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Knowledge Crunch

How to Become a Forex Trader: 6 Steps for Beginners (2021)

Monday, June 28, 2021 5:21 PM GMT

Are you looking to start trading foreign currency? 

Becoming a successful forex trader is a dream for many, and it's an ambition that isn't as doesn't entail as many steps as you might think. 

There's around $6.6 trillion of currency traded each day across the globe, and there are nearly 14 million people actively trading in the market

To join that number, you can follow our six steps to becoming a forex trader, where we share with you: 

  • The basics you need to get started trading forex
  • The accounts you need to open to be a forex trader
  • How to begin to understand forex trading

With details for each step you need to take. 

First, there are a couple of questions we want to address.

 

6 Steps for Becoming a Successful Forex Trader

What is Forex Trading?

Can Anyone Become a Forex Trader?

Step #1: Have Trading Capital

Step #2: Find the Right Trading Platform

Step #3: Open a Broker Account

Step #4: Use a Demo Account

Step #5: Keep it Simple

Step #6: Stick to the Plan

Frequently Asked Questions (FAQs)

 

What is Forex Trading?

Forex trading is when a person or business buys and sells different currencies or their crosses. 

That's it at the most simple level, but when you want to become a forex trader, it gets a little more technical. 

The foreign exchange, or forex market is a financial market that trades foreign currencies and where traders work to make a profit on the volatility. 

Volatility is the percentage price change that can happen over time.

Because of the prevalence of online trading and easy access to market trends and other data online, more people are looking to become forex traders. 

You can choose to make the trades yourself, called manual trading, using an online platform like ZuluTrade and connect it to a brokerage account. 

Alternatively, you can use Copy Trading on the ZuluTrade platform, where you copy the trades of already successful Traders, meaning you don't need to execute trades yourself. 

We've got more details about how to get started with forex trading coming up, after looking at who can become a forex trader.

 

Can Anyone Become a Forex Trader?

Potentially, anyone can start trading forex when understanding the risks involved, as long as you have money to invest, the time to spend learning the markets, and the commitment to honing your intuition. As we always mention, trading involves high risk. 

If you want to get into forex trading but don't have lots of time to study how to do it yourself, Copy Trading has a quicker learning curve to get started. 

New traders enter the market every day from all over the world. 

There are restrictions on who can trade foreign currency in some countries, so to be safe you should familiarize yourself with your local laws before starting trading. 

In lots of ways, trading forex can be a very different market to stocks or commodities, yet there are similarities, too. 

You won't need any academic background to be a foreign exchange trader, but some of the skills you will need when starting out trading currencies include: 

  • Good money management
  • Being able to find data about past performance so you can perform testing on your strategies
  • The ability to perform statistical analysis and work well with numbers
  • Understanding the implications of price movements
  • Having strong decision-making prowess
  • Knowledge of geo-political events

It's worth remembering that, no matter how skilled you are, there'll always be risks when trading currencies, which means you could lose some or all of the money you invest. 

Think you've got what it takes to become a forex trader? Here are the steps you need to follow to get started.

 

Step #1: Have Trading Capital

The first thing you need to start trading forex is money, or capital. 

Some currency brokers will allow you to open an account with as little as $1, but somewhere between $200 to $500 is more common. 

Before you start trading with real money, you can get used to understanding information such as:

  • Who traders are
  • The strategies that can be used
  • How social interference can affect markets
  • Working with Combos

As we all learn how to place orders for trades with a demo account, as shown in the screenshot below. 

This can help you get to grips with how to follow a trader, decide on a trading system you want to use, and understand the risks involved when you start to trade with your own capital. 

In a live account, your capital is going to be used in live trading and the value of your account will depend on the exchange rate for the currencies you hold and the progress of your open positions - trades that you've started but haven't yet completed. 

Once you've got the money in place to be able to start trading forex, it's onto our next step.

