How To Start Trading in Forex?

Before trading in the currency market, you should be completely aware of the market, the techniques and strategies, currency pairs, and stress management. In addition, before trading in Forex, you should learn the important terms in the currency market. Therefore, for future discussions, we will talk about the Forex market, choosing the right broker, and the account. Furthermore, we will introduce you to the common terms in the currency market, required trading skills, the right time of the trade, and how to buy and sell.

The Forex Market

The Forex market used to be only about trading currency pairs. Gradually, it expanded into a platform for trading cryptocurrencies, oil, gold, etc. To enter the currency market, due to the high risks and current volatilizes, you need training, such as how to profit and what to do when you have a loss, different trading techniques and strategies, etc.

Trading in the currency market is possible with electronic and online platforms. However, the Forex itself doesn’t have any websites for registration. Traders need to visit Forex brokers to make a trade. Basically, brokers are similar to exchanges in the currency market. Each broker has a website and/or a specific platform for registration and trading. I’m going to talk about Forex brokers in the next section.

Forex Brokers

Brokers perform as an intermediary between buyers and sellers. Usually, brokers work under regulatory institutions, and their trades and transactions are under the supervision of these institutions. Regulators have specific rules and regulations that brokers must obey. There are different types of brokers, and each broker has unique features. The features and differences of brokers include:

• The commission and fee amount
• The quality of services and support of each broker
• The type of trading platform or application that traders use
• The security of the broker
• The method of depositing or withdrawing money
• The worldwide reputation of the broker
• The diversity in the broker’s assets

There are different brokers with different services in the currency market, and people choose one based on their needs and capital. Due to sanctions on Iran, choosing the right broker is difficult for Iranian traders. However, the well-known brokers among Iranians are Alpari, Forex Time, and Hot Forex. For the next section, I’ll introduce you to different types of Forex accounts so you can trade with more knowledge.

Different Forex Accounts

To start trading in the Forex market, you need to know different types of Forex accounts to choose the best one for you. Forex accounts are demo or virtual accounts, standard accounts, mini or micro accounts, Cent accounts, ECN accounts, and PAMM accounts. You can choose one based on the functions of the account and your needs. It is worth mentioning that not all the accounts are available in some brokers. In the next section, I’ll explain and summarize each account.

• Demo or virtual account: It’s similar to a standard account in that the trader does all the transactions virtually. Even the capital in this account is virtual and fake. Amateur traders can learn about trading methods and profit and loss.
• Standard account: This is one of the most common accounts that is available to most brokers. The standard account is for experts and experienced traders because the amount of deposit and capital is calculated based on the dollar. Each broker has its own specific amount of deposit for opening an account based on its regulations. By opening a standard account, the trader can directly trade assets and currency pairs in the Forex market, and the trader has the responsibility for the amount of profit and loss.
• ECN account: this is an electronic account with clear and specific prices. This account provides different prices of various trades.
• Mini or micro account: The amount you can deposit is lower than the standard account. It’s about 1 to 10 dollars.
• Cent account: These are a group of accounts for trading with low capital. The transactions are in “cents” and there is less risk in these accounts. Traders can increase their knowledge and skill by using a Cent account.
• PAMM account: People who want to make a profit in a short period of time without analyzing the market use a PAMM account. The trader lets an analyst use their capital and take some of the profit. If the analyst makes a profit, they will receive a fixed fee. And if there’s a loss, only the trader loses money.

Now that you are familiar with each account, you will find it easier to choose a suitable account for yourself. If you’re new to the Forex market, the best option for you is a demo account. This way, you can learn and improve your analyzing skill. After learning about different types of accounts, you need to know about common terms in the currency market, which I’ll explain in the next section.

Common Terms of the Forex Market

When you want to work in any business, especially financial markets, you need to learn the related terms entirely. By learning the common terms of any profession, you will improve your skills in that area and choose a better path. In this section, I want to mention the important and common terms of Forex trading and explain their functions. The most important terms of Forex are as follows:

• Currency Pair: This is the most important and common term in the currency market. People trade the currency pairs in the Forex market. Meaning the two currencies you trade are called currency pairs.
• Major Pair: Any currency pair with the American dollar on one side is called Major pair.
• Cross Pair: This is a currency pair without the American dollar on the other side.
• Exotics: Any currency pair with an exotic or unknown currency on the other side is called Exotics. Usually, exotics have low liquidity.

• Exchange Rate: This is the equal value of one currency unit with another one. Basically, it’s the trading rate during buying or selling.
• Base Currency: It’s the base currency used during currency pairs trading. It is also called Transaction Currency.
• Quote Currency: This is the second currency we use during trading. It’s on the opposite side of the base currency.
• Broker: The intermediary between buyer and seller is called a broker, and its duty is very similar to cryptocurrency exchanges. In fact, it is the medium of trading.
• Spread: This is the price difference between the buying and selling price the trader has to pay when he buys a stock. In other words, an amount of money will be deducted from the total amount as a fee. Each broker receives a spread. The lower the spread, the better it is for the trader.
• Position: Any trade that is in process is a position.
• Buy = Long Position: It means buying an asset or a currency in the hope of an increase in its value and having profit in the future.
• Sell = Short Position: It means selling an asset or currency because you are worried about a decrease in the value and losing money in that position.
• Lot: It’s a unit for measuring the volume of transactions. For every 100,000 units of a base currency, there is a Lot. The broker determines the amount of Lot in each account in the Forex market, and it is different.

