How Do I Trade Forex?

Different market conditions, your personal goals and which currency pairs are going to be traded are all things you will become very familiar with when you start trading.  Before you are able to trade forex, you need to sign up with a forex broker.  Forex brokers are the only way that you access the international forex market, and each has their pros and cons, but each of the reputable brokers that we have feature on this site will be able to get you started with either webinar content or with a trader to show you the ropes.

Following signing up with a broker, you will need to start studying strategy.  We have a full education section to get you started, but below are some core strategy questions a trader should ask themselves, and also a collection of basic strategies that you could consider when looking for a currency pair to trade.

Core Concepts of Forex Strategy.

1.  Above all, learn the language of trading.  Before you are able to learn the basics of strategies you will need to understand what a Pip is, what a pivot point is, and what a gap is.  These are just some examples of language used, but if as you read you will learn the meanings of this new terminology.

2.  Are you certain enough that you are making the right call, and that you are putting the right amount of money into the trade.  This all comes down to money and risk management, and knowing where your currency reserves are.  A general rule is not to trade more than 2-3% of your capital in a single trade.

3.  Have you, or the market, seen these market conditions before?  History always repeats itself.  You should always be taking notes on the success and failure of your trades so that you can use this analysis to help guide you in the future.

4.  You need a target for any trade – know your exit strategy.  Whatever strategy you are about to implement, you need to have a target value.  This helps remove the emotion from the trade as well, making it easier to act with a clear mind.

5.  When are you going to enter the trade?  This could depend on the currency pair you are trading and the news being released that could affect the value of the currency.  Never rush your trades only to make a trade, but instead time them right, or use a strategy that works to your advantage.

Fundamental Forex Trading Strategies

On the first day of trading school, you could be asked about different strategies in executing trades. Each trader or broker will have their own strategy that helps them get ahead of the competition, but all of those strategies are built on one of these fundamental strategies below.  So think about these as you do your research and then use them in your trading.

  • Forex Spread Betting – Rather than investing in a currency, you are simply placing a wager on which way one currency in a pair will move.
  • Guerrilla Trading – A Lower-risk fast trading tactic taking advantage in small changes in the market using larger volumes in the trade.
  • Mirror Trading – A trading method of simply copycatting other successful traders.
  • Automatic Execution – Not really a strategy, but more of an approach where a computer program is able to make trades based on signals coming from brokers.
  • Basket Of ZAR Shorts – Where a trader engages in many trades of currency pairs involving the ZAR in an attempt to lower the risk that would be associated with only trading one of the pairs.
  • Currency Arbitrage – Different brokers will offer different spreads on the same currency pairs, and this strategy seeks to take advantage of that by buying and selling the currency through two or more brokers to generate profit.
  • Funding Currency – Buying low-interest rate currency to buy other currencies to be part of trades.
  • Grid Trading – As with automatic execution, this is a machine based trading approach, where limits are set in a grid below and above the value of a currency.  If the value of the currency increases, the machine will sell, and if the value of decreases, the machine will buy.

 

This is a very high-level overview of how to trade forex on the international markets.  For more, continue over to the education section of the site, and keep reading.