10 essential steps for Forex trading

Before you jump into it, it’s crucial to develop a strong understanding of what Forex trading is all about, especially if you are a beginner.

This article offers you essential steps to follow and get well-prepared before you start forex trading

1. Research before you start

Researching and gaining information on anything you want to venture into is a common practice.

It is crucial to obtain in-depth knowledge of forex trading, what it is all about, the different types, trading hours, and what you wish to achieve from it.

In short, what is forex trading?

Forex refers to foreign exchange. It involves the buying and selling different currencies traded in pairs using a platform provided by a forex broker.

What are the objectives of forex trading?

• Speculation is when traders take advantage of changes in currency prices. They buy a currency pair if they believe its value will rise and sell if they expect it to fall.
• Hedging in forex trading is used by businesses and investors to protect themselves from potential losses due to currency fluctuations.
• Arbitrage is the trading of small price discrepancies of the same currency pair in different markets.

Ultimately, the objectives of forex trading can vary widely, and each trader's approach is influenced by their financial goals, risk tolerance, and market analysis.

What kind of chart patterns are used?

Three main charts are used in forex trading:

1.    Line chart: Forex line charts analyse and predict price movements. They display the closing prices of currency pairs over a certain period.

2.    Bar chart: This chart shows price information using vertical bars, with the top of the bar representing the high price and the bottom representing the low price. Horizontal lines extending from the left and right indicate open and closed prices.

3.    Candlestick chart: This indicates forex price data through candlestick shapes, where the body between open and closed prices is filled or hollow.

Traders often combine the patterns on these charts with other technical indicators and fundamental analyses to develop comprehensive trading strategies.

What are the global forex trading hours?

The forex market is open 24 hours a day, five days a week.

It’s divided into overlapping trading sessions, providing traders with continuous opportunities.

A 24-hour trading day typically means that positions are opened and closed within the same day.

2. Set realistic expectations

Before you start forex trading, it’s essential to have sensible ideas about what to expect. Forex trading carries many inherent risks.

Avoid thinking you’ll always have a positive or desired result in trading. Having realistic expectations means being ready for any outcome.

This helps you make more intelligent choices, handle risks, and remain calm even if things are initially tough.

3. Apply good risk management

What happens if you don’t bring an umbrella when it rains? You get soaked. The same logic applies when you trade without any proper risk management.

Plan on how you will handle any potential losses that can occur. Research and create a structured list of strategies you can use in your trading journey.

4. Find what type of trading suits you

With markets.com, depending on your preference, you can choose between a contract for difference (CFD) or spread betting* to trade in forex.

When you trade forex CFDs, you and a broker mutually agree to trade on the difference between an asset’s price at the beginning and its price when you close the trade.

Spread betting*, on the other hand, means making a speculative bet on how the price of an underlying asset will move without owning the actual asset.

At markets.com, both types of trading can be used in shares, indices, and commodities.

5. Don’t forget about market analysis

Establish a financial planning process to keep you on track. One way is to conduct a regular market analysis.

Stay ahead of how the currency market is behaving. Monitor factors such as currency trends, economic news, political stability, trade balances, global events, and other variables that could affect the market.

6. Learn to control your emotions

A lot of things happen when you are trading. There are times when your emotions may be overtaken by excitement or fear.

Unchecked excitement from winning streaks might lead to overconfidence and risky moves. Likewise, you may sustain significant losses if you exit trades prematurely out of fear or hold on to losing positions in hopes of a reversal due to greed.

Master a disciplined and rational mindset and follow your financial plan to avoid unexpected and potentially adverse outcomes.

7. Choose a globally recognised broker

A crucial step to take when you start forex trading is to look for a reliable broker and trading platform.

An award-winning and trusted trading platform, markets.com has been serving traders since 2009. It is one of the best CFD trading platforms offering a wide range of financial instruments for traders of every level.

As a beginner, you can explore its offerings and read its educational blog posts so you can improve your trading knowledge.

8. Practise with a demo account

Using a demo account is an excellent way to know how it feels like to trade. It allows you to trade under real market conditions without having to use real money.

That way, you can experiment with various strategies, understand market dynamics, and gain valuable experience.

The good news is that markets.com offers a demo account with $10,000 virtual funds.

9. The importance of starting small

It’s wise to start with a small amount of trading capital in trading to reduce the risk of significant losses while you’re still learning the ropes.

Think of it as testing the waters before diving in. With a small amount of money, you can get real-world experience without jeopardising your finances.

Before starting to trade with real funds, find out what you should consider when making a deposit.

10. You never stop learning

Continuously expand your knowledge, especially since the markets are dynamic. Embracing a mindset of lifelong learning and adapting to market fluctuations will gradually make you a better trader.

Remember, the financial world evolves rapidly, so staying informed and constantly improving your trading strategies is essential. Just as the markets never sleep, your commitment to learning should remain unwavering.

How to start forex trading: Summary

Understanding the critical steps before you start forex trading is a solid beginning. Trading is by no means easy; and needs good preparation to get the desired results.

Invest time in research and education about effective trading practices to ensure you’re well-prepared and can enjoy the process over time.

Be sure to check out the Education Centre on markets.com, which offers easy-to-follow guides and clear explanations about trading.

Then, join markets.com by signing up for a CFD trading account. Take your first step into the exciting world of trading. Good luck.

Check this article about: The ultimate guide to opening a forex CFDs trading account

*Spread betting accounts are restricted to residents of the UK under Finalto Financial Services Ltd.

When considering "Forex CFDs" for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.