Learn how to trade forex

Forex trading steps

1. Choose a currency pair to trade
2. Decide whether to 'buy' or 'sell'
3. Set your stops and limits
4. Open your first trade
5. Monitor your position
6. Close your trade and take your profit or loss

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’s value to rise against the quote currency. Conversely, you would sell if you expect the opposite outcome. This is because a currency pair’s price represents how much 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:

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 notifications via email, SMS or push 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 initially 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’.

Forex trading examples

We’ve included an example of a forex CFD trade below.

Forex CFD trade

When you trade forex CFDs, you’re agreeing to exchange the difference in the price of a position from the point at which it is opened up until it is closed. To open this position, you’ll pay a small margin upfront to gain exposure to the larger position. However, this means your potential losses as well as profits can far outweigh your initial deposit amount. CFD prices are displayed in the same way as a regular forex pair’s quote price – for example 1.31425.

Plus, you’ll be able to take a position on prices rising by going long, as well as falling by going short. Standard forex CFDs are worth 100,000 units of the first named currency in the pair, while mini forex CFDs are worth just 10,000 units of the same. Because you can go long or short with CFDs, you can trade no matter which way the markets are moving