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How to do forex trading

Noman / Pers Fin Images
Noman / Pers Fin Images
How to do forex trading

(For the uninitiated, forex trading may be a very scary and unknown proposition, but if you start with some help, you can make decent money with very little capital.)

The forex market has a major benefit going for it – it is open 24/7, so it does not matter which time zone you are in, you can do forex trading. You can also do it according your time convenience, for example in the evening after work or in the morning before work, instead of being tied down to when stock markets open and close.

The thing going for it is that most forex trading houses offer large margins to trade in, so you actually need very little capital investment in the beginning. However, while you can make a lot of money, the forex market is a high risk, high reward proposition, so when you actually trade, you need to be able to make good your losses.

Starting with forex trading

It is vital that you study the market for some time – at least a month or more – before actually putting your money in. You can buy books and you can get a lot of information from the net regarding how to trade. But it is important to check streaming quotes and sit in front of the screen before doing actual trades.

There are sites which offer dummy trading, and you are strongly advised to do that, because you can learn from your mistakes without losing real money. Of course, if you make money, you may regret doing dummy trades, but it is better to get some practice.

Open an account

You also need to see brokerage rates, facilities offered, and the margin required by various brokerage houses and also the ease of usage of their online interface. You should also see what kind of advice they offer, because online real time advice is important.

Some sites offer demo trading accounts, so you can try them out and then make up your mind. Obviously you need a computer with an always on high speed internet connection to do this. The brokerage will give you the software needed for doing the trades and also guide you as to how to use it.

The capital needed

You need to have a certain amount of capital to invest in your account and the rest of the money you will get as a ‘loan’ from the brokerage. If you make a profit, then your margin will increase. However, if you make a loss, you will have to make good the loss, so start small.

The mental discipline

You need to have mental discipline, the aptitude and the intelligence to get into forex trading. You should also have time and put in the effort to do your homework well. You have to keep abreast of political and economic developments which will affect the market and know how to use the information to your advantage.

It is always better to start small, with an amount you can afford to lose if necessary, because it is only with experience that you will learn. Once you start making a profit, then you can become a bigger player.


Currency trading is always done in pairs, with the base currency usually being the US dollar. And once you know what to do, you can make money whether the market is rising or falling by taking the winning position.

However, do keep in mind that forex trading is a form of speculation. You can lose large amounts of money just as you can lose large amounts. So be careful when you start and in the beginning.