Forex Trading for Beginners | Forex Trading Guide (2024)

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

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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.

For a more detailed definition of forex, visit our page on 'what is forex​'.

Trading forex step-by-step guide

  1. Open a spread betting or CFD trading account. You can open a live or demo account to trade on price movements of forex pairs.
  2. Start researching to find the FX pair you want to trade. Use our news and analysis section to keep up-to-date with market news which may impact FX, and our market calendar to keep updated with market-moving events.
  3. Based on your research, decide if you want to buy or sell. Is the research you’ve conducted indicating the base currency (the first-named currency in the pair) is likely to weaken or strengthen? Go long and ‘buy’ if you believe it will strengthen, or go short and ‘sell’ if you think it will weaken.
  4. Follow your strategy. Before placing a trade, ensure you have followed your strategy which should include risk management. Also, see our tips on building a trading plan.
  5. Place your forex trade. As per your strategy, place your forex trade with defined entry and exit points. Don’t forget to use risk management conditions, such as a take-profit or stop-loss order.
  6. Close your trade and reflect. By following your trading plan, exit the market at your forecasted limits. Think about how you performed, so that you can improve after each trade you make.

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 when currency trading​.

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.

We offer trading on over 300 FX pairs through both spot prices and forward contracts​.

Forex leverage

When you trade forex with a spread betting or CFD trading account, you trade with leverage. This means you only need to put up a portion of the full trade value to open a position, known as trading on margin​. However, your exposure in the market will be based on the position's full trade value. It’s important to understand that both profits and losses are magnified when trading on leverage. Find out more about leverage in forex​ here.

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Forex holding costs

When trading forex with us, a holding cost is applied which is either credited or debited to your account depending on the direction you’re trading, and the applicable holding rate. Holding costs are evident when you hold a position open past the end of each trading day (5pm EST). Generally, when you hold a buy position, a holding cost is credited to your account. If you hold a sell position, the holding cost is debited from your account. Find out more about CFD holding costs​.

Beginner forex trading strategies

Forex trading strategies are usually differentiated by timeframe and market-specific variables. Strategies include trading market movements in minutes, or over several days. As a beginner you can test different forex strategies with a forex demo account and measure their relative success rate and suitability. You may also wish to try out and choose your preferred technical indicators for entry and exit points, and blend different aspects from several strategies. Some of the most common forex strategies include:

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  • Forex scalping​ is where traders hold multiple short-term trades and build profit based on small but frequent winning trades. This strategy may be best suited to traders who can commit a large proportion of their time to trading, and are more focused on technical analysis.
  • Forex day trading​ is for traders who enter and exit at least one trade per day by predicting daily market movements, and are look to avoid overnight holding costs. This trading method may be best for traders who aren’t very comfortable with the extremely fast-paced trading methods in scalping, but still prefer shorter-term trading methods.
  • Swing trading​ forex may be best suited to traders who prefer a balance between fundamental and technical analysis. Positions are open for several days, with the aim to buy at ‘swing lows’ and sell at ‘swing highs’, or vice versa if going short. Less time is spent analysing market trends in this method over some others, and there will be overnight holding costs and more chance of the market ‘gapping’.
  • Position trading​ involves holding positions over long-term periods and ignoring short-term price fluctuations. Position trading may be best suited to traders who spend more time understanding market fundamentals, and less time undertaking technical analysis or executing trades.

To find out more about the types of strategies you can adopt when trading forex as a beginner, visit our forex trading strategies​ guide.

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5 forex trading tips for beginners

  1. Understand the markets for both currencies: have an understanding of both currencies you are trading as part of the currency pair. Be aware of the main macro-environmental forces that could affect the markets you’re exposed to.
  2. Stick to your trading plan: following a trading plan will help you to take emotion out of your trades, and predetermine your entry and exit strategies. This structured way to trade markets can help to keep trades consistent and emotions at bay.
  3. Test, evaluate and try again: trading is about evaluation after each trade, in order to analyse what worked and what didn’t. When trading as a beginner, you will need time to develop a good trading mentality and understand that your trading psychology is a work in progress. You can test your trading strategies on our forex demo account.
  4. Follow the classic mantra: ‘cut your losses and let your profits run’, as part of your trading psychology. Don’t be tempted to take profit as soon as it appears, or be afraid of making a loss. Follow your trading strategy, and implement risk-management conditions to remove emotion from your trading.
  5. Choose the best trading partner for you: a reliable trading platform, customer service and consistent spreads are some of the important factors which help to determine your overall trading experience. Learn why traders choose CMC Markets.

Where to trade forex

You can trade forex via a spread betting or CFD trading account via desktop or mobile devices. Besides forex, you can access to thousands of financial instruments, including indices, cryptocurrencies, commodities, shares, ETFs and treasuries. Learn about our range of markets​.

Forex trading platform

When learning how to trade forex, many beginners struggle with the overload of information on trading platforms, and their lack of usability. When trading forex on our online trading platform, it’s worthwhile opening a demo account, which allows you to get accustomed to opening and closing trades, and practising your trading strategy. You can personalise our trading platform based on your preferences.

Forex mobile trading app

Whatever your level of trading experience, it’s crucial to have access to your open positions. With our award-winning mobile trading app​, you can access all of your positions, open and close trades with full order ticketing, use our fully functional charting software, and access many more features.

