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Currency Trading for Beginners

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Like stocks, currency trading happens in the financial market. The forex market happens to be the largest financial market in the world in terms of daily transaction volume.

Unlike stocks, most of that currency transaction volume is seen in the relatively unregulated over-the-counter markets rather than on the more formal, highly-regulated stock exchanges.

Commissions
$10 value per pip
Account Minimum
$0
Get started securely through IG Group’s website
Commissions
$10 value per pip
Account Minimum
$0
1 Minute Review

IG is a comprehensive forex broker that offers full access to the currency market and support for over 80 currency pairs. The broker only offers forex trading to its U.S.-based customers, the brokerage does it spectacularly well. Novice traders will love IG’s intuitive mobile and desktop platforms, while advanced traders will revel in the platform’s selection of indicators and charting tools. Though IG could work on its customer service and fees, the broker is an asset to new forex traders and those who prefer a more streamlined interface.  

Best For
  • New forex traders who are still learning the ropes
  • Traders who prefer a simple, clean interface
  • Forex traders who trade primarily on a tablet
Pros
  • Easy-to-navigate platform is easy for beginners to master
  • Mobile and tablet platforms offer full functionality of the desktop version
  • Margin rates are easy to understand and affordable
  • Access to over 80 currency pairs
Cons
  • U.S. traders can currently only trade forex
  • Customer service options are lacking
  • No 2-factor authentication on mobile
Account Minimum
100 of your selected base currency
Pairs Offered
80+
Get started securely through FOREX.com’s website
Account Minimum
100 of your selected base currency
Pairs Offered
80+
1 Minute Review

FOREX.com is a one-stop-shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker. You can’t invest in the stock or bond market through your FOREX.com and you cannot open an account with tax advantages. The confusing pricing and margin structures may also be overwhelming for new forex traders.

Best For
  • MetaTrader 4 users
  • Beginner forex traders
  • Active forex traders
Pros
  • Impressive, easy-to-navigate platform
  • Wide range of education and research tools
  • Access to over 80 currencies to buy and sell
  • Leverage available up to 50:1
Cons
  • Cannot buy and sell other securities (like stocks and bonds)
  • Confusing margin requirements that vary by currency
  • Limited customer support options
  • Cannot open an IRA or other retirement account
Account Minimum
$50 USD
Pairs Offered
47
Get started securely through eToro’s website
Account Minimum
$50 USD
Pairs Offered
47
1 Minute Review

Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).

eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.

Best For
  • International Forex/CFD Traders
  • New cryptocurrency traders looking for an easy-to-use platform
  • Traders who want to buy and sell cryptocurrencies on-the-go
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • U.S. traders currently limited to cryptocurrencies
  • Only 15 major coins available to trade
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
Get started securely through HYCM’s website
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
1 Minute Review

HYCM is 1 of the world’s leading forex brokers, offering investors access to over 69 unique currency pairs. However, forex isn’t the only thing the broker offers — HYCM also offers high rates of leverage, stock and ETF trading, commodity investing and much more. Getting started with HYCM is quick and easy, and most investors can open an account in as little as 10 minutes.

HYCM offers a varying fee structure, which allows investors to choose the spread option that’s best for them. A wide range of educational and investing tools are available, which can be equally beneficial to both experienced and novice traders. Though HYCM isn’t currently available in the United States, it can be a great choice for residents of the other 140 countries where it offers service. 

Best For
  • Investors who want a customizable fee schedule
  • Traders comfortable using the MetaTrader platform
  • Islamic traders who need swap-free accounts that don’t build interest
Pros
  • Wide range of currency pairs available
  • Excellent selection of educational tools
  • $0 deposit and withdrawal fees
Cons
  • Not currently available to traders based in the U.S.
Account Minimum
100 EURO
Pairs Offered
50+
Get started securely through AvaTrade’s website
Account Minimum
100 EURO
Pairs Offered
50+
1 Minute Review

A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.

Best For
  • Beginners
  • Advanced traders
  • Traders looking for a well-diversified portfolio
Pros
  • Controlled by regulatory agencies of multiple countries
  • Choice offered in terms of trading platforms
  • Support available in 14 languages and trading platforms in 20 languages
  • Practice/demo account available for trying out
  • Breadth of trading assets
Cons
  • Does not accept customers from the U.S. as it isn’t regulated in the U.S.
  • Transferring funds to the account may take up to five days; withdrawals could take up to 10 days

What’s Currency, or Forex, Trading?

Foreign exchange (forex), or currency trading, involves the exchange of one national currency for another at a market-determined exchange rate. Since currencies only trade in pairs, they are valued relative to one another in the forex market.

Each national currency has its own unique three-letter currency code to identify it that was established under the ISO 4217 International Standard for currency codes. The most recent edition is ISO 4217:2015, and its purpose is to provide internationally-recognized codes to represent currencies.

Some of the most commonly traded national currencies, their countries of origin and ISO 4217 codes and most common nicknames used by forex traders and market commentators are shown in the table below.

How Does it Work?