 

Step #2: Find the Right Trading Platform

To start trading forex, you need to find an online tool that'll facilitate your trades

These are called trading platforms; powerful trading software where you can open, close, and manage your trading positions. 

When you're choosing a platform to use to place your trades or find successful traders to copy, there are a range of factors to consider. 

Important ones you need to look at are; having data available for technical analysis of markets, presenting different data points about market conditions like up-to-date exchange rates and spreads…

… having historic data and forex charts like candlestick charts showing minimum and maximum prices over time… 

… charging low or minimal fees, such as the profit sharing model on ZuluTrade where you only pay your following Traders when you are profitable…

… and working with a range of successful Traders, or signal providers, to facilitate copy trading… 



To get a feel for the platform you choose and how you can work with it, you can usually use a demo account for a few days. 

ZuluTrade, and many other platforms, offer the feature and it's a very handy way for you to start to understand if the platform will work for you. 

After choosing your platform, you need a broker, which is the next step we're going to explore.

 

Step #3: Open a Broker Account

Platform chosen; it's time to select a forex broker to open an account with. 

Before you start trading, you need to choose a brokerage that offers the features you need.

There are lots of forex brokers to choose from, so having an idea of the elements to look for will help you in this process. 

To choose a broker to open your account with, look for: 

  • A regulated broker - check that the broker has all the relevant licenses and registrations from the country they're headquartered; each broker ZuluTrade works with meets this standard
  • Account features you can benefit from - look at the leverage ratio offered, what their spread looks like, and how easy it is to withdraw money
  • The currency pairs the broker offers - most brokers will offer major pairs such as EUR/USD, USD/JPY, and GBP/USD
  • A brokerage that works with your trading platform - not all brokers will work with all platforms, so choose one that integrates with the one you chose in the last step. 

To open your broker account, you'll likely need to go through some verification steps, commonly called know your customer (KYC) checks. 

This could include providing ID and other documents and may take a couple of days. 

Photo by Levi Ventura on Unsplash

 

Once your broker account is set up, you need to understand some fundamentals like  how to set up stop-loss, take profit, and target profit orders. 

This can help protect your capital from holding entering positions that are too risky for your appetite - although beware that these aren't an absolute failsafe and may not be honored in extreme cases. 

We're going to check out the fourth step, now.

 

Step #4: Use a Demo Account

As we noted in the previous steps, having access to a demo account can be a very handy tool to help you become a forex trader. 

Your time spent using a demo account is part of your forex education.

Take the time to learn the forex market, figure out how to do fundamental and technical analysis, and learn about risk management.

In a demo account, you're given "funds" that you can use to trade with or allocate to follow a successful forex trader through Copy Trading. 

Without risking any real money, you can not only understand how to use your chosen platform but also start learning how to trade a currency pair or follow a trader. 

Along with figuring out how to use your demo account, you should start to educate yourself about forex trading and the currency pair or pairs you want to work with - more on this in a moment.

You can watch webinars to learn about different trading strategies and see if it'll work for you, read blogs from professional traders, learn to read chart patterns, and pay attention to how the traders that you choose to copy their positions. 

With some studying and executing trades in this simulated environment, you'll be able to use the funds in your demo account to figure out how to respond to market movements in the same way you would in a live account.

You may also make a loss on some of your trades - take this as an educational experience, because it's also possible to lose money when you start live trading; it's useful to understand the chance you'll incur a loss. 

Put simply, your demo trading account offers you the opportunity to make mistakes and not be financially worse off.

Once you feel ready to start placing orders and executing trades, it's time to move on to the next step. 

 

Step #5: Keep it Simple

When you start to see the possible instruments you can trade with, it can be very exciting and you can feel like you want to get involved in everything. 

On a platform like ZuluTrade, after you connect your broker you can trade CFDs in:

  • Stocks
  • Cryptocurrency
  • Indices
  • Commodities
  • Combinations of all of these, called Combos

As well as a range of currency pairs for forex trading. 

