Currency trading for beginners – Things you have to know

The foreign exchange market, also known as Forex, is the largest financial market in the industry. Because of its scale and opportunities it offers, tens of millions of traders buy and sell currencies every single day in this market.

As a beginner in Forex trading, who wants to succeed in it, you need to understand what currency exchange is and how it works. It is a process of exchanging one currency into another one, usually for commerce, trading, or even tourism. According to the official data from the Bank of International Settlements, the average turnover of the foreign exchange reached around $5.1 trillion in 2019, which represents the scale and importance of this market.

After understanding the purpose of this market, then the time comes for you to master the ways to generate payouts in it. Whether it’s buying the currencies at a lower price and selling them at a higher, or the other way around, this currency trading 101 will help you understand the mechanics of Forex trading.

Guide to Forex trading – Major concepts

As we have already said, Forex trading represents the biggest market around the world. While trading currency pairs, there will be a lot of things that you should keep in mind – fundamental analysis, technical analysis, political events around the world, and many other things. What happens to Forex trading beginners is that they are getting very confused when they start trading Forex.

One thing that we would recommend to get Forex trading information, is to take everything one step at a time – learn about how the market works first, see what are the currency pairs that you can use, how they are changing, why they are changing, then look up the political events that are happening. Do they have any influence on the changes? If they do, remember the type of events that are happening, and use the information that you got in the future.

A very interesting thing about Forex trading is that once, not that long ago, it was only accessible for the biggest financial companies around the world, like banks, for example. Several decades ago, not everyone had access to this market, but, recently, it has changed a lot.

Thanks to the development of the internet, the Forex trading market got a huge following. Today, virtual currency trading is very popular around the world. This market has used everything that modern technology had to offer, thanks to which, more than ever before, Forex can be traded by retail traders all around the globe.

To learn Forex trading for dummies, it is very important for traders, especially those who are new to the market, to use every source that they can find. A great way to start learning about Forex trading is by using books.

Currency Trading for Dummies book review

If you are one of those people who are planning to get into this market but have a hard time deciding where to start, it is a great idea to use books. One of the best ones that you can find is Currency Trading for Dummies, which has helped many people around the world in the process of learning and starting out in the market. The greatest thing about this book is that the author does his best to make sure to explain hard and confusing concepts in the simplest way possible.

Currency Trading for Dummies Latest Edition is a perfect book for this ever-changing market and gives traders the ability to learn more than ever before. The currency trading market is known to be changing very frequently, but it also has the ability to offer traders a lot of benefits.

This book was initially published 13 years ago, in 2007, by Brian Dolan. The book touches upon every little detail about Forex trading and offers a very good insight into Forex trading for the dummies. While working on the currency trading for dummies review, we found that this book is one of the most popular ones in the market.

There also is an online version of the book available, so that you can download currency trading for dummies and learn more about trading.

Online Forex trading for dummies

It’s true that online FX trading is very popular and useful, and it did help the market to become what it is today. But, a lot of challenges came with it as well. Today, the internet is full of scam companies, that are lying to people, in hopes of stealing their money. Recently, the number of scam FX brokers has increased a lot, creating a very dangerous situation for traders.

Jurisdictions all over the world had a very hard time overcome this challenge, but, they came up with this idea to give regulatory bodies enough power to not only oversee the market but also to take accurate measures when needed. Because of this, there are some restrictions on this market all around the world, but, every single regulatory body works in its own different way.

When you are trying understanding currency trading, you must know that when you are trading Forex, something that you will have to deal with is the currency pairs. There are three types of currency pairs available on the market:

• Major Currency Pairs
• Minor Currency Pairs
• Exotic Currency Pairs

All of these three are very different from one another. We will talk more about this later in the guide, but to give you a general idea, major currency pairs are the ones that are made up of USD and another major currency, such as JPY, EUR, GBP, and many others. The minor currency pairs are the ones that are made up of major currencies but without USD. Lastly, the exotic currency pairs are the ones that are made up of national currencies of developing economies.

Forex trading is known to be the most liquid market, which is one of the major reasons why so many people are interested in it. Because there are so many changes happening on the market every moment, it is full of opportunities, yet, there also are many risks that should not be ignored by traders.

If you are looking for a Forex broker to trade with, you should not rule out the importance of regulations. No matter what you are doing in this market, it will be connected to huge risks. To make sure that you do not make the situation worse, you should only use regulated and trustworthy Forex brokers.

