Forex trading, or foreign exchange trading, is the act of buying and selling currencies in the global marketplace. It is the most liquid financial market in the world, with over $7.5 trillion traded daily. If you’re new to forex and wondering how to do forex trading, this guide will walk you through each essential step — from understanding currency pairs to opening trades and managing risk.

Key Takeaways

• Forex trading involves speculating on currency price movements.
• You trade pairs like EUR/USD or GBP/JPY through a regulated broker.
• Learn core concepts such as pips, leverage, lot sizes, and stop-loss.
• A good strategy and proper risk management are critical to success.
• You can practice with a demo account before using real money.

Understanding the Basics of Forex Trading

Forex trading always involves two currencies:

• Base currency: the first currency in the pair (e.g. EUR in EUR/USD)
• Quote currency: the second currency in the pair (e.g. USD in EUR/USD)

When you buy EUR/USD, you are buying euros and selling US dollars, expecting the euro to rise in value against the dollar.

Major pairs include:
EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD

Cross pairs exclude the USD:
EUR/GBP, GBP/JPY, EUR/JPY

Exotic pairs involve a major and a developing currency:
USD/TRY, EUR/ZAR

Step-by-Step: How to Start Forex Trading

1. Choose a Regulated Forex Broker

Pick a broker licensed by authorities like the FCA (UK), ASIC (Australia), or CySEC (Europe). This ensures safety of funds and compliance with international trading standards.

2. Open a Trading Account

Create a live or demo account with your chosen broker. Provide identity documents, choose account type, and set your base currency.

3. Download a Trading Platform

Install a platform like MetaTrader 4 (MT4), MetaTrader 5 (MT5), or a broker’s proprietary app to access the market, analyse charts, and place trades.

4. Learn How to Read Charts

Forex charts show price movements over time. Learn to interpret:

• Candlestick patterns
• Support and resistance levels
• Technical indicators like RSI, MACD, and Moving Averages

5. Develop a Trading Strategy

Use a consistent plan to decide when to enter or exit trades. Strategies may be:

• Trend following
• Scalping
• Breakout trading
• Swing trading

6. Manage Your Risk

Set a stop-loss on every trade. Never risk more than 1–2% of your account on a single position. Understand margin, leverage, and lot sizes.

7. Practise on a Demo Account

Before using real money, practise with virtual funds. This helps build confidence and test your strategy in live market conditions.

For deeper learning, start with a Forex Course designed to help traders build a strong foundation and apply strategies confidently in real-time markets.

Case Study: From Zero to Consistency

Samuel, a university student in Lagos, started with a demo account and enrolled in a structured online forex course. He learned to identify high-probability setups and gradually built discipline. By month four, he transitioned to a live account with $500 and applied risk management rules. Within 12 months, he had grown his account steadily without blowing it — all by sticking to a clear strategy and journal.

Frequently Asked Questions

Can I start forex trading with no experience?

Yes, but it’s crucial to learn the basics and practise on a demo account first.

How much money do I need to start forex trading?

Some brokers allow trading from as little as $1, but $100–$500 is a more realistic amount to learn with live conditions.

Is forex trading risky?

Yes. High leverage increases risk, so always use stop-loss orders and manage your exposure.

What is the best time to trade forex?

The London-New York session overlap (1 PM to 5 PM UTC) has the highest liquidity and volatility.

Do I need a license to trade forex?

No, retail traders don’t need a license. However, brokers must be licensed to offer trading services.