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If you’re looking to learn how to trade foreign exchange or forex, then you will want to get started on the right foot by taking some decent forex training from experts in the field. Appropriate types of forex training can involve getting specialized instruction in a course environment or being mentored by a successful professional currency trader.
If you plan on taking part in a forex training course as part of your preparation for becoming a forex trader, then look for an educational path that will give you the skills and information you need. For example, you’ll probably want to learn about trading strategies, market analysis, risk management, and sound money management principles just to get you started.
Read on for more information about forex training and for Benzinga’s take on how you can best learn to trade currencies.
What is Forex Trading?
At its most basic, a foreign exchange or forex transaction entails buying one national currency and selling another at the prevailing market exchange rate. Forex trading is a strategic, speculative activity that involves engaging in currency trade transactions with the goal of profiting from forecasted exchange rate movements.
Keep in mind that if you are used to investing in the stock market with the goal of increasing your net worth over time, for example, then you should know that trading forex has much more in common with strategic gambling than with any type of prudent investing.
For non-professionals who can now trade currencies in the retail forex market, getting set up to trade forex generally involves opening and funding a margin account with an online forex broker and executing forex trades via a forex trading platform. Many retail forex traders use MetaTrader 4 or 5 to get started since the platform is available as a free download from its developer.
Why is Learning Forex Trading Important?
Many people might want to profit from forex trading, but only a few of those starting out in the field seem to want to prepare themselves properly to become successful currency traders. Although the mechanics of trading forex are very easy to master, learning how to trade forex profitably can take a lifetime to achieve.
The sobering fact is that most retail forex traders lose money, and they do so for a variety of reasons. Some may have failed to familiarize themselves thoroughly with the market and its driving factors. Others may have started operating without having sufficient trading capital to survive a virtually inevitable string of losses. Then there are those novices who do not develop and test a decent trading plan that includes practical money management principles to help preserve their trading capital.
With that noted, just about anyone willing to put in the time and effort to learn and understand how forex trading works has a shot at becoming a profitable forex trader. The retail currency market has opened wide in the past few decades to accept new participants from any background, and that includes you.
5 Ways to Improve Your Forex Knowledge
No matter whether you want to learn how to become a day trader or a scalper, if you’re looking to learn about forex trading for beginners, then Benzinga has compiled a list of five ways below that you can get started with the important task of utilizing trading tools in the foreign exchange market.
Self Education
Before online forex trading arose a few decades ago, very few avenues existed for retail traders who wanted to learn how to operate in the forex market. No formal forex trading educational process existed, and pretty much the only way to learn how to trade forex was by working as an apprentice to a professional forex trader working at a financial institution or on an exchange where currency futures were traded.
With the advent of online forex brokers and the almost unlimited educational resources available via the Internet today, teaching yourself how to trade in the forex market is much easier, more readily available and less complicated. For example, you can read numerous expertly written articles and books, as well as view webinars and educational videos on the subject of forex trading.
The fastest and probably the best way to learn how to trade currencies is with hands-on experience that you can easily get for free by opening up a demo account with an online broker. A demo account lets you practice trading the forex market in real time using an online trading platform and virtual money so you are not exposing your funds to risk while you learn the ropes. Practicing in a demo account gives you an excellent feel for the forex market and a great framework for self-educating yourself in forex trading.
Social trading is another increasingly popular avenue for learning how to trade by watching and copying a successful trader's transactions in your own account. You may also have the option of following another trader’s transactions without making the same trades in your account. This practice lets you observe how that trader’s trading plan operates and uses signals for their position initiation and exit trades.
Perhaps the most obvious benefit of self-education remains the low cost. Teaching yourself can be much less expensive than a mentoring program or costly online forex trading courses. Nevertheless, self-education does have its advantages and disadvantages.
