Market Basics: How to Trade Forex

By Richard Cox
Richard Cox
Richard Cox
October 18, 2013 Updated: April 24, 2016

Market Basics: How to Trade Forex

Over the last few years, the rapidly changing computer trading environment has led to some new entries in the financial lexicon.  One example of this can be seen in the word “forex,” which was previously referred to as the Foreign Exchange market, or simply the currency market.  These changes reflect a broad upswing in popularity in retail forex trading, as market access has moved off of the trading floors and into the homes in individual investors.  Access to market information (from sources like Bloomberg, Thomson Financial, or Reuters) has also been streamlined, and it is now possible to be fully aware of market-moving news in a matter of seconds. 

Find a Reputable Broker

The first step in learning how to trade forex is to find a reputable broker.  This can be done by reading reviews and relevant forum posts to find a regulated forex broker that has low costs and a good library of free forex education.  Many forex brokers are headquartered in Europe, and this can make it harder to find the right company for you.  One of the more reputable examples forex broker can be seen in CornerTrader, which has one of the better educational programs and even offers one-on-one mentorship and synch trading.  In any case, what you must look for is an easy to use demo platform (so that you can test your trade ideas), low spread costs, and attentive customer service available to answer your questions. 

Know Your Economic Data

Once you have established your account, made your deposits and learned how to execute buy and sell orders, you will need to start focusing on a strategy.  To do this, you will need to have an understanding of economic reports, and their scheduled for release.  Bloomberg offers an excellent source here, which is quickly updated and reliable in terms of accuracy.  Markets tend to become highly volatile once these releases are made public, so it is often a better idea to avoid holding onto positions before you know the final results.  Strong economic data tends to have a large bullish influence on the currency connected to the reporting country, so it is often a good idea to look for new opportunities as the market is reacting to the newly released economic data. 

Know Your Chart Indicators

Some traders tend to avoid economic data altogether and simply focus on price activity.  This might seem like an odd approach, but these technical analyst traders would argue that all of the relevant market data is already reflected in the price itself.  To use these strategies, you will need an understanding of common indicator tools, such as the Moving Average Convergence Divergence (or MACD), or the Relative Strength Index (or RSI).  Both of these approaches are extremely useful in learning how to trade forex, and once these practices are mastered, finding new trading opportunities becomes much easier to accomplish.  As always, forex education is important, so take the time to do your homework before risking any real money.