Forex for Dummies – How to Learn Forex Trading for Beginners

There is no doubt about it – Foreign exchange trading, or forex, has garnered enormous popularity in the last decade, as droves of newcomers have crossed over from stocks and other investments to test their skills with the currencies of the world.

In this forex trading for dummies course we will lay down the basics so you can start trading forex, but remember that in order to become a successful forex trader you need a lot of practice.

Think of this as your forex quick start guide. There is a lot more to learn than we can teach you in this course, but by completing these four short lessons you will help get your trading career off to the best possible start. You should always be open to learning more and be listening to the markets in order to anticipate changes.

Forex is our largest and most liquid market – over $7.5 trillion in daily turnover – a market that can resist even the vainest attempt to manipulate it. For this reason alone, currencies are deemed to be our purest form of trading, but winning in this arena is not nearly as easy as marketing claims would have you believe.

Lessons in this Course:

Forex for Dummies – Introduction

Lesson 1: Currency Pairs and Forex Marketing Pricing Behaviour 

Lesson 2: Initial Set-up Preparation

Lesson 3: Forex Strategy Development 

Lesson 4: Execution of your forex trading plan

Concluding remarks

Yes, access is easy. Sophisticated trading platforms make it appear easy, and markets are open for nearly six days, non-stop, a week. You can trade currencies from your desk, the backseat of your car, from down at Starbucks, or even from your hot tub, if you are so inclined.

There are, however, no shortcuts. The best way to learn forex trading is with practice, you must invest the time up front to reap dividends down the road.

Knowledge, experience, and emotional control are keys to success in forex trading. It also helps to get guidance from professionals before deciding to jump into the markets and trading with your own capital. You need to be aware, unfortunately, that nearly 70% of traders lose money. Many become impatient and leap into the market before they are adequately prepared.

At Forextraders.com, we do not wish this fate on anyone, but we do understand the desire to get started quickly. There are intelligent ways to start trading forex, and we have set out one such path in this course. The objective here is to teach you the basics and give you a solid foundation that you can build on over time.

Market experience can only be gained by trading. Many forex brokers offer demo accounts for this very purpose, allowing you to develop your skills without risking your own hard-earned funds. The next few pages will arm you with key tools and strategies, giving you the best chance of being in the 30% of traders who make money.

Currency Trading For Beginners

If learning currency trading is such a difficult task, how do we proceed? Please accept that we are only providing a framework for you to get started quickly. Trading currencies entails high risk, as the high casualty rate figure warns. You must approach the market in a disciplined manner with a step-by-step strategy that guides your every movement in the market from opening your first position, to following its progress, and to closing out the position for a profit or loss. So get started with our forex trading course!

Before getting into our lessons, you have a homework assignment. Spend several hours reading articles here on Forextraders.com and on other websites. Take a forex tutorial, if it is offered. The objective is not to gain absolute competency with the material, but to become familiar with the terms and activities associated with trading. Eventually, you will need a competent forex broker, but for now, you may enjoy learning from the free demo that we provide. Once you feel a degree of knowledge and comfort about forex and the demo trading system, proceed.

Rules of the road

We will now begin with a few rules of the road, related to money and risk management, fundamental and technical analysis, and then strategy development and execution. The focus will be on visuals for instruction purposes. If you take what you see and apply it later, you will have a higher probability for success, and that brings us to our first rule of the road:

• Rule #1:  Never put pressure on yourself to generate a specific level of earnings from trading or risk money that you cannot afford to lose. These concepts will only lead to early failure. Read more on money management here.
• Rule #2:  Winning in forex is all about working the odds in your favor. There will always be a “50/50” chance for where a currency pair may move in the near-term future, but broker commissions will require a “55/45” winning percentage to break even and a “60/40” ratio to be a consistent profitable trader. The ratio has to do with “net dollars”, not trades. Losses are part of this game, but your objective is to cut losers early, but let winners run, that way you get ahead over time.
• Rule #3:  Always go with the flow. Individual traders should not bet on high- risk uncertainty. You want to seek out trends, jump on, and then jump out with a profit. This rule is the tried and true way to survive and thrive in forex. You search for situations where the odds favor your entry, then try to capitalize. If the market moves against you, get out quickly. If it goes as planned, stay with it until your projected exit point, then book your gain.
• Rule #4:  What is your Risk/Reward ratio? OK, a little math is required here, but you will need to retain these steps for future use. The accepted rule of risk is that you should lose no more than 2%-3% of your account balance on any one trade. This is a goal that every trader violates to his demise, but lessons must be experienced to be learned. If your account is $1,000, then your loss limit is $20 to $30. You will set your stop-loss (more on this later) for $20, and your exit point at $40 to $60, depending on how aggressive you wish to be. Your risk/reward ratio would then be “2X1” or “3X1”, respectively. The point here is that losses will occur. You have to be able to absorb them until your favorable trend comes along. Most of your winnings will come from a few trades, while the majority of small losers and winners will cancel each other out. A corollary is to never have more than two active trades going at one time. Over time, you may adjust these parameters, but safety first. Read more about the risk reward ratio.
• Rule #5:  Keep it simple. Newcomers tend to load up on every indicator or analysis tool available. The result is chaos and paralysis. Simple is best. Focus on one pair with a few tools to guide you. If you have three losers in a row, leave the market for a while. There is always a new opportunity around the corner. Never trade when your mind is in turmoil, and keep a journal to review accurately what you did right and what you did wrong. Learn, learn, learn!!!