A Step-By-Step Guide To How To Trade Forex Currency Pairs

There are a few things that you have to consider for selecting the most suitable financial market to kickstart your trading journey. First of all, there should be enough trading volume as liquidity is necessary to enter and exit trade positions with ease. There should be sufficient volatility for finding ideal trading opportunities from price fluctuations. Finally, the market must be easily accessible and the cost of trading should be lower as that allows you to maximise your profits without having to pay the hefty brokerage charges. 

The dynamic currency market ranks first in all these aspects and thus the high popularity of forex trading is totally justified. Forex currency pairs are the most traded asset class on a global level and this beginner’s guide covers all the steps that you have to follow to build a successful career as a forex trader. 

Steps To Start Trading Forex Currency Pairs

First of all, you need to understand how the forex market operates and study it. Forex currency pairs are very different from other trading instruments and they have a lot of peculiar features that make forex trading complicated for a complete beginner. But you can reduce the complexity by moving forward with a clearly defined trading plan which aligns with your goals.  

• Educate Yourself & Develop A Trading Strategy

To create a sound trading plan, you need to start by educating yourself about the fundamentals of forex trading. There is a lot to learn as a newbie and you should take your time without rushing the process. Many new traders make a major mistake as they skip a lot of lessons and they think that they can figure things out by going with the flow. However, this approach is not encouraged as it can lead to costly mistakes. Hence, you need to prioritise learning before you devise a forex strategy for earning.

You can also use free online tools like forex calculators to ensure precision in the planning phase. Establishing clear rules and having a structured framework is important to come up with a solid strategy. You should choose a suitable trading style, analytical method and timeframes. You should practise on a demo account until you are ready to risk actual money and decide the trading techniques that you can apply based on your skill level. 

• Open A Trading Account With A Trusted Broker

This looks like an easy step as there are hundreds of brokers in the forex market and you can open a trading account within minutes. You just have to register by submitting personal details and complete the KYC and verification formalities for live account opening. But you should do some research before finalising your broker. Because a forex broker is not a mere intermediary for accessing the decentralised market. They are also responsible for the trading conditions you get and the execution of orders.

So, you need to check the pricing in terms of spreads, commission and other charges before signing up. Above all this, you have to be sure about the reliability of the broker as you will be trusting them with your own money by depositing. If you select a regulated broker and a reputed trading platform, you can feel at ease about security and service quality. You should also consider customer support to ensure a seamless user experience on the chosen platform. 

• Pick Your Currency Pairs

When you are picking the currency pairs that can be traded from the comfort of your home, you have to find the trading sessions that you can trade based on your local time zone and personal trading hours. This will be easier for full-time traders as they have a flexible schedule but part-time traders need to consider the timeframes too for picking the perfect currency pairs that can provide profitable opportunities. Because the liquidity and volatility of pairs will be different during different trading sessions.

For example, the best time to trade the EUR/USD pair is during the overlap of New York and London sessions as you get the advantage of tight spreads. But you should also consider the volatility as it has a positive correlation with the risk. When you are selecting the currency pairs, you can use a currency converter that automatically performs currency conversion with real-time foreign exchange rates right away. Your success in Fx trading greatly depends on the pairs you pick for trading.  

• Place Take-Profit & Stop-Loss Orders

While creating your trading plan, you have to specify all the details including the entry and exit points for a trade. You may fail to stay true to your strategy in the middle of a trade either due to being indecisive or being impulsive. Both trading pitfalls can be avoided by placing a definite take profit and stop loss order for each trade. The take-profit order preserves your profits by automatically closing the trades at a specified price level, raising the gains of a win.

The stop loss order is used to limit the losses in case of a trade that doesn’t work out. When the market moves against your trade, you will encounter a loss and pro traders don’t wait until this point as they prepare for it in advance. The stop loss order will get triggered when the price movements go against your expectations resulting in a loss. When this loss reaches a specified threshold, the trade will be closed releasing the loss that you can digest based on your risk appetite. 

• Execute Trades And Review Your Performance 

Some mistakes are simply avoidable in the live trading process even after a lot of backtesting and demo account practice. Thus, you need to follow a cautious approach when you start executing trades in the live market and keep a trading journal to record everything along with the logic that you applied for entering and exiting the trade. You should review your trading performance afterwards and compare the actual results with the expected results.

You should not be afraid of losing in the initial phase of your trading journey but these losses must be under control to safeguard your trading capital. Instead of trying to make quick profits, you should trade with a long-term approach as that helps you to cope with the stress. You should set realistic goals and keep learning to improve your skills as securing success is not possible until you build competence, consistency and confidence in your own strategy and trading skills. 

Final Thoughts 

In the end, the scope of forex trading is wider for those who make wise choices with a lot of planning, analysis and calculations. Being mindful of your actions is important to avoid emotional trading. You must think about the potential outcome before making any decision. You may jump to conclusions when you are overwhelmed and intimidated by the fast-moving forex market. Being a skilled trader is not about beating the market but rather it is following the market based on how it is responding and reciprocating the same for earning profits from the favourable price fluctuations.