How to trade forex online

The forex market is the most active in the world, with billions of dollars on the move every day. This guide explains how you can become a part of it.
By: James Knight
James Knight
When he isn’t at work, James is an avid trader and golfer who likes to travel. He once fed,… read more.
Updated: Jul 21, 2021
Tip: our preferred broker is, eToro: visit & create account

In this beginner’s guide we explore the basics of forex trading, from how the market works to the different ways to speculate on currency prices. You can also learn how to trade with our step-by-step guide.

What’s the best forex trading platform?

Use any one of these brokers to start trading forex right away. You can navigate to their websites through the links in the table or read through our reviews to get more information on each one. If you’re not ready for that yet, then keep reading to learn more about the forex market.

1
Min. Deposit
$200
Exclusive promotion
Our score
10
Join the Social Trading revolution. Connect with other traders, discuss trading strategies, and use our patented CopyTrader
eToro is the world’s leading social trading platform, offering a wide array of tools to invest in the capital markets
Largest number of currency pairs to trade
Start Trading
Description:
eToro is a multi-asset investment platform with more than 2000 assets, including FX, stocks, ETF’s, indices and commodities. eToro offers a wide range of currency pairs and other trading instruments. eToro users can connect with, learn from, and copy or get copied by other users.
Payment Methods
Wire Transfer, Bank Transfer
Full regulations list:
CySEC, FCA
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
2
Min. Deposit
$10
Exclusive promotion
Our score
9.3
55+ currency pairs available
Trade on a trusted platform
24/7 support via live chats, email or phone call
Start Trading
Description:
LonghornFX is a true ECN STP broker dedicated to delivering a superior trading experience to traders no matter their level of experience. Their services are based on transparency, innovation and efficiency, ensuring an unparalleled trading experience for all.
Payment Methods
Credit Card, Debit Card, Visa, Bitcoin
Full regulations list:
LonghornFX offers high-leverage trading on a wide variety of assets. Trading with leverage carries a degree of risk which may result in losing more than your investments. Clients should practise risk management to protect themselves from losing more than they can afford when trading with leverage.
3
Min. Deposit
$10
Exclusive promotion
Our score
8.7
Can fund with BTC
64 global companies including Netflix and Amazon
Free deposits and withdrawals
Start Trading
Description:
EagleFX is an online digital asset, Forex and CFD broker providing traders across the globe with cutting edge technology to trade the world’s markets. Our focus has been to change the way people trade Digital Assets and Forex. We are driven to provide traders with incredibly low-cost pricing across all Digital assets, FX, stocks, indices, commodities and futures along with industry-leading 24/7 live customer support.
Payment Methods
Credit Card, Debit Card, Bitcoin, Wire Transfer
Full regulations list:
EagleFX offers leveraged trading on a range of assets within its platform. CFD and Spot Forex trading do carry a degree of risk which may result in you losing more than your initial investment. Please ensure you fully understand the risks involved with leveraged trading and ensure this is not detrimental to your personal or institution's financial well being.

What is forex?

The word ‘forex’ is literally a combination of ‘foreign currency’ and ‘exchange’ and it stands for the act of swapping one currency for another. The forex market has lots of practical implications, as you need to be able to exchange currencies in order to travel abroad, while companies and governments do so in order to facilitate international trade.

Individual forex traders, meanwhile, buy and sell currencies in order to try to make a profit from fluctuations in the exchange rate between them. The forex market is enormous, with trillions of dollars changing hands every day, and that liquidity means you can always find someone to take the other side of your trades.

How does the forex market work?

The market operates through many currency ‘pairs’ where each currency’s value is given relative to another. In order to buy one currency you have to sell a different one, and the prices change according to supply and demand.

The most widely traded currency pair in the world is EUR/USD. That means that if you buy it, you’re buying the Euro and selling the US Dollar. The more people that do so, the ‘stronger’ (more expensive) the Euro becomes relative to the Dollar, and vice-versa.

Since there is so much volume, any change in value tends to be small and the market deals in fractions of a cent. To make money out of these tiny changes, traders use leverage in order to make trades big enough to turn a profit.

How to trade forex online – a step-by-step guide

The forex market can look intimidating but the act of trading it is fairly straightforward. This step-by-step guide takes you through the basics of how to get started.

