An Introduction To Forex Trading: Forex Guide

This is an introduction to forex trading and this article will provide you with fundamental Forex basics. This Forex guide will also teach you how to trade.

Are you wondering if traders really make money trading Forex?

The fact is, some really do.

If you have come to the conclusion that you would like to invest your money. Then you should look into trading Forex from home.

You know that there are numerous ways to make money from home, but some will be more profitable than others.

Forex is a very profitable venture. At the same time, you must understand that the risks can vary significantly. Many people prefer trading Forex and it is true that Forex offers a wealth of benefits that aren’t available with the alternatives.

If you wanted to start trading Forex from home, you can learn how to make money trading Forex by using this guide:

Before Getting Starting

Before you get started, it is pertinent to make sure that you do not get in over your head. As a new trader, there is a good chance that you’re going to lose a little bit of money. This is why you should set a budget for your trading venture. Find out how much money you can actually afford to lose without getting yourself or your family into trouble.

Insight from major trading statistics indicates that most amateur traders lose money because they do not follow the highlighted principles below. So let's get started in order to help you as a newbie trader to the world of Forex!

Surviving should be a priority for every Forex trader. It is normal for every trader to lose once in a while, but if you run out of money, then you will be in a position where it becomes hard to come by winning trades. Therefore, keep in mind that you should always stay in the game no matter what.

Most of the amateurs and continually losing traders focus on coming up with a winning trade strategy. While such a profitable trading strategy is fundamental, utilizing strict money management principles and having a reasonable and strict training mentality will reap more rewards for you eventually.

The two common rules to follow for proper management of money are not to invest more than 3% of your entire capital for a single trade and ensuring that you have enough money to run you through at least forty trades for beginners.

It is also important to learn about the basics of Forex. You’ll be able to do that below.

Forex Basics

Now, you should know that Forex stands for the foreign exchange market. If you travel to a foreign country and exchange your money for the native currency, you’ll actually be participating in this exchange. The Forex market just happens to be the biggest in the world and there are eight major players. As a Forex investor, it is only important to pay attention to the economies of eight countries.

  • United States
  • Europe
  • UK
  • Canada
  • Australia
  • New Zealand
  • Japan
  • Switzerland

Analysts and governments release economic data about these countries almost daily. This gives investors the opportunity to make money by trading on the news.

Choose The Right Broker

While you’re at it, you’ll want to choose a broker that will actually allow you to become a success. Your broker needs to provide a great trading platform, which will allow you to perform tons of analysis. Investments in Forex can be very profitable. Just remember that your broker may charge a commission and other fees. If you’re going to make any money, you need to make sure that your broker isn’t taking it all. Research the brokers and find the one that works best for you. Also, read reviews to ensure that the broker is legitimate and safe.

Creating A Plan

To be successful with Forex trading, you need to have a game plan. You must have a way to make the right decision. And, you need to know what information can help you reach the right decisions. Many people prefer relying on fundamentals, but others depend on technical analysis. Both options can be effective. Fundamentals are great for long-term trading, while using charts is best for short-term trades. Either way, it is best to choose a plan and stick with it.

Don’t Be Afraid To Lose

There is a good chance that you’re going to lose money. Don’t be afraid to do so. You should try to minimize your losses, but it is also vital to learn from your mistakes. Experiment and make sure that you do not make the same mistakes again.

The stop loss is arguably the most critical asset for any Forex trader, such as the most powerful one for a professional poker gambler is the fold(if you understand what it is). The stop-loss gives you the chance to predict your risk down to the pip, therefore utilize it every time.

It is all about benefits when it comes to using a stop loss. It coerces you to ponder about the trade you want to invest in and when it would be considered as a failure. After opening up a position, you may want to assess your situation and see whether you should stay in a trade heading South, using all kinds of unreasonable excuses. But if you use a stop loss before launching the trade, when you were reasoning correctly, you will always have that striking light, reminding you that you would be an emotional fool if you kept yourself in the trade after triggering the stop loss.

