How to start trading forex CFDs as a beginner?

Foreign exchange, also known as the forex market, is a global, decentralized, and major investment market involving the trading of various currencies. In the forex market, investors can achieve profits by monitoring changes in currency exchange rate trends. For beginners in the market, it's essential to acquire fundamental knowledge to handle market challenges confidently.

1. Understand pairs of currencies

Forex trading always involves pairs of currencies—for instance, the euro and the US dollar (EUR/USD). In this process, you buy one currency and sell the other based on your expectation of which currency will strengthen against the other. The currency being bought is known as the base currency (displayed on the left), and the currency being sold is called the quote currency (displayed on the right).

The price of the currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency. For example, if EUR/USD is quoted at 1.35000, it means it costs $1.35 to buy €1. It’s important to note that CFD forex trading aims to closely mirror the underlying forex market. Our forex CFD prices reflect the movements of the underlying market, except during weekends when markets are closed. During such times, prices may be influenced by anticipated market events and client sentiment.

2. Choose your currency pair to trade

There are over 80 currency pairs to choose from with us, including major, minor and exotic pairs. Before selecting a forex pair to trade, it's important to conduct both fundamental and technical analysis on the currencies involved. This involves evaluating how the 'base' currency (on the left) and the 'quote' currency (on the right) behave in relation to each other.

3. Understand lot sizes

Currencies are traded in standardized batches called lots. These lots are typically large due to the relatively small fluctuations in forex prices. For instance, a standard lot is 100,000 units of the base currency, while a micro lot is 1,000 units. These sizes help traders manage risk and leverage by determining the amount of currency they are buying or selling. Choosing the appropriate lot size is crucial for aligning with your risk management strategy and trading goals, as it affects potential profits and losses. Understanding lots helps traders make informed decisions and maintain proper risk control.

4. Choose a reputable CFD trading platform

Markets.com is a prominent online trading platform that offers access to a variety of financial instruments including forex, indices, commodities, stocks, and cryptocurrencies. It provides a user-friendly interface and tools for traders to engage in CFD trading across multiple markets. Markets.com has been in business since 2009, and they’re fully regulated in five different major markets, including Europe and the UK. Markets.com is a global company with more than 5M registered accounts which is regulated in Cyrpus, UK, BVI, Australia and South Africa. Click here to open an account right now!

5. Open your first forex CFD trade

Once you've opened your live account with us, you're set to begin trading forex CFDs. Simply access our CFD trading platform and decide whether to buy or sell the selected currency pair. Opt to buy if you anticipate the base currency will strengthen against the quote currency, or sell if you expect the opposite. Lastly, establish your stop-loss and take-profit levels before initiating a trade. Given the forex market's volatility, these risk management tools are crucial for mitigating potential losses.

6. Monitor your position

Once you’ve opened your position, you can monitor your FX CFD trade in the ‘open positions’ section of our platform. This area provides a clear view of your active trades and their performance. To stay informed and make timely decisions, keep an eye on the latest news updates, trading signals, and alerts available on our platform. These tools offer valuable insights into market trends and potential price movements, helping you adjust your strategy as needed. Regularly reviewing this information ensures you are well-equipped to manage your trades and respond to market developments effectively.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.Trading cryptocurrency CFDs and spreadbets is restricted for all UK retail clients.