Making a living trading the foreign exchange market from home is an enviable lifestyle for many traders. However, understanding the basics of Forex trading, choosing the right Forex account and starting small are important before working up to a full-time Forex career.
Find out how to start Forex trading from home and build your CFD trades into a sustainable source of income.
1. Get the know the basics of Forex trading
If you’re a complete novice in the world of CFD trading, it’s important to learn the basics before diving in. Take a look at our guide to Forex trading terminology and the costs of starting to trade to make sure you know what’s involved.
2. Learn how to read a currency quote
Each world currency has a three-letter code that’s used in Forex quotes. Some of the most common currencies for traders are:
- European euros (EUR)
- US dollars (USD)
- British pounds (GBP)
- Australian dollars (AUD)
- Japanese yen (JPY)
- Swiss francs (CHF)
- Canadian dollars (CAD)
Foreign exchange prices are indicated by quotes in a fraction-like format, called currency pairs. The first currency is the 'base' and the second is the 'quote'. The base currency is always considered ‘1’ and the quote currency shows how much it costs to buy one unit of the base currency. For example, AUD/USD = 1.3500 means that it costs 1.35 Australian dollars to buy 1 US dollar.
3. Decide what currency you want to buy and sell
Choosing a currency to trade in relies on making predictions based on economic indicators. For example, if you believe that the Australian economy will weaken, which is bad for the AUD, you’ll probably want to sell Australian dollars in exchange for a currency from a country where the economy is robust.
4. Open a demo account
While you’re getting to know the ins and outs of Forex trading, open a free demo account where you can make daily trades with $100,000 in virtual cash. This gives you the opportunity to test trading strategies without the risk of actual losses.
5. Create a live trading account
Once you’ve familiarised yourself with the trading platform, it’s time to put your knowledge to use in the real world. With a live ForexCT account you get access to courses, videos, reports and more, so you can continue building your skills as you start trading.
It’s best to start small until you have a good handle on the Forex trading landscape. The minimum deposit amount is $500, which gives you room to monitor real trades without making a significant investment.
It’s also advisable to use a stop loss order initially, which means your position will be closed out if the exchange rate reaches the level specified in advance by you. This prohibits downside risk, limiting the amount you can lose on a position.
Getting started with CFD trading? Join the ForexCT community and get access to our free forex trading beginner’s eBook.