Using a stop loss makes you consider the ratio between your winning and losing trades. Taking an example where you want to risk 50 pips for 100, that implies that you will require a winning trade at least 1/3 of the time for you to be in business. Does your strategy give you profits 33% of the time?

The other benefit of the stop loss is that you do not have to be scared that a single erroneous trade will derail your entire account if it goes wrong and you are not able to close it down for some reason. Ensure that you always use a stop loss and do not keep it far away from you after opening the trade.

Top Things Successful Forex Traders Do

There isn't a magic pill you can take and become a successful forex trader. The markets require a trader to blend good analysis with effective implementation. Here are four strategies to serve you well in all markets.

Use market analysis

Every trade from an account will have to be placed with a goal. That goal will be fixed with the position sizing. Traders will have to be careful with the proper trading process from the start of their career. The position sizing strategy is the most appropriate and correct one for all the traders.

To ensure a winning outcome from a trade, traders will have to place the trade properly into the markets. It is only possible when you will learn about Forex Market Analysis.

Traders will have to learn about Forex Market Analysis and doing the right approach to it. The price trends, key swings, support levels, and resistance points will have to be researched properly for every trade. Then your success will be amplified since each trade will be backed by data. In fact, traders will be able to stay very healthy with their trading business following this kind of strategy.

Evolve as a trader

Retail traders always try to make a profit within a short period of time. Forex trading is just like any other business in the world. You can’t make tons of your money without doing the hard work. You will need to learn how to evolve as a Forex Trader, which takes time.

Once you have the perfect trading environment, start to trade the market and focus on gradual progress. Never try to trade based on emotions as it will result in a huge loss.

Use demo accounts

In order to become a successful Forex trader, one requires doing a lot of practice to become familiar with the art of trading forex. For this reason, different online trading platforms offer new traders the chance to learn the trade without risking their money.

With a demo account, you can try out different Forex trading strategies and learn your strengths and weaknesses as well as finding your most ideal platform to trade-in. You can fine-tune different strategies to make them work for your style of trade. All this prepares you for trading in a live account. 

For proper learning about anything, traders will have to have the chance to practice. The demo accounts are the most suitable place for all traders to learn about trading Forex.

The money involved in the demo trading process is not real at all, the traders will feel no pressure from losing money. They will be able to learn about the proper management of the trades.

Then all the strategies and plans can be easily learned by the traders. So, if you want to be a good trader in the Forex marketplace, you will have to get some sort of demo trading account from a broker.

Trade with confidence

Sure, you'll win some trades and lose some trades, but that's all apart of the process. This is absolutely true for Forex Traders. No trader will be able to win the first trade in the market without doing due diligence or they're lucky.

Unless you have the right kind of start in this profession, there will be a lot of losses from trades at the beginning of your career. The key is building confidence that is backed by market analysis and proper education.

Love complex challenges

Retail traders always think they have the perfect strategy to make money by trading forex. But after trying hard with their real account they lose a significant portion of their investment. The majority of the traders are losing money since they don’t know the proper way to assess the risk factors.

Those who really want to establish their career in the Forex market should start learning the three major parts of market analysis. Start thinking like successful traders. They often face complex challenges but due to their sincere devotion, they can easily solve the complex puzzle of the trading industry.

Having the passion that pushes you to work more

When you are passionate about something, you will work beyond your limit. It may sound impossible but it is what many people have been doing for years. When we play video games, we do not realize how fast time is flying because we love the game. Think of the market as a game but only with real money.

When you find the passion, you will realize that your mind is telling you to push more. You will start exploring new opportunities and it will give you the chance to improve your performance.

How to Reduce The Risk of Forex Trading

Trading Forex is risky. We know it is not easy, many great investors have given up and became frustrated after massive trading losses. However, there are still rays of hopes if you want to learn how to reduce your risk when trading.