• Leverage: The trader can improve their power of buying and making a profit by using leverage. Brokers are very fond of traders using leverage because they make a lot of profits when traders use leverage. As much as using leverage makes you gain a lot of profit, it can make users lose high amounts. By using leverage, you can increase the profit factor of the trade.
• Margin: Part of the trader’s capital is in a separate deposit as a safe margin of loss. The trader is not allowed to withdraw money from the margin account and only can use it during a transaction.
• Call Margin: This is when a trader loses all of their capital because they hadn’t defined a stop loss. In this situation, the broker withdraws all trader’s money, and their account becomes the Call margin.
• Stop loss: This one helps traders with risk management. By using stop loss, you can close your position after the price reaches a certain amount. In fact, this is a preset, and it will close the position without your presence.
• Swap: This is the bank interest. If a position is in process for more than 24 hours, it has to pay interest (swap). To attract traders, some brokers don’t take an interest.
• Pip: Pip is the abbreviation for price interest point. This is the lowest difference that a currency rate makes in the market. Pip is very important to those traders that make a profit off of momentary volatilizes of currency pairs.

In the last section, we introduced the most important terms of the Forex market. Therefore, when you trade in the Forex market, you will trade with a tool called knowledge. If you don’t learn these terms, you won’t be able to trade properly. In fact, Forex market terms are like the alphabet of a language. It’s a necessity. In the next section, I will explain how to trade in the trading account.

Depositing Capital in the Forex Account

Maybe you have this question how much money do you need to start trading in the Forex market? Based on the type of broker and account you choose; your initial capital may differ when you start trading in the forex market. Therefore, this is how you start trading:

• Choosing the suitable broker and registering in the website or platform mentioned by your broker
• Choosing the account’s type
• Depositing capital in your account in the broker
• Starting to trade

After your broker of choice has confirmed your identification, you should deposit capital into your broker’s account. Transferring money is available from exchanges, crypto wallets, etc. Every broker has different methods for transferring money, and this is a complex issue and full of risk for Iranian traders due to sanctions.

If you make the smallest mistake, you may lose your entire capital. Therefore, before transferring money, make sure to read all the depositing methods of your broker. I will explain depositing methods briefly down below:

• International bank account: By using an international bank account, you are able to deposit capital directly. Actually, the easiest and safest method is opening this account. An international bank account, which includes PayPal, Visa Card, and Master Card, lets you deposit money to your account in a simple and easy process.
• Depositing and withdrawing Rial: Some brokers let traders use their Iranian bank account to deposit money directly. In this method, the broker suggests an account number or exchange so you can deposit money directly. After that, your account receives the money and is ready for trading. Each broker has different methods for depositing Rial and transaction fees. Therefore, don’t forget to check the fee before depositing.
• Virtual wallet: This wallet is an easy method for transferring money online, and you can say that it works just like an international bank account. The digital wallets that most brokers use are WebMoney, Perfect Money, and Top Change.
• Cryptocurrencies: Cryptocurrency is another method of depositing and withdrawing money. Actually, most brokers support cryptocurrencies.

Now that you’ve learned about transferring money, it’s time for trading in Forex. You need to learn all the strategies and techniques to start trading in Forex. After reading the news and considering the traders’ emotions and the downward and upward trend of a currency pair in the past, you can start trading. If you’ve learned all of this, you are ready, and you can start trading. If this is your first time trading in the currency market, I suggest you open a demo account. It helps traders to improve their skills.

Trading in the Forex Market

Before each trade, you need to be aware of the market’s timing. The currency market closes from 22 o’clock on Monday Sydney time until 22 Friday night New York time. However, during some periods of time, the market and trades are at their peak levels, and sometimes, such as Christmas, the market experiences depression. When you’re about to trade, you have to be aware of the start and end times of the market working day.

If you follow all the mentioned points, you will have lucrative profits based on your knowledge and risk management. According to your knowledge and news about a currency pair, start to position a trade with the allowed amount of your broker and your capital. Make sure that you always have a stop loss so that when you do not have access to your account or have a problem with your internet connection, you won’t lose a high amount of money.

Now, based on a continuous awareness of news and following your strategies and analysis techniques, you should define your short position. If you plan to keep a position, don’t forget to pay attention to your broker’s commission. You can keep a position in the Forex market daily, monthly, long-term, and even annually. Everything depends on your trading strategy. There is a method that gives you small profits momentarily from different positions. To be aware of the trading method of your choice, you have to consider the following:

• The amount of your capital
• The amount of time you want to spend for each trade
• How much time and experience you have in trading
• The characteristics of your personality
• Your risk tolerance

For example, if you are an impatient and hasty person, long-term trades are definitely not your cup of tea. If you spend only a short time in the market, high-risk trades with high profits are not suitable for you because high-risk trades require momentary awareness of the news, currencies volatility, traders’ feelings, and many other reasons, and being aware of all of them in a short period seem impossible.

Conclusion

In this article, we introduced you to the overall situation of the Forex market, different accounts, how to choose a suitable broker, and also trading in the Forex market. You have realized that before each deposition of money or each position, you have to choose the right broker and the method of depositing money carefully. Also, you learned about common terms of the market and how to deposit money into your account.

Dear friend, investing in financial markets, first and foremost, requires knowledge and learning all the methods and techniques of trading in the market. Therefore, before you deposit money and start trading in the Forex market, don’t forget to have a thorough study and find a suitable strategy in this market.

FAQ

1. What is trading?

Trading is buying and selling, and it’s one of the fundamental terms of the financial markets.

2. Do we need especial tools to start trading?

When you want to start trading in the currency market, you need a proper internet connection and a laptop. Then, you need knowledge of market analysis, such as vital fundamental, technical, and sentimental techniques

3. Are there specific criteria for choosing a trading method?

The amount of initial capital, how much time you spend in the market, your experience and knowledge as a trader, your personality, and finally, risk tolerance. These are some of the most important criteria for choosing trading method.