough, you can make some good money before moving to big cash. Never ever trade with the money you don’t have or you don’t plan to lose. Remember to take full responsibility because some people lose lots of money through forex trading.