Forex Trading For Beginners – a Simplified Guide to Trading FX

In the past decade there has been a large amount of growth in forex trading. Global technological advancements are constantly being made in this area. In addition, it is becoming easier to access this form of trading. This has all led to forex trading being more popular than ever. This popularity has led to an increase in forex brokers that offer platforms that have a number of features such as multiple FX currencies, charting, and even commissions that are quite low.

So first of all, what is Forex Trading?

It is important to not only understand what forex trading is, but what forex brokers offer. Each broker providers different features that can help with trading performance. It is important to understand these features and choose a broker that is right for you.

Let Us Help You Choose the Right Forex Broker

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  • Welcome Bonus:
    Up to $2500*
    Conditions Apply, visit broker for more information
  • AUD/USD spread:
    0.8 pip
  • EUR/USD spread:
    0.8 pip
  • JPY/USD spread:
    0.8 pip
  • Maximum Leverage:
    200:1
  • Fixed Spreads
  • Overnight Financing:
    2.5% fee
  • Minimum Deposit
    $0
  • Regulated By:
    ASIC
  • Platform
    Cloudtrade
city_index
  • Welcome Bonus:
    Up to $1000*
    Conditions Apply, visit broker for more information
  • AUD/USD spread:
    From 0.5 pip
  • EUR/USD spread:
    From 0.5 pip
  • JPY/USD spread:
    From 0.5 pip
  • Maximum Leverage:
    200:1
  • Variable Spreads
  • Overnight Financing:
    2.5% fee
  • Minimum Deposit:
    $500
  • Regulated By:
    ASIC
  • Platform
    Advantage Web
fp_markets_logo
  • Welcome Bonus:
    Match Your Deposit*
    Up to $500 | Conditions Apply, visit broker for more information
  • AUD/USD spread:
    From 0.5 pip
  • EUR/USD spread:
    From 0.4 pip
  • JPY/USD spread:
    From 0.95 pip
  • Maximum Leverage:
    500:1
  • Variable Spreads
  • Overnight Financing:
    Variable fee
  • Minimum Deposit:
    $100
  • Regulated By:
    ASIC
  • Platform
    IRESS, MT4 & MT5
markets_com
  • Welcome Bonus:
    Weekly Trade Rebates*
    Conditions Apply, visit broker for more information
  • AUD/USD spread:
    From 1.3 pip
  • EUR/USD spread:
    From 1.3 pip
  • JPY/USD spread:
    From 1.3 pip
  • Maximum Leverage:
    300:1
  • Fixed & Variable Spreads
  • Overnight Financing:
    Variable fee
  • Minimum Deposit:
    $100
  • Regulated By:
    ASIC, FCA, CySEC
  • Platform
    Markets Web Trader

Risk Warning: CFDInvestors contains factual information on a range of online brokers but does not cover every online broker available in the market. The various commission and spread rates and trading account terms & conditions can change and we cannot guarantee our information shows the latest updates. We cannot guarantee the quality of any financial advice or service given by organisations listed on the website. It’s important to conduct your own research or refer to a qualified investment professional before applying for any type of investment account. The risk of loss in CFD, Forex and share trading can be substantial. You should, therefore obtain and read the relevant Product Disclosure Statement (PDS) or other offer documents, and carefully consider whether such trading is suitable for you, or contact a qualified investment professional before applying for any type of investment account. CFDInvestors may receive a commission or benefit for referring you to the services of a 3rd party site.

How Does Forex Trading Work?

Before trading forex you will need an account with a forex broker. Once you have made an account and deposited money into it, you will be ready to trade. Not a lot of money is necessary to start trading forex as you are trading on a margin.

One of the benefits of trading on a margin is that you can make a large profit off of a small investment. The main goal of an FX trader is to profit off of the amount of change in value of currencies. This is completed by speculating about the way that FX prices will move.

Essentially, you are simply determining whether a certain asset will go up or down in price within a specific time frame.

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What are some of the Benefits of FOREX Trading?

What are some of the Risks of Forex Trading?

Most people make the mistake of only looking at the potential profits that can be made by trading forex. However, the truth of the matter is that nearly 90 percent of the people who trade FX will lose money. In some cases, people have become bankrupt because of this type of trading. For these reasons it is important to understand the risks of trading a leveraged product such as FX.