  1. Find a broker. You have to place trades through a broker. Look for one that’s regulated and which has a good reputation. Then you need to create an account, which means providing some personal information, and deposit some money into it before you can do anything else.
  2. Choose a currency pair. The first decision you have to make is which coins you want to buy and sell. Each currency pair falls into one of three camps, which are known as ‘majors’, ‘minors’, and ‘exotics’. The major pairs are the US Dollar with other leading currencies, like the British Pound or the Euro. It’s best to start with these as they’re easiest to understand and have the most trading volume.
  3. Choose your trading method. There are two main ways to trade forex: on the ‘spot’ market or with contracts for difference (CFDs). Practically, these are almost identical but CFDs are a bit easier to get to grips with for beginners. You can be ‘long’ or ‘short’ a currency pair with CFDs and you can see profit/loss and settle your trades all in the same currency (normally USD).
  4. Decide whether to go long or short. Research the factors that affect the price of the two currencies you’re exposed to and use that to decide which one is likely to do better. If you’re trading the USD/GBP pair and you expect the dollar to perform better, you should ‘long’ (buy) the pair, for example, while if you think the pound might do well instead, then ‘short’ (sell) it.
  5. Set your position size. In the forex market the minimum trade size is normally $1,000, which is known as a ‘micro lot’. The standard lot size is $100,000 and you might find some platforms that offer ‘nano’ lot sizes that are just $100. Most traders don’t actually put this amount of money down every time they open a position, though, instead you can put a smaller amount down and use leverage to get to at least the value of a micro lot.
  6. Execute trade. All that’s left is to execute the trade. You should see it show up as one of your open positions, and you can monitor its fluctuations in real time. Each point of movement in forex is known as a ‘pip’. Pips normally refer to $0.0001 and are how we monitor currency price changes. Remember that if you’re using leverage to multiply the size of your trade, even a single pip can be important.
  7. (Optional) Set order limits. Stop loss limits are trades that execute automatically whenever the price hits a certain level and are particularly useful in the forex market where you’re using leverage and need to manage your risk carefully. You can set limits above your buy price to close your positions and lock in profits at a certain point or set them below in order to reduce your losses if the price falls dramatically.

Trading forex for beginners

The most important thing to do before you start is research. The forex market is fast-moving, works differently, and is affected by very different factors compared to other asset classes like stocks or commodities. Keep reading to find out what else you need to keep an eye on.

What to do before starting to trade

There’s a lot more to forex trading than just buying and selling pairs. You should set guidelines for yourself and make sure you’re prepared before you put any money on the line. Here’s a checklist of things to do before you get going.

  • Research the currency pair. Make sure you understand the factors that affect how currencies rise and fall in relation to each other. For example, when each country releases economic data like interest rates or its balance of payments that might impact the value of its currency.
  • Read up on forex terminology. The foreign exchange market has its own language and you need to know what it all means. Here’s a quick run down of the key terms and you can follow the links to learn about each in more detail.
    • Pip stands for ‘percentage in point’ and is the smallest amount a currency price can change. For pairs that are denominated in US Dollars, it refers to $0.0001.
    • A lot is the size of your trade and is usually made up of a fixed amount of currency. The standard size is $100,000 but there are now smaller lot sizes available, all the way down to $100.
    • The majors are the most popular currency pairs that make up the vast majority of forex trading volume. The six pairs that make up the majors include the US Dollar with the Euro, Japanese Yen, British Pound, Swiss Franc, Australian Dollar and Canadian Dollar.
    • The minors are all other combinations of leading currencies
    • Exotics are pairs that include much smaller currencies, such as the Norwegian Krone or Thai Baht. They tend to be harder to trade and the price is more volatile.
    • Base and quote currency simply refers to the two currencies in a pair, such as USD/GBP. In that example, USD is the base and GBP is the quote.
  • Set a budget. Never risk more than you can afford to lose. It’s a good idea to set yourself some limits on how much you want to spend before you start. That way, you won’t be tempted to overreach or chase losses if things turn against you.
  • Decide on a trading strategy. Forex traders fall into two camps depending on whether they base their decisions on technical or fundamental analysis. Technical is favoured by the most active traders, who study price data in order to predict future moves. The alternative is a more fundamental approach, where you use economic indicators such as interest rates or inflation to guide you.
  • Choose a broker. Every broker is different and has its own pros and cons. You can find one with low trading fees or one with a set of the most advanced trading features. Decide what’s most important to you and use that to help pick a broker.

