How to trade forex?

Want to know how to trade forex? Take a look at some of the key terms to understand and steps you will need to take before getting started.

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Understanding what forex trading is?

If you want to start trading forex, you need to know what forex trading is.

Forex trading is the purchase and sale of currencies, with the end goal of having more profit then losses. With the foreign exchange market being open 24 hours a day, five days a week, this allows traders flexible opportunities to trade currency pairs and reach their financial goals, which could mean a profit or a loss.

In the ‘real world’, people would buy physical currency before taking an overseas trip. In the FX market, traders constantly make virtual exchanges, counting on exchange rates changing in their favour.

Find out more information about exactly how forex trading works.

How to trade forex?

To make a profit, forex traders speculate on the change in the value of one currency relative to another (a currency pair). Unlike traditional stocks which must increase in value compared to the initial investment, FX traders have the ability to speculate on whether a price will rise or fall, so they may have a profit or loss in either market direction.

Thanks to easily accessible forex trading software (also known as a trading platform), trades can be made from anywhere in the world, any time the markets are open.

Ready to start trading forex?

Follow our process to start forex trading today:

  • Understand what forex trading is and how it works
  • Open a demo and live account
  • Discover the currency pair you want to trade
  • Select your trading platform
  • Open a position, monitor and close your first trade

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Discover the most traded currency pairs

To get a better understanding of the currency pairs you can trade with Axi, the table below shows some of the most popular forex currency groups, including: majors, minors and exotics. You can see all our available currency pairs in our product schedule.

Live forex spreads

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How much money do you need to start trading forex?

Anyone can start trading forex with Axi using as little as $10. However, some platforms do require a higher amount of capital, sometimes up to a minimum of $500.

Generally speaking, forex trades are carried out in what’s known as ‘lots’. A standard lot is 100,000 currency units. This is equal to, for example, USD $100,000.

  • A mini lot is 10,000 currency units
  • A micro lot is 1,000 currency units
  • A nano lot is 100 currency units

The reason you can get started with as little as $10 is the ability to use leverage to increase your initial investment. The higher the leverage you use, the higher the risk, but ultimately the amount you choose to trade is up to you.

Where does forex trading happen?

The forex market is a decentralised market, which means there’s no single authority to run it. Instead, there are many forex market participants from all over the world. These investors can be large in size (such as banks, hedge funds and financial institutions) or small (such as a single retail trader). Retail traders access the forex market by using a broker – a business that facilitates a specialised trading service that includes access to liquidity, trading platforms and support. In general there are three main types of broker:

Market Makers act as a counter-party to a retail trader. In this arrangement, a trader’s loss is a broker’s gain, and vice versa. The nature of this relationship means trades can be executed very quickly. 

Electronic Communications Network (ECN) is used by major banks and financial institutions who provide price feeds to an ECN liquidity “pool”. Brokers access this ECN pool and pass on the best bid and offer prices, which often results in very low spreads for traders.

STP Brokers (Straight Through Processing) work similarly to ECN brokers by connecting traders to liquidity providers. The main difference is that STP brokers have individual connections to liquidity providers.

Forex trading strategies

As you gain more knowledge of how forex trading works, you will establish overarching strategies that will help you decide when to trade. There are many different strategies to follow, each with a different level of risk and involving different timelines. For comparison, here are some popular forex trading strategies.

Scalp Trading

Scalping is a short-term forex trading strategy that’s preferred by traders who don’t have a lot of time to trade. Scalpers tend to follow the news closely and get in and out of trades very quickly which can result in a profit or a loss fast.

Swing Trading

Swing trading is a longer-term strategy where a trader may hold positions open for days, weeks, or longer. It is less affected by daily price fluctuations and more concerned with overall trends.

Forex trading platforms and tools

With an Axi account, you get free access to a wide range of resources and powerful trading platforms designed to help you find your trading edge. Whether you want the simplicity of one-click trading or highly advanced analysis driven by artificial intelligence, we've got the right forex trading platforms to service any level of trader.

MetaTrader 4

MetaTrader 4 is the smart choice for online traders everywhere who are looking for a trading edge. Simple for beginners and full of advanced functions for professionals, the MT4 platform helps you unlock unlimited trading possibilities.

Learn about MT4

PsyQuation

Built to utilise Artificial Intelligence and Machine Learning, PsyQuation is a highly advanced trading analytics platform designed to reduce your trading mistakes and provide powerful performance analytics.

Learn about PsyQuation

AutoChartist

Autochartist continuously scans the market for customised trade opportunities, based on realtime pricing and your specific trade setups, then alerts you to potential trades.

Learn About Autochartist

Discover more markets to trade with Axi

Choose from a variety of global markets to trade with Axi, using ultra competitive spreads & flexible leverage to trade your edge.

Forex trading FAQs

‘Long’ and ‘short’ trades are forex terms you will quickly come to understand.

To "go long" means you are buying a currency pair in anticipation that the price will rise. 

"Going short" on a currency pair means you are selling it and hoping the market price will decline.

Due to the fluctuating nature of the forex market, there’s an inherent risk in any trade that it could go against you. To hep reduce that risk and protect your capital, there are two key tools commonly used by traders.

Stop Loss is a predefined level – set by you when you place your trade – at which a trade will automatically close. This helps you to avoid experiencing a loss more than what you’re comfortable accepting.

Take Profit works in a similar way, but instead of being there to protect losses it is set to lock in profits once a predetermined target has been met. While taking a profit early may prevent you claiming even higher profits, it will also ensure you don’t drop below your accepted level.

On the forex market, a ‘limit’ order dictates buying or selling at a specific price, or a better price. For example, you can place a ‘buy limit’ to only buy at or below a specific price. A ‘sell limit’ can be set to sell at or above a specific price. 

When these prices are reached, your orders are executed automatically in the forex trading platform.

The foreign exchange market is not open seven days a week, but prices can still change over the two days when trading does not take place. Sudden price changes can also occur, usually because of a major economic or environmental event that drastically influences the value of a currency.

Within these “gaps” in normal trading, currency values can still go up or down, so some traders have strategies for trading gaps to take advantage of this occurrence.

In forex, a swap rate is also known as a rollover rate. This is the amount either added or subtracted from your overnight holding position.

Your swap rate may put you ahead or behind in terms of profits, and they change based on a number of factors but are mainly based on current interest rates.

Day traders do not have to worry so much about swap rates, but you will have to factor in the cost if you are using more long term strategies.

Axi has an economic calendar that you can use to monitor global economic events that may affect the movement of the market or individual currencies. This can be filtered based on countries and specific events happening around the world. Check out our guide on how to read an economic calendar to utilise this tool.

Economies around the world are constantly changing and are influenced by things like changes in leadership, conflict, resources and consumer confidence. Almost every shift that takes place will have some kind of an impact on the foreign exchange market. These could be anything from unemployment figure announcements in Canada to the latest mortgage application numbers in the UK. A speech made by the US President can impact the foreign exchange, as can property price changes in Australia.

If you’re serious about achieving success through trading on the foreign exchange, it helps to be aware of these big announcements ahead of time. They may be able to give you an indication of how currency pairs will move so you can make decisions about how to trade the forex market.

Trade forex online with Axi

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