How to Start Forex Trading

Forex trading has become more popular and available to ‘social traders’ looking to trade some of their disposable income in the markets, looking to make a return. 

In this article, we discuss what Forex trading is, how it works, and show you how to start trading for yourself.

What is Forex trading?

Forex trading (also known as foreign exchange or FX trading) is a trading term where one currency is converted into another through a buy and sell process. Forex is one of the most actively traded markets globally, favoured by traders, large organisations, and banks. There is around $6.6 trillion worth of transactions carried out daily.

As an international market, Forex trading occurs around the world, with the largest markets being in major financial cities like London, New York, Hong Kong, and Tokyo.

Learn how to master online financial trading

How does Forex trading work?

Like many forms of trading, Forex trading involves someone purchasing an asset using a currency. When you make a trade using Forex, you sell one currency to buy another. The way you would make money trading like this is when the currency you buy moves up against the currency you sold.

The numbers shown will tell you how much it cost to buy one of the other currencies you’re looking at using another currency. For example, at the time of writing, £1 buys you $1.3372.

Understanding the different currency ISO codes

Each currency has its own ISO code, which helps you identify it quickly.

• AUD – Australian Dollar
• CAD – Canadian Dollar
• CHF – Swiss Franc
• CNH – Chinese Renminbi
• EUR – Euro
• GBP – Pound Sterling
• HKD – Hong Kong Dollar
• JPY – Japanese Yen
• KRW – South Korean Won
• MXN – Mexican Peso
• NZD – New Zealand Dollar
• SEK – Swedish Krona
• TRY – Turkish Lira
• USD – US Dollar

Common currency pairs

• EUR/USD
• USD/JPY
• GBP/USD
• USD/CAD
• AUD/USD

Essential Forex terminology

Forex pairs – The combining of two currencies, which are then traded against each other. While there are hundreds of different combinations available to choose from, there are some popular options, such as the Euro/US Dollar (EUR/USD), US Dollar/Japanese Yen (USD/JPY), and British pound/US Dollar (GBP/USD).

Pip (“point in percentage”) – A single digit movement in the fourth decimal place of a currency pair. For example, when the GBP/USD moves from $1.35361 to $1.35371, it has moved one single pip.

Lots – All currencies are typically traded in lots, which are simply batches of currency.

Benefits of Forex trading

We have put together a list of 5 benefits of Forex trading. This is not an all-encompassing list, but it will provide you with a good understanding of some of the main benefits of the Forex market.

It’s good for beginners

Getting into Forex for the first time is relatively simple, especially with trading platforms such as eToro. While it’s simple to get started, you need to gain the right skills and knowledge, such as those we teach on our eToro Forex trading course (which includes other trading methods too).

You can trade 24 hours a day

The Forex market is open during local trading hours, and due to the time differences between Tokyo, London, and New York, you can find trading opportunities almost 24 hours a day.

You can buy or sell currency pairs depending on the market

Forex allows you to buy or sell currency pairs based on market fluctuations (going long or short).

It’s Well Regulated

Trading takes place in a digital, global landscape and regulating foreign exchange is not easy. As there’s no centralised exchange system, independent bodies like the Financial Conduct Authority (FCA) in the UK are responsible for regulation. This helps ensure UK brokers are licensed and adhere to the strict guidelines that protect Forex traders.

There Are Low Transaction Costs

Not only do you benefit from a low financial barrier to entry, but you will also benefit from low transaction costs. Brokers will make their money from spreads, measured in pips, which they include in the price of a currency pair.

How to become knowledgeable in Forex trading

Forex trading has elements of skill, ability, and luck! As investments can go down as well as up, it’s always a good idea to arm yourself with as much knowledge and skills as possible to make educated decisions. In time, you too could become a Forex expert.

The eToro trading platform is a user-friendly tool for social selling that we highly recommend. We have partnered with eToro, to offer novices an excellent Forex trading course to help them understand the basic principles of trading and learn to navigate eToro’s trading platform.

Our trading programme has been developed around three elements:

eLearning – 12 eLearning modules with an assessment at the end. You will have access to a mentor throughout your eLearning who you can communicate with on any question or clarification you may require.

Mentoring – Your mentor will always be on hand to answer any questions, irrelevant of how trivial they may sound.

Webinars – You will receive notifications of upcoming webinars that we run. These regular webinars will cover core topics in more detail and explain aspects of trading that we are finding our learners may be struggling to understand.

The syllabus covers:

• How to Start Trading
• The Market and different types of Traders
• Pips, Spread, and Price Action
• Trends and Cyclicity
• Moving Averages
• Support & Resistance
• Margin and Leverage
• Risk Management
• Analysis
• Price Actions Patterns
• Exponential Moving Averages
• Momentum Indicators
• Pivot Points
• Support & Resistance Detailed
• Hard & Soft Levels
• Psychology, and more!  

eToro & e-Careers cannot offer financial advice.

How to start trading online

Getting started is simple. We have created an excellent trading course online in partnership with eToro, which you can complete online, in your own time 24/7. Explore the full eToro Financial Trading Course & Mentoring Programme before enrolling to get started.

If you have any questions along the way or you would like to speak to one of our Course Consultants, contact us on +44 (0) 20 3198 7700 or submit your contact details, and one of our team will be in touch shortly.

Frequently Asked Questions

How much does it take to start Forex trading?

It is not expensive to start trading Forex. Some brokers will let you deposit a starting trade amount of around $10. eToro as a platform has a minimum deposit amount of $50.

Can I teach myself to trade Forex?

To be able to make educated decisions and trade effectively, you must take some form of Forex training, such as our eToro Financial Trading course.

Can you get rich by trading Forex?

It is possible to make money with Forex, and how much you can make depends on your level of skill, knowledge, risk, and more! As with anything to do with financial trading, your investments can go down as well as up and if you are not sure, always seek advice and guidance from financial experts.  

eToro & e-Careers cannot offer financial advice.