Before diving into the world of foreign exchange, understanding forex trading what to know is essential to avoid costly mistakes and build a sustainable trading plan. The forex market is the largest and most liquid financial market in the world, but it also carries significant risk if approached without proper preparation.

This article explores the core concepts, risks, tools, and mindset needed to trade forex successfully, whether you’re a beginner or brushing up on essentials.

Key Takeaways

• Forex trading involves currency pairs traded 24/5 across global sessions.
• Risk management is more important than prediction.
• You need a solid strategy, consistent journaling, and a reliable broker.
• Emotional control and discipline are key to long-term success.
• Regulation, leverage, and market hours vary by country.

What Is Forex Trading?

Forex trading is the act of buying one currency and selling another simultaneously, aiming to profit from fluctuations in exchange rates. Trades are executed in currency pairs such as EUR/USD, where the first currency is the base and the second is the quote.

Example: Buying EUR/USD means you’re buying euros and selling US dollars.

What You Must Know Before Starting Forex Trading

1. The Market Operates 24/5

• Four main sessions: Sydney, Tokyo, London, New York
• Most liquidity during London–New York overlap
• Plan your trading hours based on your location and time availability

2. Leverage Amplifies Both Profit and Loss

• Brokers may offer 1:30 (retail) to 1:500 (professional) leverage
• Always calculate position size based on risk, not just opportunity

3. You Need a Trading Plan

• Includes entry/exit rules, risk management, and strategy validation
• A plan keeps you consistent and prevents emotional decisions

4. Risk Management Is Non-Negotiable

• Never risk more than 1–2% of your account per trade
• Use stop-loss orders and calculate proper lot size

5. Psychology Can Make or Break You

• Fear, greed, revenge trading and overconfidence are common
• Journaling and reflection help maintain emotional discipline

Tools and Skills Every Forex Trader Should Learn

Skill/Tool	Description
Technical Analysis	Study of charts, trends, indicators
Fundamental Analysis	Understanding macroeconomic factors
Price Action	Reading market structure via candlesticks
Lot Size & Risk Calculators	For accurate trade sizing
Economic Calendar	Track events like NFP, CPI, rate decisions

How to Fast-Track Your Learning

New traders can waste years figuring it out alone. Our structured Forex Course teaches you the core principles of strategy, risk, and mindset in a step-by-step format trusted by professionals.

Common Pitfalls New Forex Traders Face

• Overleveraging: Leading to margin calls and blown accounts
• No Strategy: Random trades without an edge
• Chasing the Market: Entering after big moves without confirmation
• Ignoring News Events: Leading to unexpected volatility
• Poor Broker Choice: High spreads, slippage, and unregulated conditions

Case Study: Trader Who Failed, Then Succeeded

Arjun, a self-taught trader from Mumbai, lost 60% of his capital in 3 months due to overtrading without a plan. After enrolling in a structured education program, he built a journal-based strategy focused on EUR/USD and GBP/USD during the London–New York session. Over 6 months, he transformed his approach, reduced trading frequency, and reached consistent profitability through rule-based discipline.

Fundamental vs Technical: Which Should You Learn First?

Factor	Technical Analysis	Fundamental Analysis
Short-Term Trading	✅ Most effective	❌ Less relevant
Long-Term Trading	✅ Supports decisions	✅ Core for macro outlook
Learning Curve	Moderate	Steeper
Based On	Charts, patterns, indicators	Interest rates, inflation, GDP

Frequently Asked Questions

What is forex trading and how does it work?

It’s the buying and selling of currency pairs like EUR/USD, where traders profit from price changes in exchange rates.

Is forex trading risky?

Yes, especially with leverage. But proper risk management can reduce potential losses.

How much money do I need to start forex trading?

You can start with as little as $100, but $500–$1,000 gives more flexibility and stability.

Do I need a strategy to trade forex?

Absolutely. A repeatable strategy is essential for consistency and risk control.

Can I learn forex trading on my own?

Yes, but structured learning through expert-led courses can fast-track your results and reduce mistakes.