Leverage – The Double Edged Sword

As mentioned, FX only requires a small deposit to have access to larger trades. This means that if you speculate correctly you can make a lot of money. However, if you speculate wrong, you can lose a lot of money very quickly as well.

Market volatility

The volatility of the market can be quite ruthless. An account can be wiped out in mere seconds if the market suddenly turns against you. It is important to be careful around big news announcements as this can cause movements to be very large.

Market are open 24/5

A market that is open 24 hours a day 5 days a week, seems great. However, it is important to keep an eye on all of your trades at all times or something may go wrong during the night, causing you to wake up to a large amount of debt.

Losses can exceed the money you put in your trading account

It is possible to lose more money that you put into your account. Since the market can move quickly, you may end up owing money, which is never a good situation to be in.

How Much Does it Cost To Trade CFDs?

The ‘Spread’

The spread refers to the difference between the buy price and the sell price. The smaller that the spread is, the lower the amount it will be to open the trade. For example, a trade with a spread of .00005 is going to be cheaper to open than a trade with a spread of .00004.

Commissions

The majority of FX brokers do not charge commissions on FX trades. The spread is the only cost upfront for the trade. There are some brokers that do charge a commission. It is important to make sure that you find out if a commission is charged for fx trades as there are some brokers that will not disclose this information.

Overnight Financing:

If you open up a trade and want to hold your position through the night, an overnight fee may be charged. The cost for holding a trade overnight is quite common in fx trading. Essentially, this charge is a small interest payment that is used to cover the cost of keeping the trade open through the night. This fee may be negative or positive based on the direction of the trade and the financing rate.

What Are Some of The Things I Need To Consider When Choosing an FX Broker?

There are plenty of FX brokers throughout the world from which to choose. However, not all fx brokers are the same. It is important to make sure that you conduct some research to find a broker that will best meet your particular needs. Each broker is different, so it is important to know what the major factors are that you are concerned with when you are searching for your perfect broker.

FX brokers make money through the costs of trades. This includes commissions and the cost of a spread. It is important to understand all of the costs that are involved by choosing a certain broker. there are some brokers that charge more than others. It is important to choose one that charges fair prices. If your broker is charging too much, search for a different, more budget friendly choice.

It is important to remember that the spread is important in terms of cost. The wider that the spread is the more you are charged. Be careful with a broker that markets a zero spread as typically there is some form of catch involved. Remember if it sounds too good to be true it likely is.

It is also a good idea to determine whether the broker charges a fixed or variable spread. A variable spread means that spreads can be changed throughout the day based on the volatility of the market. Make sure that you do your research about the broker that you are considering and be careful with variable spreads as they can sometimes be misleading.

Fixed Spread AUD - USD Currency Pair on the TradeDirect365 Trading Platform
Fixed Spread AUD - USD Currency Pair on the TradeDirect365 Trading Platform

It is important to make sure that you only choose a broker that is regulated. In Australia, fx brokers are regulated by the ASIC. A reputable broker will have an Australian Financial Services License. Never trade with a broker that is not regulated by the ASIC if you reside in Australia. It is easy to find out whether or not a broker is certified as you can simply go to the website and locate the AFSl number if they are registered.

if you cannot find the AFSI number, you can go to the ASI website to search for them. There are many benefits of trading with a regulated broker. The main reason to choose a regulated broker is that these brokers are monitored and have to work with certain laws and regulations set by the Australian government.

It is also important to consider the withdrawal and depositing process of the broker. Timing is important as you will want to know how fast your funds will go into your trading account when you make a deposit. Perhaps more importantly, you will want to know how long it will take to withdraw funds for your bank account.

Funding methods are also important as you want to make sure that you choose a broker that will accept the type of payment that you wish to use. Most types of funding are available including debit cards, credit cards, a bank transfer, PayPal, POLi, Neteller, etc. It is also important to find out if there is a fee to deposit or withdraw your funds.

Customer support should be available around the clock in case you need it. Make sure that there is someone there to provide technical support whenever you might need it. In addition, customer service reps should be friendly and helpful.

Even though people don’t consider customer support when researching platforms, this could make or brake your interaction with the selected brokers.