Photo by Austin Distel on Unsplash

 

Tempting as it might feel to dabble in all of these, as a beginner to the forex trading world, you should consider keeping it simple. 

It can take a lot of time and effort to really drill down the knowledge of a currency pair.

Photo by Kevin Ku on Unsplash

 

By keeping your forex trading simple, you can focus your attention on one major pair and start executing trades. 

The same holds for when you choose to do Copy Trading

At first, consider following only one or two traders, making it less time-consuming to understand what moves each trader is making, either through their manual trades or the automations they have created.  

If you start to overcomplicate your forex trading strategy when you start, you can begin to feel burned out. 

 

With so many data points to consider and market moves to keep track of, you could easily take on too much if you try too many strategies or copy too many traders at once. 

Moving on to the next step of our process.

 

Step #6: Stick to the Plan

Most, if not all good forex traders will have a trading strategy

There are lots of strategies available, some of which are better suited to beginners, like Copy Trading, and some which may be better left to a professional forex trader. 

Some examples of forex trading strategies you may have heard of include:

  • Scalping
  • Day trading
  • Swing trading
  • Position trading
  • Carry trading

Each will require different initial capital and a different time commitment. 

Your trading plan should be considered and resilient and it can be good practice to have your stop-loss and take profit orders in place. 

You will also need to test your strategy yourself through backtesting and forward testing. 

This is a process where you take the strategy you're considering and test it against historical data, allowing you to see if it would have worked for you in the past. 

Whichever strategy you choose to research and execute, stick to it. 

If this sounds rather involved and challenging as a beginner, another strategic option you can choose is Copy Trading.

Copy Trading is a useful tool for you as you start out, since you get to watch the strategies of professional traders, and even ask questions to the trader about their positions.

You can change the trader you choose to copy whenever you wish, making it easier to try out different strategies before choosing one to stick with. 

Generally, a strategy becomes well-known and commonly used once it's been proven successful, but that's not to say it'll always bring you profit.

 

That's your journey to start forex trading complete; let's wrap this up.

 

Now Over to You

That's your complete process. 

By following our six steps to becoming a forex trader, you should find yourself ready to start actively trading or following successful traders through Copy Trading

From having the money ready to invest and a platform and broker to facilitate your trading, to choosing what you'll trade and how, you now know what it takes to start trading. 

What stage in the process are you at? 

When you're ready to choose your platform, ZuluTrade is ready to help you create an account and get started with forex trading. 

 

Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.

 

Frequently Asked Questions (FAQs)

Do you still have questions? 

It's a big commitment to invest your money into something new, so we've put together this list of frequently asked questions to cover what we often get asked. 

 

Q1. What qualifications do you need to be a forex trader?

 

Becoming a currency trader doesn't require specific qualifications, but there are training courses online and in-person that you can take. Being a forex trader is about skill, working hard, experimentation, and being able to spot trading opportunities where there is a chance to make a profit. 

Q2. How much do forex traders make in a year?

In the USA, the average base salary for a forex trader is $95,500, according to Glassdoor. It's common for professional FX traders to also earn a bonus based on the profits they make for their employer. If you choose to trade foreign currency independently, it's possible to make profitable trades consistently, however, you should note that currency markets are volatile and profits aren't guaranteed.

Q3. What are the benefits of being a forex trader?

Choosing to trade forex can have financial benefits that you can realize quickly; short-term trades give quick returns - and losses. As an independent forex trader, you also have the flexibility to choose your hours since currency markets function 24 hours a day, 6 days a week. Trading involves high risk so make sure you understand it before start trading.

Q4. What’s the best forex trading platform?

To trade on the foreign exchange market, choosing the right platform is essential and the ZuluTrade Copy Trading platform has all the capabilities you need. Our platform has detailed data available, is clear and easy to learn how to use, and we work with a range of brokers to suit your needs. 

 

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