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What is Forex Trading? A Beginner’s Guide

Last Updated on January 26, 2025 by Arif Chowdhury

You’re here because you’ve heard the buzz about forex trading.

Maybe a friend made some cash. Maybe you got hit with an ad promising financial freedom. Maybe you’re just sick of the 9-to-5 grind and want in on the action.

But you’re also wondering: Is this legit? Can I actually make money? Where do I even start?

I get it.

I’ve been in this game since 2015. I’ve spent thousands of hours testing strategies, analyzing charts, and even building 15 trading bots that work around the clock on pairs like EUR/USD, GBP/USD, and USD/JPY.

So let’s cut the fluff and break this down.

What is Forex Trading?

Forex (short for foreign exchange) is the global marketplace where currencies are bought and sold.

You trade one currency for another, aiming to profit from price movements.

It’s the largest financial market in the world.

  • Daily trading volume? Over $7.5 trillion (BIS 2022 report).
  • Liquidity? Insane. You can get in and out of trades in seconds.
  • Open 24/5. Unlike stocks, forex doesn’t sleep.

You’ve already participated in forex trading without realizing it.

Ever traveled abroad and exchanged money? That’s forex.

The difference? Here, you can profit from those currency swings without leaving your couch.

How Do You Make Money in Forex?

You profit from price movements.

Let’s say EUR/USD is at 1.1000.

  • If you think the euro will rise against the dollar, you buy (go long).
  • If you think the euro will drop, you sell (go short).

Price moves up? You win.

Price moves down? You lose.

Simple in theory. Harder in execution.

That’s where strategy comes in.

The 2 Types of Forex Traders

Most traders fall into one of these two camps:

1. Fundamental Traders

  • They focus on economic data, news, and interest rates.
  • Example: If the U.S. economy is booming, the USD usually strengthens.

2. Technical Traders (Like Me)

  • We use charts, patterns, and indicators to predict price movements.
  • No need to follow the news 24/7. Just let the charts tell the story.

Both work. But I stick to technical analysis because price action never lies.

3 Must-Know Forex Trading Strategies

1. Scalping

  • Fast in, fast out.
  • Trades last seconds to minutes.
  • Requires high focus and quick execution.

2. Swing Trading

  • Holds trades for days to weeks.
  • Perfect if you have a full-time job.
  • Uses key levels, moving averages, and trend lines.

3. Algorithmic Trading (Bots)

  • My personal weapon of choice.
  • 15 bots trading across major currency pairs, based on my custom-built strategy.
  • Removes emotions from trading.

If you want to see how they work, I share my results regularly. Check out my YouTube channel (YT link).

4 Mistakes That Kill New Traders

Avoid these, and you’re already ahead of 90% of beginners:

1. No Risk Management

  • Never risk more than 1-2% of your account per trade.
  • One bad trade shouldn’t wipe you out.

2. Trading Without a Plan

  • Random entries = random results.
  • Have a clear strategy before clicking ‘Buy’ or ‘Sell’.

3. Overleveraging

  • Just because brokers offer 500:1 leverage doesn’t mean you should use it.
  • High leverage = high risk. Trade smart.

4. Emotional Trading

  • Revenge trading? Chasing losses? FOMO?
  • That’s how accounts get blown.
  • Stick to logic, not emotions.

How to Start Forex Trading (The Right Way)

  1. Pick a broker
    • Regulated, reliable, and tight spreads.
    • I recommend this one. Sign up and get a bonus.
  2. Start with a demo account
    • No risk. No stress.
    • Test your strategy before going live.
  3. Learn one strategy and master it
    • Don’t jump between strategies.
    • Stick to one until you’re profitable.
  4. Use tools to automate your trading
    • My bots take care of this for me.
    • Want to see how? Check them out (YT link).
  5. Be patient
    • Forex isn’t a get-rich-quick scheme.
    • But if you stay consistent, it pays.

Final Thoughts

Forex trading is simple but not easy.

You need:

  • A proven strategy.
  • Discipline to stick to it.
  • The right tools to execute it.

If you want to cut the learning curve, I share everything I know on my YouTube channel and through my bots.

Check them out here (YT link).

See you on the inside.