How to Trade Forex, Forex Trading Tutorial, Currency Trading Guide | ThinkMarkets | UK

Start trading forex in 6 steps

1. Pick your currency pair
Choosing which currency pairs to trade is the first decision you will have to make as a forex trader. At ThinkMarkets, we offer a wide selection of major, minor and exotic pairs to select from. New traders tend to start with currencies they are familiar with before moving on to finding opportunities in currencies they have less exposure to.
 

2. Determine the type of forex trade to perform
There are several ways to trade with us. These include CFDs or spread betting.

CFD trading – You trade a specific number of CFD contracts in base currency units. If you opt to trade EUR/USD, for example, your investment is in Euro. On the other hand, if you are trading USD/JPY, it is in US dollars.

Spread betting – You trade currency pairs for every point movement, which is typically the fourth decimal point.
 

3. Decide whether to buy or sell
After choosing your market, you have to determine the current trading price and the direction in which you think the market is going to move. Forex pairs are quoted as one currency (base currency) versus another (quote currency), therefore:

– If you think the base currency will strengthen against the quote currency or the quote will decline versus the base, you buy the pair.

– If you think the base currency will weaken against the quote or the quote will appreciate versus the base, you sell. 

Each currency pair has two prices. The first is the bid or sell price, while the second is the ask or buy price. The difference between the two quoted prices is the spread, which is your trading cost.

4. Add orders
An order is an instruction to trade automatically at a future time when exchange rates meet a particular pre-determined level. Stop-loss and limit orders are used to make sure that profits are locked in and losses are minimized.
 

5. Monitor your trading position
In an open position, your profit and loss (P&L) fluctuates with each market price movement. That’s why it’s important to monitor your P&L in real time. This way, you can easily add or close trading positions when necessary.
 

6. Close your trading position
Closing a trade is similar to opening a position. If you initially bought 5 units, you need to sell the same number of units upon closing. When you close a trade, your profits and losses are reflected right away in your trading account.