In this article, we will tell you some of the classic but proven techniques that have been used by the former traders to reach that goal. We will also focus on some new concepts as it is essential to cope with the dynamic industry.

A trader is can get major experience with demo accounts. It is not important how much time you have spent on the live sector, as long as there is no proper profitable exercise, it will not help to improve your results.

Having said this, let’s start divulging the secrets and show the strategies of how to perform well and reduce your risk when trading Forex.

Never forget the root

Many people are disappointed to find this point at the beginning. It is the fundamental technique to reach the goal in any business. No matter how much progress has been made, always try to look back and remember why you are trading and what are your goals. Are you trying to make a living? Make some side income? Evaluate the root of your short term and long term goals and you will be closer to a profitable outcome.

That being said, before beginning your trading life, spend as much time as possible to understand the basic knowledge of currency trading. Do not underestimate the market, the predictable trends are not what they seem. A single decision made by the trader with a simple flaw can overthrow the whole game plan. Stay informed and continue to learn, adapt, and grow as a trader.

Keep yourself calm

Following an aggressive trading strategy never helps. The elite traders in the exchange-traded funds industry always suggest that a new trader's trade with a stable mind. It’s true, aggression will help you to recover some loss but eventually, you will blow up the trading account. Try to be a conservative trader since it will protect your investment.

Have a contingency plan

In case the market turn against the volatility, it is better to retreat as soon as possible and stick to a stop loss. It may not provide an opportunity to make money but will allow traders to exit before your position is lost. There is no guarantee a plan will work as desired as uncertainty always prevails in Forex.

To cope with this risk, a backup plan must be developed that will only be used when your trade goes sideways. With the right formula, major losses can be eliminated effectively. How do you think the brokers manage the multi-million dollars fund? Find the back door to run away if the market is trying to take away capital.

Learn from observation

It is easier to learn from the experience and by observing the performance of other successful traders. It saves time and also allows the chance to make big monetary rewards. We can give a small example describing the importance of observation. There are many online groups of Forex investors who provide feedback and trading insight.  Interested and traders form a group and trade with common decisions and these groups are a simple Google search away.

Observe their methods and find out why these traders do or don't profit. The industry is eagerly waiting to teach students, be humble and observe every situation that occurs closely.

Rectify past flaws

It is not possible to change the past but the future can be carefully planned for to avoid risk. Run experiments and identify the reasons why the former decisions resulted in the loss. It will hurt but will reveal many faults that one can use to help a trading career. As long the past mistakes are not rectified, the future will not be any less risky.

Avoid These Common Forex Mistakes

Generally speaking, everybody wants to have more money to cover debts and other expenses. In trying times it is great to have something to depend on. Starting an online Forex business may be a perfect way to establish financial well-being.

To get started in the business it is vital to find what works for success. Setting up a trading platform where one can pick and choose trades might be helpful. There are even practice sessions allowed to help a potential trader get used to the nuts and bolts of currency trading. However, you may face some losses. To avoid any big loss, you need to evade some common mistakes.

Jumping out of revenue to early on and deficits too late

When I began, having read all the marketing advertisements, I was persuaded I should have the ability to make 20 to 30 pips a trade. After dropping a fair little bit of money, I made a decision to make an effort to make 20 to 30 pips each day. That still didn't make me money.

Eventually, I resolved right down to 6 pips per day which equated to a rise of 1% per day. However, I still lost, because although I got making 6 pips every day I used to be regularly residing in losing deals more than 20 pips. You do not have to get a calculator to see where I traveled wrong. Now deficits are unavoidable in trading, big deficits are avoidable with a proper strategy.

Trading without a stop-loss

Nowadays I never, ever before the trade with my stop-loss. I never placed my stop-loss on the purchase price that I would like to escape a trade. For me personally, the stop-loss is defined to safeguard my profile when for reasons unknown I am unable to reach the laptop or when I lose access to the internet.