Forex brokers – Stay safe while trading

While working on this currency trading beginners guide, we wanted to make sure to help those who are just starting out on the market in taking further steps on the market. However, before you decide to do anything, you must be sure that you are trading with a broker that can safeguard you and your hard-earned money.

We can’t stress enough how important regulations on this market are. We have all heard the horror stories about people who have lost all of their money after trusting wrongful Forex broker, remember, there are many companies that might say that they are regulated, while, in reality, they are scams. One way to make sure that you are trading with a trustworthy Forex broker is to contact the regulatory body directly.

Some of the top regulators on the market have special pages dedicated to the Forex brokers that they have regulated, if there is no such page, you can always contact the regulator and ask them about the regulatory status of the Forex broker that you are planning to use.

Check out our top Forex Broker reviews:

• XM
• AvaTrade
• TradeMarket 

Different types of regulators

There are many regulatory bodies around the world, and all of them have different requirements and all of them have different reactions to misconduct. There are some that are very strict, and there are some that give more freedom to traders and brokers. For example, in the United States, only the Forex broker that is authorized locally are able to offer services to the people of the country.

On the other hand, Asian regulators are not as strict (excluding Japan and China) and they give out licenses very easily. Recently, the main regulatory body of Australia, ASIC, has changed its regulatory framework a lot. Now, in Australia, the maximum leverage has become a lot lower than it was. In Europe, regulations are very strict as well. The recent trends are showing that regulatory bodies around the world are adopting more restrictive measures than before, to safeguard the rights of traders.

When talking about currency trading, there are not so many things as important as regulations are. They are something that can be used by traders to both stay safe, and find the brokers that can actually offer them well-developed, safe, secure, and transparent services.

Currency pairs in Forex trading

We have already talked a little about currency pairs in the world of Forex trading, but there is a lot more that you should know about them. First and foremost, as we have already said, there are three types of currency pairs available on the market: Majors, Minors, and Exotics.

Which one you will decide to trade will have a huge impact on the experience and outcome of the trading in the end. In general, most of the Forex traders prefer to use major currency pairs, especially EUR/USD, which is the most traded currency pair on the market.

One of the biggest reasons for the popularity of this currency is the fact that it is very liquid. While working on this currency trading guide, we found that the absolute majority of traders love this market for its high liquidity, and it should not come as a surprise that the currency pair that is known for its liquidity is so much popular in the market.

Among the most popular major currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, etc. These are known to be the most heavily traded currency pairs on the market. Around the world, the US dollar, Euro, Japanese Yen, British Pound, and Swiss franc are the most traded currencies. They are very popular on the market, especially the currency pair of EUR/USD, which is the most heavily traded currency pair. It represents 20% of all Forex transactions around the world.

Minors & Exotics

The currency pairs that are not associated with the USD are called minor currency pairs, or, sometimes, cross-currency pairs. They have a little wider spread, and they are not as liquid as major currency pairs. The best cross-currency trading example is the following pairs: EUR/GBP, GBP/JPY, and EUR/CHF. They are known to be the most traded cross currency pairs.

Lastly, the exotic currency pairs are the ones that are from emerging markets. These currency pairs are many times regarded to be the hardest ones to trade because of a very simple fact: they have very wide spreads, while not being liquid at all, especially compared to other currency pairs on the market.

In today’s guide, we have discussed a very popular book. If you are having a hard time using currency pairs, understanding Forex trading for dummies become very easy with that book, so we recommend using it if you are still a little confused about currency pairs.

While choosing which currency pair to trade, you have to be very focused on what your needs on the market are: it might be very hard for some to trade exotic currencies, for example, while for others, they might be the best options. In general, it is much easier to do research about major currency pairs, which is why they are used so actively by so many traders around the world.

Forex trading dictionary

When you are getting started in this market, the currency trading education that you have is of utmost importance. Many people find it very hard to understand the major concepts about Forex trading, but, in reality, they can be explained in a very easy way.

There are several major concepts that you should understand about Forex trading. When you are trading Forex, there are several factors that you should know and understand very well.

In the world of Forex, while trading, you will have to understand what pip stands for. This is a very important part of Forex trading and stands for 0.0001 change in the currency pair. So, to better understand pips, let’s discuss a Forex trading example: if the currency pair EUR/USD stands at 1.16776, and it increases to 16777, it means that it has increased with one pip.