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Summary

Once you’ve understood the basics of forex, try putting your new-found knowledge into practice with a demo account below. You can test forex strategies and tips, and start to create a trading plan to follow. Once you’re comfortable with a strategy using the demo account, including managing your risk, and are familiar with the trading platform, you can open a live account to trade on forex for real.

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Forex Trading for Beginners | Forex Trading Guide (2024)

FAQs

How do I teach myself to trade forex? ›

Preparing for Your First Forex Trade
  1. Step 1: Learn About the Forex Market. ...
  2. Step 2: Choose How You Want to Trade Forex. ...
  3. Step 3: Choose a Broker. ...
  4. Step 4: Open a Trading Account. ...
  5. Step 5: Prepare a Trading Plan. ...
  6. Step 6: Choose a Forex Pair to Trade. ...
  7. Step 7: Analyse the Market. ...
  8. Step 8: Buy or Sell.

Is $100 enough to start forex? ›

Overall, while it is possible to start trading forex with just $100, it is important for traders to approach it with caution and to have a solid understanding of the market and their own risk tolerance.

Is $500 enough to trade forex? ›

This forex trading style is ideal for people who dislike looking at their charts frequently and who can only trade in their free time. The very lowest you can open an account with is $500 if you wish to initiate a trade with a risk of 50 pips since you can risk $5 per trade, which is 1% of $500.

How long does it take for a beginner to learn forex? ›

It could take two to three weeks to learn how to trade forex. Probably even earlier if you dedicating 15–16 hours a day. However, the sad fact is, even if you dedicated yourself 24/5, doesnt mean your going to be a succesful trader. Success comes from trial and error.

Is forex trading like gambling? ›

Forex trading vs. gambling: Forex trading may appear similar to gambling, but there are key differences. While gambling relies on chance and randomness, forex traders can use strategies and tools to tilt the odds in their favour. Importance of self-control: Successful forex trading requires discipline and self-control.

Is $1000 enough to start forex? ›

Conclusion. In conclusion, $1000 is enough to start trading Forex. However, it's important to have a realistic trading plan and manage your risk carefully.

How much money do I need to start forex? ›

Answer - You can start trading with as little as $10 or invest more, like $100, $1,000, or even $15,000. Higher investments can potentially lead to higher profits in forex. However, it often requires substantial investments to achieve significant gains.

What is the best currency to trade in forex as a beginner? ›

Best Currency Pairs to Trade for Beginners
  1. EUR/USD. Traders who are new to forex can benefit from the low spreads, low volatility and liquidity features of EUR/USD, one of the most popular currency pairs in the world. ...
  2. GBP/USD. ...
  3. USD/JPY. ...
  4. USD/CHF. ...
  5. AUD/USD.

Can forex make one a millionaire? ›

The answer is yes! Forex can make you a millionaire if you are a hedge fund trader with a large sum. But forex from rags to riches for the majority is usually a rocky and bumpy ride which often leaves some traders in their dreams.

Do you need $25,000 to day trade forex? ›

Why Do You Need 25k To Day Trade? The $25k requirement for day trading is a rule set by FINRA. It's designed to protect investors from the risks of day trading. By requiring a minimum equity of $25k, FINRA ensures that investors have enough capital to absorb potential losses.

Can I day trade with 1000 dollars? ›

Believe it or not, you can start forex day trading with $1,000 or even less. It requires mastering position sizing and managing risks, but if you navigate your way to success, the rewards can be significant. In this article, we will discuss in detail how you can day trade with $1000.

How much can I make with $5000 in forex? ›

So… How Much Can You Make Trading Forex?
Trading Capital3%/mo
$5,000$150
$10,000$300
$20,000$600
$50,000$1,500
1 more row

What is the average profit per month in forex? ›

Profits depend on multiple factors

A good forex trader anticipates a return of 5%–10% per month, on average. Considering this to be a minor target is realistic and sustainable. While some traders may have higher targets, that, of course, is not without additional risk.

Can a beginner make money in forex? ›

Yes, it is possible for a beginner to make money in the forex market with proper training and education, but it is not easy or guaranteed. Forex trading involves a lot of risk, and you need to have a solid understanding of the market, the trading platforms, the strategies, and the psychology involved.

Can you learn forex alone? ›

Yes, you can learn to trade by yourself, without a course, if you are patient and understand that it will take a lot of time! Trading is a competitive industry, and to succeed you will have to pave the path for your own success.

Can I forex trade on my own? ›

Brokers work with liquidity providers and have segregated accounts for client funds. To trade forex without a broker, one can buy currency at a bank or currency exchange office and sell at a higher rate. Another option is trust management, where you trust a manager with your money for investments.

How hard is it to learn forex? ›

There is a steep learning curve and forex traders face high risks, leverage, and volatility. Perseverance, continuous learning, efficient capital management techniques, the ability to take risks, and a robust trading plan are needed to be a successful forex trader.

How should a beginner start trading? ›

Here is a day trading guide for beginners
  1. Learn the basics of the stock market.
  2. Choose a broker.
  3. Set up a demo account.
  4. Develop a trading strategy.
  5. Start small.
  6. Be patient.
  7. Manage your risk.
  8. Take breaks.

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