Forex is the largest financial market in the world that has no physical location or central exchange, that allows trading 24-hours a day based on a global network of business, banks, and individuals.

There are multiple ways that one can trade forex, but they all work the same way, which is by simultaneously buying one currency while selling another. Initially, a lot of forex transactions have been made via a forex broker. However, with the rise of online trading, one can take advantage of the forex price movements using derivatives (products whose value derives from and is dependent on the value of an underlying asset) like CFD trading.

Learning how to trade forex is not as complicated as what it seems. To ease the process, we have made a simplified step-by-step guide:

• Decide on how you would like to trade forex
• Choose a currency pair
• Learn about how the forex market works
• Open an account
• Build a trading plan
• Choose your forex trading platform
• Open, monitor and close your first position

 

Step 1: Decide on how you would like to trade forex 

As mentioned above, a lot of forex trading takes place between major banks and financial institutions, which buy and sell massive amounts of currencies every single day. Some individuals might prefer starting with a safer amount of forex trades which can be done either through a forex CFD or trading via a broker.

A forex CFD basically involves a contract where traders would agree to exchange the difference in price of a currency pair from when traders open their position to when they close it. Hence, when you open a position and the forex position increases in price, then the trader will make a profit.  If it drops in price then traders will make a lost.

To trade via a broker or at times a bank, it works in a broadly similar way with CFD trading. So, traders speculate the price movement of currency pairs, without actually taking ownership of the currencies themselves.

 

Step 2: Choose a currency pair  

Deciding on which currency to trade is extremely important as it determines the profit or loss from the trading opportunity and there are over 65 currencies to trade from.  Traders always trade currencies in pairs as traders are exchanging the value of one currency to another.

Additionally, we at Doo Prime recommend that you should take your time to understand the amount of price volatility associated with the currency pair to help manage your risk.

 

Step 3: Learn about how the forex market work 

Research and analysis should be the foundation of traders trading endeavour. Without these, traders might fall into the trap of operating on emotions which typically doesn’t end well.

One of the essential points to learn is how the market operates which is very different to exchange-based systems such as shares or futures. When you first start researching you might find a numerous forex resources which can be overwhelming at first. However, as you slowly read on, you will eventually get the gist of it or you could start with researching on a particular currency pair first. Once your search has been narrowed down and more focus on, you will find valuable resources that are in your favour.

Furthermore, you should regularly look at current and historical charts, monitor news for economic announcements, check indicators and perform other technical and fundamental analysis. At Doo Prime, we have collaborated with Trading Central to deliver you such services. Trading Central is a fintech company that has been awarded for their fusion of automated AI analytics, impressive user interfaces and registered investment adviser expertise. Hence, we will assist in finding and validating new opportunities for traders, time trader’s trades, learn about the financial markets, alongside manage trader’s risk.

Besides that, it would also be useful for traders to understand the forex charts which usually comes in three forms; candlestick chart, bar chart and line chart.

A candlestick chart is also known as a Japanese Candlestick chart which is often favoured among the traders as it portrays a wide range of information including the high, low, opening and closing prices. A candlestick has three points; open, close and the wicks. The wicks signify the high to low range and the ‘real body’ (wide section) signifies if the closing price was higher or lower than the opening price.  If the candlestick is filled, then the currency pair closed lower than it opened. If the candlestick is hollow, then the closing price is higher than the opening price.

As for a bar chart, it shows the opening, closing, high and low of the currency pair’s prices as well. The bar chart is more simplified as the top of the bar represents the highest paid price and the bottom indicates the lowest traded price for the specific period of time. While the actual bar represents the currency pair’s overall trading range and the horizontal lines on the sides represent the opening and the closing prices. With that, the bar chart is most commonly used to identify the contraction and expansion of price ranges.

A line chart is the easiest to read for forex trading as compared to the candlestick chart and the bar chart.  When connected, it is easy to identify a general price movement throughout a period of time and determine the currency.

 

Step 4: Open an account 

Opening an account with Doo Prime only requires four simple steps which involve registering, certifying, depositing and then you will be able to start your first transaction.

With Doo Prime, you can also practice trading with a demo account which has equivalent functions as a real account. This allows traders to avoid putting their capital at risk but at the same time have access to real time market data, the ability to trade virtual currencies (not to be mistaken with cryptocurrencies) and access to the latest trading insights from expert traders.

 

Step 5: Build a trading plan  

As previously mentioned, research and strategies are essential for forex trading and so is building a trading plan. The key idea of trading plan is to develop a set of rules for the traders themselves so that they are going to adhere to, and how they are going to implement them. Once that have been established, it is much more efficient to apply them, as a clear plan of action on how to trade or operate has been prepared and thought through.

In addition to this, a trading plan can assist traders in analysing the market better, alongside apply the analysis to the trading strategy. A forex trading plan can prevent traders from making rash, irreversible decisions – something that is particularly useful when emotions are involved. Hence, a trading plan can prevent traders from making careless mistakes alongside evaluate the wins and losses.

Beginners are recommended to:

• Outline their motivation
• Decide on time allocation for trading
• Define your goals
• Choose a risk-reward ratio
• Decide on capital allocation for trading
• Assess your market knowledge
• Start a trading diary

 

Step 6: Choose your forex trading platform  

At Doo Prime, you are able to trade the financial market on the go as we provide top-notch award-winning trading platforms which includes MetaTrader 4, MetaTrader 5, FIX API, Trading View, and InTrade in both web-based and mobile versions. These trading platforms are available for download for Windows, iOS and Android.

 

Step 7: Open, monitor and close your first position 

You can start your first trade once you’ve chosen your trading platform.  With that, you are able to track market prices, keep watch on the unrealised profit or loss update in real time, attach orders to open positions and add new trades or close existing trades from your chosen trading platform.

When you are ready to close your trade, you simply need to do the opposite from opening trade. For instance, you bought 3 CFDs to open, you would sell 3 CFDs to close. Hence, by closing your trade, your net profit and loss will be realised and immediately reflect in your account’s cash balance.

What’s more, traders are provided the option to add orders. By adding an order, it refers to an instruction to automatically trade at a point in the future when prices reach a specific level predetermined by the traders themselves. Simultaneously, traders can utilise stop and limit orders to help ensure that traders lock in any profit and minimise their risk when the traders’ respective profit or loss targets are reached.

So, what are you waiting for? Start trading forex with Doo Prime now!