How to trade Forex
Once you learn how to trade forex, you’ll understand why it’s such a popular market. You’ll discover that you can choose between many different currency pairs – from majors to exotics – and trade 24 hours a day. Read our guide to learn how to trade currency with our FX trading steps and examples.
Interested in trading forex with us?
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
Choose a currency pair to trade
We offer more than 80 currency pairs – from majors like GBP/USD, to exotics like HUF/EUR. When you trade with us, you’ll be taking a position on these forex pairs rising or falling in value with CFDs. These make use of leverage, which enables you to open a larger forex trade with a small upfront deposit (called margin). However, this means your losses as well as profits can far outweigh your margin amount as they are calculated based on the full position size, not just your margin.
Before choosing an FX pair to trade, you should carry out fundamental analysis and technical analysis on the two currencies in the pair. This means you should assess how the ‘base’ (the currency on the left) and the ‘quote’ (the currency on the right) move in relation to each other.
Decide whether to ‘buy’ or ‘sell’
Once you’ve chosen a currency pair to trade, you need to decide whether you want to ‘buy’ or ‘sell’, based on your analysis.
You would buy the pair if you expected the base currency to rise in value against the quote currency. Or, you would sell if you expected it to do the opposite. That’s because a currency pair’s price represents how many of the quote currency you’d have to spend to buy a single unit of the base currency.
For example if the price quoted for GBP/USD is 1.28000, it means you’d have to spend $1.28 to buy £1 – so the pound is stronger than the US dollar.
Set your stops and limits
The forex market is particularly volatile, which is why it’s important to have a plan to guide the entry and exit points of your trades. There are various stops and limits you can set to manage your risk when trading forex:
Normal stops will close your position automatically if the market moves against you. Note that normal stops do not protect against slippage.
Guaranteed stops will always be closed out at exactly the price you specified – even if the market moves quickly or ‘gaps’. You’ll pay a small premium if a guaranteed stop is triggered
Trailing stops will follow positive price movements and close your position if the market moves against you
Limit orders can help you to achieve your profit target, and your position will be closed when the price hits your chosen level
Open your first trade
If you want to trade on the value of forex pairs rising or falling with CFDs, why not open an account with us? Once you’ve done that, simply go to our award-winning trading platform,1 search for the forex pair you want to trade, enter your position size and choose ‘buy’ or ‘sell’.
There’s no obligation to add funds until you want to place a trade.
Monitor your position
Once you’ve opened your position, you can monitor your FX trade in the ‘open positions’ section of the dealing platform. You can also set price alerts to receive email, SMS or push notifications when a specified buy or sell percentage or point is reached.
Even with these alerts set, it’s still important to keep up to date with the latest news and political events that could move the forex market.
Close your trade and take your profit or loss
Once you’ve decided it’s time to close your position, simply navigate to the ‘positions’ tab, select your position and click on ‘close’. Alternatively, just make the opposite trade to the one you opened. In other words, if you went long on GBP/USD, go short by an equivalent amount to close the position – assuming you’ve selected the ‘net-off’ option on our platform, rather than ‘force open’.
FAQs
How much money do I need to start trading forex CFDs?
To start trading forex, you’ll need to make sure there is enough capital in your trading account. Unlike the stock market, there is no enforced minimum. This means that your required capital can be based on your goals and trading style, but it is often suggested that traders shouldn’t risk more than 1% of their account on each trade. For example, if your account contains AUD$10,000, then you may decide not to risk more than AUD$100 on a single trade.
What do I need to start trading forex CFDs?
Once you have established how much capital you have available, you will then need to start preparing the rest of your forex trading plan – this should include when you want to get out of your trade, the time you are willing to commit to trading, researching which markets you want to trade, your risk management strategy and your trading strategy.
Can anyone trade forex CFDs?
Whether you’re completely new to trading or have traded other markets before, the volatility of the forex market is a very unique environment that takes time to understand. However, anyone can trade forex if they develop their trading knowledge, build a forex trading strategy and gain experience trading the market.
What is a good forex trading strategy?
A forex trading strategy should take into account the style of trading that best suits your goals and available time. For example, day trading is a strategy that involves opening and closing positions generally within a single trading day, taking advantage of small movements in the price of a currency pair. On the other hand, position trading is the strategy of holding positions open for a longer amount of time to take advantage of major price movements. Both have different time commitments and different techniques needed for success.
What currency pairs move the most?
The nature of the forex market is extremely volatile, so a currency pair that moves a lot one week, might show very little price movement the next. However, the majority of forex trading volume is found on a handful of forex pairs, including EUR/USD, UDS/JPY, GBP/USD, AUD/USD and USD/CHF – because these pairs attract the most traders, they often see the most movement.
If you want to keep up to date with the most recent forex price movements, visit our news and trade ideas section.
Discover forex trading with IG
Learn about the features of forex trading and see how you get started with IG.
You might be interested in…
Learn more about CFD trading with us
Be aware of the risks associated with forex trading and understand how we support you in managing them
Discover the different platforms that you can trade forex with us
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