In the process of currency trading learning, one very important thing that you will have to know is the lot. Lot, on the Forex trading, is the specific amount that is traded in Forex. The standard lot size is 100,000 units, which means that 1 lot equals 100,000 units. There also are mini, micro, and nano lot sizes available on the market, mini been 10,000, micro 1,000, and nano 100 units.

While trading Forex, there will be a certain amount of money that you will have to pay for the services that you are using, This money is very important for Forex broker to offer you good and well-developed services. One of the types of the commission that you will have to pay is the spread, which is the difference between the purchase price and the sale price of the currency pair.

The amount of spread that you will have to pay depends a lot on the currency pair that you are trading. For example, the more liquid and popular currency pair is, the lower will be your spreads. For those that are not being that often traded, the spreads are a little higher. To better understand all of the concepts about FX trading, we would recommend using Currency Trading for Dummies Full Edition.

Forex leverage – How does it work?

The main idea behind Forex trading leverage is that it offers traders the ability to make their income in the world of trading bigger. This is how it works: if you are trading with a leverage of 1:100, for every $100 on your account, you will be able to trade $10,000 worth of positions.

Although there are many people who enjoy trading with high leverage, Forex traders should keep in mind that leverage is connected to a lot of challenges and risks. While learning about currency trading basics, it is very important to understand the risks that come with leverage.

Forex trading is a very risky market, and as we have already said, very liquid as well. It is changing every moment, and if something really important happens in the world of finance or politics, the price of certain currency pairs might change drastically out of nowhere.

If you are using high leverage while something like this happens, you might end up losing all of your funds. Even more than that, you might end up losing all of the money that you have on your trading account and even more than that. To avoid it, some Forex brokers have the service called Negative Balance Protection, thanks to which, you will be guaranteed that no matter what happens, you will not lose more money than you have on your trading account.

With the help of the negative balance protection, all of your positions will be automatically closed once your account balance nears zero. But, not all brokers offer this. Because of this, it is very important to always trade with trustworthy and reputable Forex brokers that actually care about you and your funds.

When should you use leverage?

If you want to learn currency trading, you should learn little details that are involved in this market. Leverage is a very important part of this market, and if you want to be successful, you should know how, when, and where to use it. If you are a complete beginner, it would be better to use as little leverage as possible.

If you have just started Forex trading, it would be much better if you used leverage between 1:10 and 1:20, or not at all. Once you have gained enough experience in Forex trading, you can start using higher leverage. But, using leverage also depends on the trading strategy that you are using.

For example, if you are using trading strategies such as scalping or day trading, it means that you will be opening very short positions. Especially with scalping. If you use this strategy, you will be opening and closing several very small positions during the day, without using leverage, it simply can’t be profitable at all.

Also, while using leverage with scalping, even if you lose, the loss won’t be that much, because the positions that you are opening as scalper will be very small. While working on this 101 to Forex trading, we found that there actually are many people who trade in this market without understanding the strategies that are available, so, before you start trading, look for the strategies that you can use in this market.

On the other hand, there is no need of using leverage while trading with larger positions. In this case, the risks are increasing as well, so it would be much better to avoid high leverage while trading with large positions.

How to learn more about Forex?

There are numerous sources that you use to learn more about how Forex trading works. For starters, over the years, there have been tens of different currency trading books published all around the world. These books are a great way for traders to learn more about the market and the way it works.

Also, do not forget that we are living in the age of the internet, where finding needed information is not a challenge anymore at all. The internet is full of information about Forex trading, there are different types of forums where you can very easily meet other Forex traders, exchange knowledge, look for tips, and many other things.

The best thing about the Forex trading market is that some of the best Forex brokers in the market offer traders special educational material. These educational materials can be used by beginners to learn more about Forex trading, most of the material includes webinars by some of the most successful traders in the market. It is a great opportunity to learn from the best people, who actually know how the market works.

Finding the best currency trading wiki for you online is not hard at all. There are tons of materials on the internet that you can use to grown and further develop as a trader.

Forex trading accounts

When you are trading Forex online, you will need to have an online trading account. Every Forex broker offers different types of trading accounts, created for traders of all backgrounds. These accounts can be very diverse, yet the main idea behind them is very much the same.

To access the Forex trading market today, a trading account is something that you will absolutely need. Every broker has accounts for beginners, intermediate, and advanced traders. These account types offer different types of services, some of them are created for those who like to trade with huge amounts of money and offer traders high leverage, while others are for those who are just getting started in the market.

