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What’s the Best Way to Learn to Trade Forex?

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In 2019 more than $6.6 trillion was traded on the Foreign Exchange, or Forex, market. This was the highest recorded level yet, and is in part due to the rise in popularity of Forex trading.

Forex trading has reached new heights of popularity due to factors such as social media promotion, and rising unemployment levels as a consequence of the economic downturn exacerbated by the global pandemic.

As the Forex Markets are both the largest and the most liquid asset heavy in the world, many people believe that in just a few clicks they’ll have wealth beyond their wildest dreams.

Whilst this is possible, it’s not possible the way that some online websites and social media influencers are promoting. 

Just like anything, Forex trading has a learning curve and there are best practices as to how to learn to trade Forex correctly. 

Trading always comes with risk, which is why it’s essential to take the time to learn and study the markets and methods required in forex trading. This lessens the chance of making consequential mistakes and sets you up for a successful outcome. 

So if you’ve heard of Forex trading and you’re wondering where to start, we’ve signposted the four major things you must do.


What is Forex?

The word Forex is derived from combining the words “foreign” and exchange” together. Foreign exchange refers to the process of changing one currency to another, and the Forex market therefore is where these currencies are traded. 

When trading Forex, currencies are traded in pairs, for example EUR/USD. This is because as you buy one currency, you sell another. 

1. Get a Forex Education

Educating yourself in Forex means learning as much as you can about Foreign Exchange, currency rates , and how the market operates. 

Just like when we receive any education, you can start with books or courses that give an overview of how forex trading works, how to make trades, the active trading times and much more. 

Alternatively there are great online resources like forums and also the Wall Street Journal. 

We recommend taking this step before simply opening an account and diving headfirst, especially if this is your first venture into trading. Not only could the market appear confusing, you could leave yourself vulnerable to risky trades and losing money.

Only once you have taken some courses and learnt as much as you can should you open a Forex demo account.

These accounts are exactly as they sound: Demos, where you simulate real trades but with fake money. They’re great teachers as they provide firsthand experience for traders to grasp the mechanics of trading and learning a specific trading platform.

Further Reading: A Guide to the Different Types of Traders

2. Learn All You Can About Currencies

As well as learning the markets, and how and when to trade, Forex traders of course need to learn about currencies.

A common mistake for beginners is that they trade anything that looks as though it will move, using high leverage and executing random trades in both directions. The result is ultimately a loss of money. 

Understanding currency pairs and the currencies that you will go on to buy and sell will make a profound difference in your ability to execute good trades.

An attractive element of currency trading is the fact that there are many different currency pairs to trade, allowing traders to use leverage and increase their profit from small price changes.

This is also something to be wary of, however. The vast selection sometimes leaves traders under the impression that they can trade a multitude and make quick profits.

Whilst that’s true, it’s much more advisable to only focus on 2-4 currencies that are not related to one another. Remember that behind every currency there will be economic news to learn, evaluate and watch. Having too many currencies to do this with will begin to get confusing and complicated, leading to potential mistakes for beginners.

Learning about currencies is a constant learning process for Forex traders. It’s important to have a solid understanding beforehand, and to learn on your demo account but it is recommended to only deposit more money once you feel comfortable with assessing a currency’s rhythm. 

This is the only way you’ll be able to fully understand the market and most importantly, carve out your own trading strategy.


Read More: How to Get a Career as a Proprietary Trader

3. Open a Micro Forex Account

The drawback with the demo trading accounts mentioned earlier is that traders don’t get a comprehensive idea of what it’s like to trade with real money.

On a demo account it can be very easy to throw big money on trades and see the potential big profits, without needing to worry about the risk associated if that trade fails.

So once you have spent some time learning currencies, learning the markets and experiencing both good and bad trades, it’s time to open a micro forex account.

Micro Forex Accounts are types of accounts that allow traders to access the forex market using real money. However, as suggested in the name, Forex Micro Accounts cater to those who don’t want to risk trading too much money.

Therefore the trading activities carried out are similar to real trades, it’s just the money involved is at a much smaller level. For example, if a trader deposits $10 into a Micro Account, they will have capital of ¢1,000. This is because in micro accounts the lot (or contract) is scaled to 1,000 units of the base currency. 

Trading small is a great place for beginners to start. It allows for money to be used, and profits and losses to be experienced but on a much smaller, much less risky scale. This will be a valuable form of experience for traders, and as they get more comfortable, then they can progress to depositing more money in real trading accounts.

4. Learn How To Manage Risk

Finally, we’ve mentioned risk throughout this blog but it is one of the most crucial elements that traders must learn.

In trading, it’s common knowledge that managing your emotions is the first step to managing risk.

When traders feel emotional, such as greedy to increase their profits, or fearful, and make mistakes out of panic, that is when they open themselves up to experiencing risk and failure.

Trades must be influenced objectively, not emotionally. Logic should be applied to the trading chart, and sufficient analysis and evaluation must be performed first.

If you feel any form of emotion, whether excitement, greed or fear, it is best to re-evaluate why you feel this way and approach the trade from an objective standpoint.

Risk management techniques will be taught alongside experience, as well as found in courses and books. However, some methods to correctly manage risk include planning your trades, charting stop-loss and take-profit points, and calculating your expected return. 

To Summarise:

Learning Forex Trading is not an overnight occurrence. Taking the time to properly educate yourself in the markets, the currencies, and the correct way to trade is essential if you want to make successful trades.

Look for reputable online courses, review and research recommended books and keep your mind open to learning from experienced traders. Then take your knowledge and test this out on demo, or micro accounts to be taught by the best teacher of all: Experience.

At Alphachain Academy, Forex makes up one of our Asset Classes in our Global Trader Course. Our programme teaches you how to start a Proprietary Trading career, and offers you the chance to begin a career with us trading live on a $15,000 funded account. All we need from you is a willingness to learn.

Interested? head to our Global Trader Programme page where we’re offering 20% off the course for a limited time only. 

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