Online Forex trading for beginners

Moving across to online Forex trading or Currency trading is a natural progression for millions of traders around the world who are looking to start trading FX on MT4. Our introduction to Forex trading for beginners is a great way to lay a solid foundation, especially if you are new to the currency markets.

For those looking to dip their toe in the water, our introduction to Forex trading covers all the critical basics for beginners plus a few of the advanced topics. We start with ‘What is Forex’ and move all the way down to swap and rollover rates.

Towards the bottom, you will see one of the most popular and frequently asked questions, which relates to margin FX trading examples. Spend some time on this page and feel free to get in contact if you have any questions. Our team is here to help in understanding the Forex market.

Forex

What is Forex?

The global foreign exchange or currency (“FOREX”, “Forex” or “FX”) market is the largest market in the world, with more than $5 trillion daily turnover dwarfing the combined turnover of the world’s stock and bond markets. For this same reason, private investors and individual traders have entered the market and discovered several advantages – many of which are not available in other markets.

The liquidity and competitive pricing available in this market are unsurpassed, and today with the irregularity in performance in other markets, the growth of Forex trading (Currency trading), investing and management is accelerating.

What are the features of trading Forex?

Trading Forex offers access to a global currency market with features that may appeal to both new and experienced traders:

• 24-hour market access with high liquidity.
• Flexible leverage, which can magnify both gains and losses.
• Competitive trading costs, including commission-free trading on standard accounts (spreads and other fees may apply).
• Opportunities arising from market movements, allowing traders to implement various strategies.

Important risk information: Trading Forex carries a high level of risk. The use of leverage can result in losses exceeding your initial investment. You should only trade if you fully understand the risks and can afford potential losses.

Who trades Forex?

Online trading, web-based research and analysis combined with competitive pricing have made the market more accessible. Hundreds of thousands of informed individuals, businesses and investment funds actively trade Forex. This means that anyone from beginners to experts trade daily.

How do you trade Forex?

Beginners and novice traders are always curious to learn how to trade Forex in both practical and analytical terms. When it comes to FX trading, it’s important to develop a strategy that works for you. This can be done by combining thorough research and practising with a free demo account. Our guide on forex trading for beginners allows new traders to develop their skills.

Which is the best platform for Forex trading?

MetaTrader 4 is a leading forex trading platform that allows beginners and experienced traders alike to conduct fast trades, adequately analyse the market, and use a platform that’s efficient and reliable. Offering a free demo account, MetaTrader 4 can be the perfect introduction to forex trading for beginners, as they can experience real trading experiences at no cost. MT4 also offers advanced charting options, mobile platforms, and the ability to trade Forex, Indices and Commodities.

Base currency and counter currency

A trade requires two currencies (a cross) in which the first currency is known as the “base currency”, and the second currency is known as the “quote currency”. A forex trade involves the simultaneous buying of one currency and selling of another.

Buying a currency pair means one is speculating in the base currency appreciating in value against counter currency. Alternatively, when selling a currency pair, you are expecting the base currency to depreciate against the counter currency.

GO Markets will automatically exchange your profits and losses into your deposit currency.

Bid-ask spread

When trading Forex, investors are quoted a dealing spread, which offers a buying and selling level for the trade. When clients are wanting to sell a currency pair, they are interested in the Bid price. Alternatively, when clients are wanting to buy a currency pair, they are interested in the Ask price. The Bid price is always lower than the Ask price.

The difference between the Bid and Ask price is known as the Spread, which is usually measured in pips.

The dealing spread for major currencies can range according to market liquidity, however, you will find major currencies typically range between 0.5 – 2 pips.

For example, when AUD/USD is trading at 0.71358/0.71376, the spread is 1.8 pips.

Leverage

What is Leverage in Forex Trading?

Leverage is a key feature of Forex and CFD trading. It determines the margin you must hold in your trading account to open and maintain a position. In simple terms, leverage allows you to control a position larger than your initial deposit.

However, higher leverage does not only lower the margin requirement — it also increases risk, as it magnifies both potential profits and potential losses. Even small price movements can lead to rapid and significant losses.