Pros
- Work and learn at your own pace
- Develop your own trading strategy
- Simple to begin
- Low start-up costs
- Focused forex education based on your interests
- Can open a free demo account to practice in
Cons
- Steep learning curve
- High risk when learning in a live account because of market volatility
- Possible lack of structure
Forex Trading Courses
A variety of forex trading courses are now available. They largely exist online these days, although some are still taught in person. Some forex courses might be offered free of charge, while others have a substantial fee associated with them.
In addition to a basic introductory forex training course, you can also take courses that cover specific topics related to forex trading techniques and forex strategies that you feel you need to learn more about. This process can help you fill in and direct your educational process.
Pros
- Learn through a structured program
- Access to a variety of different trading strategies
- Specific courses for different aspects of trading
Cons
- Can be costly
- May not address specific trading strategies or concepts of interest
One-on-One Training
You can get personal training or mentoring from a professional forex trader. Many of those new to forex trading find this more personal approach effective once they have mastered the basics.
Most mentors charge on an hourly basis for general training and more specific consultations. Since some personal trainers and mentors are definitely better than others, it makes sense to get a referral from another forex trader who was satisfied with the training course they received.
Pros
- Personal attention to your trading goals and issues
- Useful for fine-tuning your trading strategy
- Can be done remotely
- Take advantage of an expert’s wisdom
Cons
- Quite costly since you are paying for the time of an experienced trading professional
- Not all trading experts are equally good mentors
Video Tutorials
Watching online videos can augment your existing knowledge base on various forex trading topics. Make sure you are watching videos from people who actually know what they are talking about since just about anyone can make a YouTube video. Most online brokers offer video tutorials to their clients, so visiting your broker's website would be a decent place to start looking for videos from good sources.
Pros
- Progress at your own pace
- Learn from home, while commuting or during spare time at work
- Low or no cost
- Good for filling in or furthering your trading education with specific topics
Cons
- Does not accurately reflect real-time market conditions
- May not apply to your particular trading style
Forex Trading Schools
A forex trading school can offer online coursework or in-person workshops that can help you get a more interactive forex training session. The best type of forex trading school for your needs will depend in part on whether you can personally attend classes and how you prefer to learn.
Pros
- More structured educational process
- Testing and milestones to gauge your progress
- Introductory courses for a general overview of the topic
Cons
- Might require personal attendance
- Extra travel and accommodation costs for in-person schools
- Expensive tuition
Best Forex Brokers for Beginners
Some online brokers that offer retail forex trading are definitely better than others for beginners. For example, you will probably benefit from opening an account with a broker that offers good resources for forex trading novices like free educational materials, ebooks, webinars and video tutorials.
You will also generally want to select a well-regulated and reputable broker that offers a high-quality forex trading service to residents of your country. Finding an online forex broker can be especially challenging if you live in the United States since many do not accept U.S.-based clients.
Benzinga has simplified the process of finding a good forex broker for novices by compiling the following table of suitable brokers.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Frequently Asked Questions
Can I learn forex myself?
Yes, you can learn how to trade forex from books, videos and other self-directed learning materials, although you may need expert mentoring if you fail to become profitable and wish to keep trading.
Can I learn forex for free?
Yes, many online forex brokers offer an extensive array of educational materials aimed at novice forex traders that can teach you how to get started trading forex. Keep in mind that learning to trade forex is not that hard, but learning how to do so profitably can take a lifetime.
How long does it take to learn forex?
It should take less than an hour to learn how to enter a forex trade. It should take a few months to learn what drives exchange rate movements and how to analyze the forex market so that you can take a strategic position in a currency pair. Still, it can take a lifetime to learn how to trade forex successfully, and many novice traders fail before doing so.
Get a Forex Pro on Your Side
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About Jay and Julie Hawk
Jay and Julie Hawk are the married co-founders of TheFXperts, a provider of financial writing services particularly renowned for its coverage of forex-related topics. With over 40 years of collective trading expertise and more than 15 years of collaborative writing experience, the Hawks specialize in crafting insightful financial content on trading strategies, market analysis and online trading for a broad audience. While their prolific writing career includes seven books and contributions to numerous financial websites and newswires, much of their recent work was published at Benzinga.