Traders often perform market analysis before taking a trade. This can involve looking at the fundamentals for a currency pair, including relevant news and economic data releases, as well as checking out a chart of the exchange rate for the currency pair as it moves over time and applying technical analysis methods to see if the likely future direction of the pair can be discerned.  

One of the most popular types of charts that forex traders use is known as a Japanese candlestick chart. Each time period shown on this type of chart has a body that stretches from the open to the closing exchange rate. This body is also color-coded, with one color that signifies a rise in the market and one that signifies a decline.

At the top and bottom of each candle’s body is a vertical line called a wick. The upper wick stretches from the open or the close (whichever is higher) to the period’s high point, while the lower wick goes from the open or close (whichever is lower) to the period’s low point.


Candlestick chart of the EUR/USD exchange rate. Source: MetaTrader 4.

To explain how trading works, let’s suppose that you’ve done some technical analysis based on a chart like the one shown above.

As a result of your research, you now think that the EUR/USD exchange rate will decline, which means that you expect the value of the euro to fall relative to the U.S. dollar. Your market view would, therefore, be bearish on the euro and bullish on the U.S. dollar.

How to Start Currency Trading

Using the example in the previous section to start trading forex, you will need to make a trade to profit from this bearish euro view. You might decide to sell 1 million euros and buy U.S. dollars at a EUR/USD exchange rate of 1.2000 as your first transaction or trade. You would end up holding $1,200,000 since that equals 1 million euros multiplied by the 1.2000 exchange rate.

Since you made that trade to take an initial position in the market, a forex trader would say that you had sold or “gone short” 1 million euros against the dollar at 1.2000. You would also simultaneously have bought or “gone long” $1,200,000 versus the euro by taking that position.

The way that you would subsequently make money on that short euro trade versus the U.S. dollar trade would be if the EUR/USD exchange rate was lower when you purchased the euros you originally sold back. Conversely, you would lose money if the exchange rate rose by the time you bought euros and sold dollars to close out the initial position.

As an example of the magnitude of gains you could make if your market view was correct, let’s say the market went down to 1.1900 and that you decided to buy the euros you had sold back at that point. Your profit would be 1.2000 minus 1.1900, or 0.0100 multiplied by 1 million euros. This yields a gain of $10,000 on that successful trade.

Another increasingly popular way to start trading is to find a successful trader with a proven track record whose transactions you can copy, usually for a fee. This is known as copy trading, and it can be a good way for people with little experience or time to devote to market analysis to get quickly involved in trading the forex market.

What You’ll Need Before You Start

Now that you have some idea about what forex trading involves, you’ll need to take some practical steps before you can actually start making currency transactions. See the step-by-step guide below.

Step 1: Learn About Forex Trading

One of the best ways to avoid the various pitfalls of trading is to be prepared. You can do this by educating yourself about the forex market and what factors move it.

You should also take time to learn about fundamental and technical analysis to develop the ability to make directional predictions about the way the market will move in the future.

This helps you improve the odds of winning on trades you take. Fortunately, most online brokers provide a range of educational materials, tools and market analysis that you can use to further your trading education. Or, you can check out some a forex trading course or forex trading book to expand your knowledge.

Step 2: Find a Suitable Online Broker

Once you feel suitably prepared and educated, shop around for an online forex broker. Ideally, a broker will be well-regulated in your local jurisdiction, keep client funds separate and have a good reputation among its past and present clients.

A broker should also offer competitive dealing spreads and access to the forex market and other any other asset classes you want to trade.

Commissions
$10 value per pip
Account Minimum
$0
Get started securely through IG Group’s website
Commissions
$10 value per pip
Account Minimum
$0
1 Minute Review

IG is a comprehensive forex broker that offers full access to the currency market and support for over 80 currency pairs. The broker only offers forex trading to its U.S.-based customers, the brokerage does it spectacularly well. Novice traders will love IG’s intuitive mobile and desktop platforms, while advanced traders will revel in the platform’s selection of indicators and charting tools. Though IG could work on its customer service and fees, the broker is an asset to new forex traders and those who prefer a more streamlined interface.  

Best For
  • New forex traders who are still learning the ropes
  • Traders who prefer a simple, clean interface
  • Forex traders who trade primarily on a tablet
Pros
  • Easy-to-navigate platform is easy for beginners to master
  • Mobile and tablet platforms offer full functionality of the desktop version
  • Margin rates are easy to understand and affordable
  • Access to over 80 currency pairs
Cons
  • U.S. traders can currently only trade forex
  • Customer service options are lacking
  • No 2-factor authentication on mobile
Account Minimum
100 of your selected base currency
Pairs Offered
80+
Get started securely through FOREX.com’s website
Account Minimum
100 of your selected base currency
Pairs Offered
80+
1 Minute Review

FOREX.com is a one-stop-shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker. You can’t invest in the stock or bond market through your FOREX.com and you cannot open an account with tax advantages. The confusing pricing and margin structures may also be overwhelming for new forex traders.

