Introduction to Trading for beginners

Forex trading for beginners

Learning to trade forex can be a tough topic for beginners, but this article will help you get started trading forex. This trading guide covers real-life forex examples, basic forex principles, beginner strategies, tips for success and a step-by-step guide to getting started.

What is forex trading?

Forex trading is the process of speculating on currency price movements, with the aim of making a profit. Many currency conversions on the forex market are for practical use, and not for creating profit. However, traders can speculate on forex market price movements, with the aim of capitalising on correctly forecasting these movements.

Forex trading examples

When placing trades on the forex market, you are trading the strength of one currency against another. For example, if you go long and ‘buy’ USD/GBP, you are speculating that the US dollar price will increase, relative to the price of the pound. Alternatively, if you go short and ‘sell’ EUR/AUD, you are speculating that the euro will weaken in comparison to the Australian dollar.

Example trades are a useful way to learn the process of forex trading. Our forex trading examples show the opening and closing of a trade position, and how to calculate the accompanied profit associated with the trade.

Forex basics

As a forex trading beginner, it’s important to understand the basics of the forex market. These fundamentals will help your understanding of the key aspects of the foreign exchange market and ultimately help you to make informed decisions.

The foreign exchange market

Forex, foreign exchange, or simply FX, is the marketplace where companies, banks, individuals and governments exchange currencies. It’s the most actively traded market in the world, with over $5 trillion traded on average per day. When trading currencies on the foreign exchange market, currency pairs are often split into major, minor and exotic (or emerging) currency pairs.

The US dollar is considered the most popular currency in the world, and constitutes around 60% of all central bank foreign exchange reserves. So it’s no surprise the US dollar is evident in many of the ‘majors’ (major currency pairs), which make up 75% of all forex market trades. As a beginner, it may be wise to trade the majors, as they’re known to be the most liquid and least volatile of the currency pairs.