There also are VIP accounts with special offerings for traders. Although these types of accounts are not as popular as they were in the past, you will still be able to come across them today.

Currency trading demo account

A huge majority of all Forex brokers on the market today offer demo trading accounts. This is one of the best ways to learn more about Forex. While using a demo account, you will be able to trade Forex without opening yourself up to any risks. The demo account is one of the best ways you can start trading. Demo accounts are a great option for those who are looking for ways of training in Forex trading market.

While using this account, the Forex broker that you are using will provide you with virtual cash, that you will be able to use for Forex trading, Once you have spent all of the virtual cash, you will be able to ask for more and trade with it. Although you will not be getting any fortune with this account, you will still be able to get the real-life experience of Forex trading.

A very interesting thing about this account type is that many people think that it can only be used by beginner traders, which is not the case at all. Using this account can be very beneficial for even the most experienced Forex traders, because it offers them the ability to test out different types of strategies, try out different tactics, and see which ones work for them the best. In short, demo currency trading can be very helpful for traders.

Also, while using this account, you can see how exactly the broker works. You can get used to the way the charts look and learn a lot about trading and the broker as well. However, do not forget that with a demo account you will be trading without any emotions, which is not the case with real-life trading at all.

While trading Forex with a live account, you will have to deal with a lot of emotions. Keep in mind that real-life trading will be totally different from the experience that you will get on the demo account in terms of emotions, so, keep in mind that after the demo account, you will gave to get used to the feeling of real-life trading.

Islamic trading account

When it comes to Forex trading, it is something that is created for everyone. To make sure that everyone around the world has the ability to invest in this market, Forex brokers are coming up with new ideas. One of them that is working very well is the Islamic account. This gives traders who are following the beliefs of Islam the ability to trade Forex without paying any amount of money swaps. This account type is also known as the swap-free account.

As it is known, Sharia law prohibits people from paying or receiving any amount of interest, with the help of swap-free accounts, those who follow the beliefs of Islam are able to invest in this market without any problems.

Choosing account type

Even if you understand anything behind the account types in currency trading, you might still have a little hard time deciding which account to create and which will work better for you. One thing that we can recommend is to try and understand what it is that you are looking for in this market.

If you are an absolute beginner in this market, it is very important to use the account type that offers low leverage, tight spreads, and diverse account types. Currency trading for beginners can be very confusing, because of this, it is of utmost importance that you use something that fits all of your needs the best.

Forex trading platforms – Forex trading for beginners

Understanding basic concepts about Forex trading for beginners and dummies might be a little confusing, but, no matter what you do in this market, you will be dealing with FX trading platforms. While trading Forex, one thing that will determine your whole experience is the trading platform. The trading platform is something that will give you access to the trading market, a lot depends on it. There are tens of different trading platforms available in the market, and every single one of them is very different from one another.

The most popular trading platform around the world is MetaTrader 4, also known as MT4. MT4 was developed by a Russian company called MetaQuotes, which is a very famous company. The trading platform was created 15 years ago, and since then, it has managed to get a huge following worldwide. As official data shows, more than 90 percent of all Forex brokers on the market are offering MetaTrader 4. While talking about Forex trading education, it is of utmost importance to understand how the trading platforms work, because they are the main thing that you will have to use while trading.

Recently, the Russian company also issued an update of MT4, called MetaTrader 5. However, MT4 still manages to be a more popular version. MetaTrader also has a web-based version, called Webtrader. This trading platform offers traders the ability to trade Forex without having to download any additional applications, directly from their web browser.

Forex trading with smartphones

Over the years, the mobile industry has changed and developed very fast. Today, smartphones are used by almost every industry around the world, and Forex trading is not an exception either. Today, most of the Forex brokers around the world are offering traders special versions of trading platforms for both, iOS and Android devices.

With the help of this, traders are now able to invest in this market from anywhere they want to. This is great news especially for those people who are always on the go. Now they are able to use this market very easily and if they see that there is some type of movement in the market, they can directly act on it without having to wait to get back home.

Forex 101 – trading strategies

While trading Forex, you will be able to choose between different strategies. That said, you can also come up with one on your own, but because this market is so risky, it is always better to trust something that has already been used and is proved to be helpful.

Forex is a market that has something to offer every type of trader. Whether you are looking at Forex trading as a full-time job, or you are someone who wants to simply open positions and go on with their day, there is something that you can find very easily.

