How to trade Forex

Forex trading is abbreviated from ‘foreign exchange’ trading, and it is the exchange of currencies through buying and selling.

This exchange is in the Forex market, the largest and most liquid market globally, with daily trades amounting to trillions of dollars. It is not controlled by any single entity or individual, and all participants within the market contribute to market price fluctuations, albeit on different scales.

Those just getting into Forex trading can familiarise themselves with our introductory guideon Forex and basic Forex terminology first.

When to trade Forex / Forex market hours

 

The Forex market has no central location, as trading takes place electronically and internationally. Instead, Forex market hours are driven by local sessions, of which there are three major ones: Tokyo, London, and New York. Sessions are open for eight to nine hours a day on weekdays, and each session opens in the morning and closes in the evening.

The Forex market is closed on weekends to retail traders. But since FX trading is a global activity, some regions will be trading at weekends too. Traders are free to participate in any session they wish, which means that the Forex market is actually open for 24 hours a day, for a little over 5 days a week.

 

Forex trading regulations / How is trading regulated?

 

The Forex market is not owned by a single individual or corporation. Therefore, it has no single list of regulations for traders who participate from around the world. Instead, trading regulations are determined by country or region, and traders are subject to local laws and any rules set by their broker.
 
GKFX is fully licenced to operate within the European Union, and our financial services abide by the regulations stated in the EU legislative framework MiFID II.

Forex trading strategies

 

There are two main trading strategies traders use to make better predictions of market price fluctuations—fundamental analysis and technical analysis. These can be applied not only in Forex trading but also in trading stocks, commodities, and other assets.

 

Fundamental Forex Trading Analysis

 

Fundamental analysis is the evaluation of market prices through the lens of market sentiment and through examining the intrinsic value of an asset. This includes analysis mainly from an economic and sociological perspective.

In Forex trading, fundamental analysts use an economic calendar that keeps track of global political and economic events and predicts their potential effects on market prices. They keep a close eye on GDP growth rate figures, payroll numbers, and interest rate decisions made by central banks. They also keep up to date with global and national political news, and they draw links between these factors and market price movements.

 

Technical Forex Trading Analysis

 

Technical analysis is the evaluation of market prices through examining past and present price charts of currency pairs. This includes analysis of numerical data and requires a sharp eye and a knack for mathematics. In Forex trading, technical analysts identify trends and patterns in Forex market price charts and make market price predictions based on their calculations of probabilities.

Ways to place trades

 

There are several ways to start trading Forex. These are spot, futures, and options trading.

 

Spot trading

 

Spot trading is trading ‘on the spot’, where transactions occur immediately or as soon as possible. Forex traders who participate in the spot market trade at the spot  pric  the current market price at the time of the exchange.

 
Forex futures trading

 

Forex futures trading is the trading of currencies at a predetermined date in the future.This is executed using a currency futures contract. That is a legally  binding contract  that the buyer and the seller draw up between themselves. When a buyer purchases a forex futures contract, they are essentially purchasing the obligation to trade a currency pair at a specific price on a specific date. Forex futures contracts can be bought with a sum of money called a premium.

 

Forex options trading

 

Forex options trading is also executed with the use of a contract made between the buyer and the seller. When a buyer purchases a forex options contract, they are purchasing the right to trade a currency pair at a specific price on a specific date. This means that unlike forex futures, forex options are not legally binding. Traders can buy or sell anytime the contract is in effect, and they are given the option to  do neither. If they do not want to take action, they can simply allow their options contract to expire.

Forex options contracts are also bought with a premium. When a trader chooses not to make the trade after some deliberation, the only loss they suffer is the premium they paid.

 

How to place a trade

 

Forex trading can be a bit of a challenge, especially for beginners. Here, we will run through the key steps in the Forex trading process and address any issues and questions a first-time trader may have.

 

1. Create a trading account

Our trading accounts come in two options for our  retail traders—Standard or  Premium. Both of them offer 42 currency pairs for Forex trading and can be accessed on several trading platforms, including WebTrader and MetaTrader 4 and 5. Traders can choose the account type that suits them best, depending on their personal preferences. For technical support, please refer to our detailed guides on creating an account and using MetaTrader.

Additionally, traders who regularly make large trades or execute trades professionally can apply for a Professional account, provided they are eligible.
 
Once you have created and verified your account and deposited the required amount, you may start trading Forex.

2. Select a currency pair and the amount to trade

The next step is to select the currency pair you would like to trade and how much of the currency you would like to trade.

Major currency pairs—those that consist of the US dollar paired with another major currency—are the most liquid. They are generally the least prone to extreme fluctuations in market price, but they still fluctuate frequently to make trading exciting and potentially profitable.

When in doubt, it is best to trade currency pairs with which you are most familiar. Additionally, as Forex trading contains a fair amount of risk, it is advisable to only trade amounts you can afford to lose.

3. Decide to go long or short

Decide to buy (go long) or sell (go short) the currency pair depending on your price
predictions.

If you think the base currency will appreciate against the quote currency, buy now to sell later at a higher market price. If you think the base currency will depreciate, sell now to buy back later at a lower market price.

4. Place your order

After you have decided, place your order on the platform and keep an eye on market price fluctuations.

5. Know when to exit your trade

Traders should always open positions with two  price points in mind—high  and low—that will act as triggers for them to exit their trades.

For example, a trader goes long GBP/USD and opens his position at the market price of 1.3580. He predicts the price will rise, and he tells himself that he will sell and take profit at 1.3620. However, he is also aware his predictions may not be correct, so he also tells himself that if the British pound depreciates, he will sell at 1.3580. This way, if the market price continues to plummet, he will have cut his losses early.

Every trader wants to make a profit from trading, but the Forex market fluctuates constantly and unpredictably. Knowing when to exit your trade—and sticking to it—is the key to trading for traders of all levels.

 

Trade Forex now

 

GKFX is a fully European Union regulated broker. We offer 42 Forex trading pairs, with deposits and spreads as low as €200 and 0.6 for our Standard traders and a deposit of €25,000 with spreads as low as 0.1 for our Premium traders. Deposits can be made in USD, EUR, and GBP.

GKFX traders can also access daily and weekly market analysis as a supplement to our trading guides. For beginners just getting into Forex trading, you can open a free trading account to try a demo to hone your skills. Experienced traders may also start trading live upon registration and verification of their account.