Learning the Basics of Forex Trading as a Beginner

Like the financial crash between 2008 and 2010, the coronavirus pandemic has triggered significant change in the fiscal and socio-economic landscape across the globe.

For example, day trading in the forex market has become increasingly popular worldwide since the onset of the pandemic, with daily activity rising dramatically during the first quarter of 2020 in relation to the same period of 2019.

With increased periods of time spent at home triggering a clear rush to market, however, it’s important that beginners first strive to learn the art of forex trading. Here are some steps to help you on your way!

Understanding Currency Pairs and Key Market Terminology

When starting out, your first task is to understand the function of forex trading and how to invest in international currencies.

In simple terms, currencies are traded in pairs and as derivative products, which mean that you can buy and sell such entities without assuming ownership of the underlying instrument. This allows you to speculate on price movements in real-time, while there are also major, minor and exotic pairs that showcase different levels of volatility and liquidity.

Major currency pairs are the best option for beginners, as they combine seven major currencies with the omnipotent US dollar.

These entities make up 68% of the forex market’s total trading volumes, while they’re incredibly liquid and can be bought and sold with relative ease in the real-time marketplace.

Another key piece of terminology in this marketplace is leverage, with this referring to the process of taking on debt (margin) in order to control positions that are considerably larger than your initial deposit.

Leverage is typically expressed as a ratio and is available up to 100:1 on reputable brokers, so you can execute large and lucrative orders with minimal capital holding.

However, you’ll need to understand the precise relationship that exists between leverage and margin, so that you can manage your activity and risk over an extended period of time.

Making the Most of Online Trading Platforms

As a new trader, you’ll also need to utilise online trading platforms and resources to achieve success in the forex market. Of course, this rule applies to experienced traders too, especially with so much activity driven through virtual brokerage sites in the digital age.

Trading platforms also include options such as the MetaTrader 4, which was specifically designed for the purpose of forex trading and allows users to customise charts while also utilising expert advisors (EAs) to capitalise on automated trading.

There are also apps that allow investors to engage in ‘pelican trading’. In simple terms, pelican trading connects beginners with experienced investors, enabling them to copy proven strategies and techniques and apply them to the real-time marketplace.

This type of social trading is highly popular in an increasingly interconnected marketplace, while successful investors are more than happy to share their strategies and boost their profile in the process.