There are extensive horror stories of folks losing vast amounts of money because they never arranged their stop-loss, moving the stop-loss in the anticipation that the marketplace will submit your favor is another area where many people lose cash. The only satisfactory move of any stop-loss is to secure one's profits.


Over-trading includes both ways too many sequential trades per day as well as way too many simultaneous trades. There's great excitement, a rush whenever a trade develops in the manner that people expect it too. However, one of the main bits of advice that I've ever before received is never to run after the trade but allow trade come for you. It is all too easy to attempt to look for trade after trade after trade. Avoid this enticement.

Way too many simultaneous trades is a problem. It's important to have the ability to monitor all the wide-open trades, to be sure of exit points, to consider the symptoms that will show to you that we now have potential changes that will impact your trade. This is very hard to do when only three or four short conditions trades are available. One of the items I have observed is the fact that reversals and retracements happen more speedily than normal actions.


Most new traders often overlook the information they could obtain from the other traders. It is undeniable that reading content about forex is crucial. Books can give you a great starting point within a short period, giving you a good stepping stone.

Practicing is the other vital factor to get to terms with how things operate fast, but you will be shocked to find out how regularly other traders can give you useful information concerning your strategy, or concerning different ways of going about particular trades. You should join an online forex community or come up with a trading blog where people can react to your strategy.

Do not be put off by the fact that you are an amateur, keep in mind that we all started out as beginners and most of the traders you meet there are probably starting out as well.

Avoid being emotional

This final trading tip is probably the most fundamental one. As it has been stated, trading on the forex market is an enjoyable experience, but it is vital not to get overexcited because of this. Seasoned traders approach it as a source of income and not a hobby.

The primary purpose of your trading capital should be to make business moves; some of them will be profitable, and others will cost you money, it's that straightforward. But the moment you throw your rationality into the air, I guarantee that the losses will start accumulating very fast. forex trading for I am referring to those situations that do not shift your stop loss since you just cannot get yourself to take the hit. Or those cases that you venture even though your plan advises you to be patient since you are afraid to miss the trade or you have nothing important to do. Those situations that you become angry because you lost fifteen trades consecutively that you start investing with triple your normal amount, and taking positions in trades you never participate in.

The bottom line

Unless a lucky charm has stricken you, do not expect to get an 80% profit on all your trades or boost a $500 trading capital into a $9000 in just over five months. Heading into forex trading with such unrealistic expectations will only result in disappointment and failure. (unless you are fortunate)

Try and be realistic right from the beginning. Come up with an achievable percentage of winning strategy, keeping in mind your experience and approach. Look at the amount of time you can channel on learning and trading. With a clear picture of the tools at your disposal and surrounding conditions, you will be able to work towards a rewarding trading strategy efficiently.

For instance, imagine you are a day trader with a strategy where you risk around 15 pips for 30. After completing about 200 trades, you find out that half of your trades attained the targeted profit and the others went sour and activated your stop loss. So you have essentially gained 100 by 30 pips=3,000 pips and lost 100 by 15 pips= 1,500 pips, giving you a gross revenue of about 1,500 pips. The income is labeled gross since you have to pay for the transaction cost to your broker. Let us put the spread at two pips per transaction, implying that the 200 trades you engaged in cost you 400 pips. Thus your net revenue stands at 1,1000 pips for the 200 trades which is 5.5 pips for every trade.

Evidently, working on the data obtained from 200 pips is not very reliable, but that will give you something to work on: every trade gives you an average of 5.5 pips.

By being alert to these common flaws, the investor will position himself in a solid position to reach your goals in owning a home Forex business. These and other lessons were all learned whilst trading alongside experienced professionals and can be learned by anyone.

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of Gabcast, formerly SavingExpert, a personal finance site helping you make your money work for you. He helps readers bring in passive income in order to increase their saving potential and start building wealth for the future. He regularly writes about saving, budgeting, investing, and general personal finance topics aimed to help anyone save more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Insider, Yahoo! Finance, NASDAQ, Discover, MSN Money and more.