The different ways to trade

When it comes to the act of trading itself, there are a few ways to get involved in the forex market. Brush up on all of them by reading the list below so that you’re informed enough to decide what’s best for you.

  • ‘Spot’ trading CFDs. Contracts for difference are contracts between you and your broker that represent the price of a particular asset and the ‘spot’ price is the current market price. When you trade a CFD your profit is the difference between the spot price when you bought the CFD compared to that at which you sell it. They’re ideal for short term traders and popular in the forex market, because you can use them to open and close positions quickly, and use leverage to make bigger bets each time.
  • Spread betting. When you spread bet you make a prediction that the price is going to move in a certain direction and stake a fixed amount per point of movement. Your profit is the stake multiplied by the number of points moved (and it also works the other way: if you’re wrong the loss is the stake times by the movement).
  • Futures contracts. A futures contract is an agreement to buy an asset at a fixed price at a set date in the future. The key point to remember is that as soon as you enter into a futures contract you’re obligated to buy the currency on the specified date. Although they’re more traditionally used in the commodities market, futures are an ideal way to trade if you’re expecting something to have a significant impact on the price in the near future. 

Should I start trading forex now?

It depends on your level of trading expertise and knowledge of how the market works. Forex trading can have a steep learning curve and so can be risky if you don’t know what you’re doing. To help you decide whether forex is for you, here is a summary of its most important pros and cons.

Pros

  • It’s a highly active market so there is always someone on the other end of the trade
  • You can trade all sorts of different currencies, from the most mainstream to smaller, exotic pairs
  • There are a lot of potential trading strategies and you can pick one that suits you

Cons

Where can I learn more?

Here on Invezz you can find out all the latest forex news so that you don’t miss out on anything important. You can also use our education section to learn more about how foreign exchange works, or head to our forex investing hub to find out more about the different currency pairs.

Latest forex news

The NZD/USD pair was little-changed during the Asian session as traders reflected on the latest New Zealand trade numbers. It is trading at 0.6960, which is a few pips below Friday’s high of 0.6990. New Zealand trade numbers The New Zealand economy is seeing a strong economic recovery helped…
The USD/RUB price declined to the lowest level since July 6 after the latest Central Bank of Russia interest rate decision. The pair fell to 75.60, which was about 2.58% below the highest level this month. Bank of Russia interest rate decision The Russian Central Bank concluded its monetary…
The GBP/USD price retreated on Friday after the latest UK retail sales and flash manufacturing and services PMI numbers. The pair fell to 1.1.3730, which is a few pips below this week’s high of 1.3786. UK retail sales and PMI numbers According to the latest data by the Office…
The EUR/USD price drifted higher after the latest European Central Bank (ECB) interest rate decision. The pair rose to 1.1808, which was slightly higher than this week’s low of 1.1750. ECB decision The EUR/USD has been in a tight range this week as investors waited for the ECB decision.
The South African rand (USD/ZAR) was relatively unchanged on Wednesday after the relatively strong inflation data. It is trading at 14.6660, which is about 9.56% higher than the lowest level this year. South Africa inflation The South African economy has recently gone through one of its toughest challenges in…

Try some of our forex trading courses for beginners

Forex Courses
In an interview with Francesco Bianchi, Professor of Economics at Duke and Cornell universities, Invezz asked: what is quantitative easing, and how does it affect the economy? Invezz: Would you explain quantitative easing to our readers in the simplest possible terms? Professor Bianchi: Basically, quantitative easing is a particular form of monetary…
Forex Courses
A PAMM (Percent Allocation Management Module) account is a forex account managed by a professional trader – managed and invested in by multiple investors. It is a type of trust management that provides profit for all the participants: investors as well as managers and partners. Advantages of PAMM account An investor earns money…
Forex Courses
Anyone new to trading forex will almost certainly have come across different offers for ‘forex signals’. Even those who have been trading for some time and have never used signals will likely still have the open question as to whether they really bring value and how to go about choosing a…

Fact-checking & references

Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.

Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

James Knight
Financial writer
When he isn’t at work, James is an avid trader and golfer who likes to travel. He once fed, rode, and ate an ostrich all on… read more.