How to Learn Forex Trading: Step-by-Step Guide

Oh, you’ve probably googled “What is forex trading?”, “How to trade forex?”, and “How to profit from forex trading?” Now what?

You have to actually start learning. Dig deep into the concept of forex trading, master the market, learn the analysis, explore patterns, indicators, and oscillators, and find the best strategies for you.

Forex education is not just for beginner traders, though. It’s for ALL forex traders.

Read on and discover how to learn forex trading in the right way.

Knowledge is very accessible these days – but make sure you’re getting credible ones.

When you search for forex trading online courses, you’ll be bombarded with hundreds of thousands of resources.

There are paid courses. While these could be valuable, they could often dent your wallet.

On the flip side, free trading courses or resources are also available. But here’s the thing: they sometimes have little to no value, and worse, they can be misleading.

So, should you stick to paid courses to ensure the credibility of the information you’re getting? It depends.

If the quality of education aligns with your financial capability, then it becomes an investment worth considering. However, it’s important to remember that learning forex doesn’t have to be expensive.

Just find a trusted forex education – even though it’s like finding a needle in a haystack!

Moreover, you can opt to listen to trading podcasts or be part of online trading communities. This way, you approach forex learning more practically.

Regardless of how you approach forex education, the source must be credible. If you’re gathering information from forums or social media, ensure it comes from experienced traders or investors.

The last thing you want is misleading advice from marketers who are more focused on selling products than helping you succeed.

How to Learn Forex Step-by-Step Guide

Forex trading isn’t just about knowing how to execute a trade—it’s more about understanding how to adapt to the ever-changing market.

As much as you have the burning passion to succeed and earn from trading, you should also have the patience and passion for learning because the profitable things you knew yesterday may drag your investment down the drain today.

Step 1. Know the basics of the forex market

It should be “How does the forex market work?” rather than “What is forex trading?”

Just like when you move into a new neighborhood, you must know if it is risk-free, accessible to malls and terminals, has a friendly community, and has other factors that would make your life easy, comfortable, and safe.

In forex trading, you must know the market structure, participants, and its accessibility.

The forex market is the largest financial market. It’s so big that in 2020, it was valued at approximately 2.4 quadrillion USD. In 2022, the market recorded a global trading activity of 7.5 million USD.

Wondering about the entities behind these ballooning numbers?

They’re the central banks, financial institutions, hedge funds, and corporations. These market participants are known to move the market the way they want.

While they can be intimidating, these big market players can be your friendly neighbors if you know what they want and how they do things.

Step 2. Study the forex market operation

The forex market is the most liquid of all financial markets, however, you must find the best time to trade your asset.

How do you know the best time?

You consider these two things: your pair and the activeness of the market.

If you’re trading a USD-denominated pair, it’s wise to trade during the New York session. If your pair has an Asian-pacific currency, execute your trade when the operating trading session is either Tokyo or Sydney.

For pairs that have European currencies, it’s profitable to trade during the London session.

Here are the four major trading sessions and the currency pairs that trade the best during each session.

Step 3. Master your assets

Currency pairs are your money maker in forex trading. This is literally the pairing of two currencies.

The pairing should have a base currency and a quote currency. The base is the first listed in the pair, while the quote comes after it. Basically, you compare the value of one currency to another.

When you go long, you’re buying the base currency. On the other, you’re selling the base currency if you go short.

Currency pairs are categorized into three groups: major pairs, minor pairs, and exotic pairs.

Major currency pairs

This is the pairing between the major currencies and USD. Here is the list of major pairs in forex:

1. EUR/USD
2. GBP/USD
3. USD/JPY
4. USD/CHF
5. CAD/USD
6. NZD/USD
7. AUD/USD

With the global importance of the currencies’ economies, these pairs are the most influential in the forex market.

Note: The US dollar’s safe-haven status comes from its influence in the global market. It’s the world’s reserve currency, and investors tend to flock to it during global economic turmoil.

Minor pairs

Also known as the cross-currency pairs, this group cross-pairs all major currencies except the US dollar.

These pairs are as influential and profitable as the majors.

Exotic pairs

This forex group pairs up major currencies with those of developing economies or emerging markets.

These pairs are known to be less profitable and liquid while having a wider spread.

Step 4. Learn different analyses

Knowing which direction the market will move is the core of forex trading. But how can you do that? Do you merely trust your guts, or is there a more systematic, proven approach to doing it?

There are! They’re called market analyses.

• Technical analysis
• Fundamental analysis
• Sentiment analysis

Remember, you never gamble in trading. You place your trades based on sound analysis, while following strategies and risk management techniques. It’s about trends and data, not luck.

Step 5. Find the best trading styles

Your friend’s style may not work for you, and your past style is not guaranteed to perform the way they did before.

You must find the best one based on your strategy, time commitment, risk tolerance, and overall financial goals.

Here are the four major trading styles and their characteristics.

• Scalpers aim to make multiple small trades to profit from tiny price movements.
• Intraday traders execute long and short positions within the trading day, taking advantage of the primary day price range while avoiding overnight fees.
• Swing traders focuses on capturing short- to medium-term market trends. This strategy is best for fundamental traders who can’t actively monitor the market.
• Position traders buy and sell currency pairs to take advantage of the market’s long-term trend. Position trading requires a great understanding of economic and fundamental indicators.

Step 6. Master Leveraging

Leveraging is a staple term in forex trading.

Basically, leverage allows you to access high notional value trades with a relatively smaller capital. The most common leverage offered by forex brokers is 100:1.

The value 100 is your capital’s multiplier. It means you can access 100 USD with just 1 USD. If it’s 50:1, 1 USD equals to 50 USD.

So, if you want to open 10,000 units (mini lot) of EUR/USD at 1.2000, your trade’s value is 12,000 USD.

With 100:1 leverage, you don’t have to pay 12 grand just to access and control the position. You only need 120 USD

• 120 (capital) x 100 (leverage) = 12,000 (notional value)

Sounds a good deal, right?

But remember, leveraging is a double-edged sword. While it can boost your profitability, it can potentially ruin your trading account with a small market movement.

That’s why you don’t just learn; you must master it.

Step 7. Practice with a demo account

The majority of forex brokers provide free demo accounts to users. This helps traders become familiar with the brokerage platform and the live forex market without risking their own money.

You’re basically testing the waters when demo trading.

Why Should Learn Forex Trading?

Forex trading is among the most effective strategies to grow your capital and establish financial security. However, you must accept that learning is a continuous process to succeed in an ever-changing forex market.

After all, commitment is the ultimate risk management technique in the high-stakes world of online trading.