If we look at Forex trading strategies, it can be seen that while there are some short-term strategies, there also are several long-term trading strategies as well. No matter which one you are planning to use, however, keep in mind that you will have to go through Forex trading training to have a good outcome.

One of the most popular strategies in the market is scalping. When you are using this strategy, you are opening and closing several positions during the day. For this strategy users, it is very smart to use high leverage, to make sure you get some profit. The positions that scalpers are opening generally last several minutes. When using this strategy, you will have to sit in front of your computer the whole day, meaning that you will have to dedicate all of your time to trading.

Forex day trading 101

Day trading is another very popular short-term trading strategy. Day traders are opening position at the beginning of the trading day, and closing it before the end of the trading day. While using this strategy, just like scalping, you will be able to avoid overnight swaps and risks, that might cost a lot to other traders.

But, while using it, you will most probably have to look at Forex trading as a full-time job, because you will have to dedicate much of your time to Forex trading. Day traders have to do very intensive research to make sure that they are up-to-date with the changes that are happening in the market.

While continuing the Forex trading learning process, you will see that there also are long-term trading strategies as well. While using those strategies, such as long-trading strategy and swing, you will be opening positions for longer periods of time. While using the swing strategy, the positions that you will open will last from several weeks to several months.

Using this strategy means that you will have to open yourself up to a lot of risks, such as overnight swaps, for example. The same is true for long term trading strategy. Some long term traders have positions open for several months, and if you are someone using this strategy, you should try to use smaller leverage to make sure that the risks that you are facing are limited.

Forex trading explained – Payment methods

Once you have found a broker and created a live trading account, it is now time for you to make your first payments. There are several payment methods available in the market, and the ones that you will be able to use depends a lot on your location and the broker that you are using.

Most of the Forex brokers in the market offer traders to make payments using credit/debit cards, direct bank transfers, and online payment methods. In most cases, card payments and bank transfers are the ones that take the most time, so if you want to make your payments as fast as possible, using online payments is the way to go.

On the other hand, there are many people around the world who want to use more traditional ways of payments, such as credit cards and bank transfers. Recently, mobile payment methods have become very popular among FX traders as well. The thing is, there are many payment methods available around the world, and you should use something that fits your needs the best.

Tutorial on Forex trading – Cost of trading

When you are trading Forex, you must understand that they will be a certain amount of money that you will have to pay for enjoying the services. First of all, when you start making deposits, you will most probably have to pay a certain amount of money for fees and commissions.

The amount of money that you might have to pay largely depends on the Forex broker you are using and the payment method. In most cases, some of the top Forex brokers charge very small fees, but, always make sure to contact your payment issuer, especially if you are using credit cards, to learn how much money you will have to pay for commissions while making deposits.

Also, any available Forex trading tutorial will tell you that you will have to pay spreads while trading Forex. Now, many people have a very hard time understanding why they have to pay spreads. The thing is, when you are trading Forex, you are enjoying services that were created by people who have worked very hard on them.

Paying spreads while trading Forex – Forex trading explained

The Forex broker needs to have some type of income to maintain the company and offer you great services. This is one of the major reasons why Forex brokers are charging traders spreads. The amount of spreads that you will have to pay depends on several factors.

Some of the Forex brokers charge different amounts of spreads from different types of account holders. Also, the currency pair that you are trading will also have an influence on the number of spreads charged. If you are using more liquid currency pairs, such as, major currency pairs, you will have to pay lower spreads, while for those who are trading exotic currency pairs, the spreads are higher.

Also, if a Forex broker tells you that they are not charging any amount of spreads or commissions, there is a huge chance that the broker is a scam company. For brokers, the money that they are getting is vital, because they need a certain amount of money to offer you their services. Spreads are the amount of money that you are paying to the broker for their services, and there is nothing bad about it.

Final thoughts on how to start Forex trading

The foreign exchange market attracts millions of traders from around the world with its vast opportunities for profit. If you are planning to start trading in this market, getting to know its basics, as well as some of the more complicated driving forces, is usually a good idea.

There are many elements that go into this market, and if you want to stay safe, as well as profitable in it, you need to understand them properly. Over the last few years, Forex trading has become more popular than ever before, and it is accessible for people all around the world.

So, if you want to start trading Forex, do not hesitate. Look for different types of educational material, follow Forex trading lessons, and try to understand everything in detail. This market is very diverse, thanks to which, it can be used by any type of trader.

Frequently Asked Questions on currency pairs basics