Best For
  • MetaTrader 4 users
  • Beginner forex traders
  • Active forex traders
Pros
  • Impressive, easy-to-navigate platform
  • Wide range of education and research tools
  • Access to over 80 currencies to buy and sell
  • Leverage available up to 50:1
Cons
  • Cannot buy and sell other securities (like stocks and bonds)
  • Confusing margin requirements that vary by currency
  • Limited customer support options
  • Cannot open an IRA or other retirement account
Account Minimum
$50 USD
Pairs Offered
47
Get started securely through eToro’s website
Account Minimum
$50 USD
Pairs Offered
47
1 Minute Review

Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).

eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.

Best For
  • International Forex/CFD Traders
  • New cryptocurrency traders looking for an easy-to-use platform
  • Traders who want to buy and sell cryptocurrencies on-the-go
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • U.S. traders currently limited to cryptocurrencies
  • Only 15 major coins available to trade
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
Get started securely through HYCM’s website
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
1 Minute Review

HYCM is 1 of the world’s leading forex brokers, offering investors access to over 69 unique currency pairs. However, forex isn’t the only thing the broker offers — HYCM also offers high rates of leverage, stock and ETF trading, commodity investing and much more. Getting started with HYCM is quick and easy, and most investors can open an account in as little as 10 minutes.

HYCM offers a varying fee structure, which allows investors to choose the spread option that’s best for them. A wide range of educational and investing tools are available, which can be equally beneficial to both experienced and novice traders. Though HYCM isn’t currently available in the United States, it can be a great choice for residents of the other 140 countries where it offers service. 

Best For
  • Investors who want a customizable fee schedule
  • Traders comfortable using the MetaTrader platform
  • Islamic traders who need swap-free accounts that don’t build interest
Pros
  • Wide range of currency pairs available
  • Excellent selection of educational tools
  • $0 deposit and withdrawal fees
Cons
  • Not currently available to traders based in the U.S.
Account Minimum
100 EURO
Pairs Offered
50+
Get started securely through AvaTrade’s website
Account Minimum
100 EURO
Pairs Offered
50+
1 Minute Review

A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.

Best For
  • Beginners
  • Advanced traders
  • Traders looking for a well-diversified portfolio
Pros
  • Controlled by regulatory agencies of multiple countries
  • Choice offered in terms of trading platforms
  • Support available in 14 languages and trading platforms in 20 languages
  • Practice/demo account available for trying out
  • Breadth of trading assets
Cons
  • Does not accept customers from the U.S. as it isn’t regulated in the U.S.
  • Transferring funds to the account may take up to five days; withdrawals could take up to 10 days

Step 3: Get an Online Trading Platform

Once you’ve found a broker, the next thing you will need to do is obtain a trading platform, or a type of software you use to execute trades. You can either get access to a platform through your broker or you can download and install the popular MetaTrader 4/5 platform from the MetaQuotes website.

This platform has the advantage of a large user community that has created numerous expert advisors (EAs) capable of trading the market automatically for you. You can also access low-cost copy trading services provided by members of its user community.

Read Benzinga’s full MetaTrader 4 or MetaTrader 5 Review

Step 4: Open a Practice Trading or Demo Account

Before you fund a trading account with real money, practice trading to get used to your broker’s trading platform. You can do this by opening a demo account funded with virtual money with your broker. Most brokers offer free demo accounts to prospective clients.

Some of Benzinga’s favorite demo accounts include FOREX.com, TD Ameritrade and CMC Markets.

Step 5: Develop a Trading Plan

A winning trading plan and the discipline to stick to it is the key to long-term success as a forex trader, so it makes sense to devote some serious time to developing a plan you can follow with confidence.

Once you have one formulated, you can backtest it using MetaTrader 4/5 over a specified range of historical exchange rate data to see how the strategy would have performed if you had been trading it during that testing time frame.

Step 6: Gather Some Risk Capital Together

Now start thinking about where the money to fund your trading account is going to come from. Since trading is generally a speculative activity, you should never put money at risk trading forex that you need for the essentials of life like food or housing. It’s also better to avoid trading on borrowed money.

Step 7: Open and Fund a Live Account

At this point, you’ll need to gather your personal documentation together to satisfy your broker’s requirements and to prove your identity so you can open an account. You might also need to show a government-issued ID, a passport and/or proof of address like a utility bill, in addition to providing your bank account information.

You’ll also need to have your funds available in liquid form to transfer to the broker via a deposit method the broker accepts. Withdrawals generally need to be made via the same method as deposits. Different brokers have different payment and withdrawal methods.

Step 8: Analyze the Market

Now that you’re ready to trade, figure out what the market is most likely to do by analyzing it and following your trading plan. Most traders use fundamental analysis to discern the likely long-term direction of the market and technical analysis to time entry and exit levels.

Step 9: Take a Position

This final step involves actually executing a transaction based on the view you developed by analyzing the market. If you are bullish on a currency pair, you might go long, and if you’re bearish, you can go short.

Ready to Go?

Now that you know what to expect when you trade currencies, you can check out any of the best forex broker options we’ve compiled to start your trading education and open an account today.

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