How does leverage work?

You have a trading account with GO Markets with a balance of $10,000. If you have a trading leverage of 30:1 and wish to use $1,000 on one single transaction as the margin, then you will have an exposure of $30,000 in your base currency ($1,000) = 30 × $1,000 = $30,000 (trade value). The concept here is that GO Markets have temporarily given you the necessary credit to make the transaction you are interested in making. Without this margin, you would only be able to buy or sell transactions of $1,000 at a time.

Important: While leverage allows you to potentially increase profits from a relatively small investment, it also magnifies losses. Even small market movements against your position can lead to rapid and significant losses, potentially exceeding your initial margin if not carefully managed.

Margin Trading Explained

Forex trading is normally undertaken on the basis of ‘margin trading’.

A relatively small collateral deposit is required in order to initiate much larger traded positions in the market.

For example, you have a trading account with GO Markets with a balance of $10,000. If you have a trading leverage of 30:1 and wish to use $1,000 on one single transaction as the margin, then you will have an exposure of $30,000 in your base currency ($1,000) = 30 × $1,000 = $30,000 (trade value). The concept here is that GO Markets have temporarily given you the necessary credit to make the transaction you are interested in making.

Important risk information: Margin trading demands a disciplined approach and a solid understanding of the risks involved. Beginners should ensure they understand all risks fully before undertaking margin trading.

Margin calculation example

To calculate the FX margin requirement, you will require the following formula:

(Market quote * Volume) / Leverage = Margin Requirement

Example
The current EURUSD price is quoted as 1.13729, and we would like to trade one standard lot (100,000) using our account leverage of 1:30

The calculation would be (1.13729 * 100,000) / 30 = $3,790.96 USD

Note: If your trading account’s base currency is not in USD, the margin will be converted back into your base currency.

Risk

Monitoring your risk exposure

It must be pointed out that it is extremely imperative to understand the risks involved in Forex trading for beginners using high leverage. Traders must find the appropriate level that suits their trading style, as the effect of leverage is that both gains and losses are magnified.

Many FX traders use Expert Advisors (EAs) to trade on MetaTrader 4, and popular EAs often include money management tools designed to place the correct trade volume based on the size of the account. However, not all EAs feature these tools, so it is important that traders always manually supervise the trading activities on their accounts and make any margin payments as they become due.

Increased leverage carries a greater risk and the potential to make significant losses on very small movements in the Forex market.

Our GO Markets MetaTrader 4 platform has been designed to provide tools to help traders monitor and manage their risk effectively, based on each client’s margin requirement. The platform will calculate both the funds needed to retain your current open positions and the funds required to enter into new positions. However, as stated above, it is the traders’ own responsibility, not GO Markets, to continually monitor their positions. If the equity in your trading account falls below the margin requirement, a ‘margin call’ will ensue, and we may close all your open positions to limit your risk to usable margins.

Swaps

What is a Swap in Forex trading?

When you buy or sell a currency pair and hold it overnight, a Swap or Rollover fee may be paid or charged to you. This is the funding (interest) component which is needed to maintain your position. The amount of which you receive or pay will depend on the relative interest rate yield of each currency in the traded pair, among other important considerations such as money market rates and liquidity provider charges.

Spot FX and Metals trades are settled two business days from the entry date. As trading through GO Markets does not involve physical delivery, all trades left open at the end of a trading day (23:59:59 Platform Time) will be rolled over to the next day and as such will have exposure to a swap charge or credit.

It is important for beginners to note that the rollover at the close of Wednesday’s trading will be three times the usual amount. This charge is market convention, accounting for weekend settlement.

GO Markets swap rates are calculated using a consensus of our upstream liquidity partners and may be adjusted both positively and negatively in the interest of competitiveness and/or local costs.

Swap rates for individual currency pairs and metal contracts can be viewed by referring to your MT4 Terminal – right click on Market Watch, left click on Symbols, then choose a currency pair, CFD or precious metal of your choice, followed by Properties. Rates shown are expressed in ‘points’, where 1.0 point is equal to one tenth of 1 Pip.