How to Start Forex Trading Using a Systematic Approach

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As more and more entrants arrive to the Foreign Exchange (Forex) market whether for academic research, curiosity, or to make a serious investment of their time and money into learning how to start Forex trading, the initial focus naturally starts on where to begin and how.

The Forex market is an attractive financial market not only because it’s the largest in the world, but also because unlike the stock market, FX trading happens 24 hours a day, nearly 6 days a week across the globe. As FX markets have become mostly electronic, they can be accessed from anywhere with a viable internet connection and computer – which is the essence of online trading.

This article will provide a general basis to following a systematic approach in order to progress from theory to practice, using both the Forex trading software in a Forex demo account, and then applying that understand to transition into a live Forex trading account when the time comes and if deemed appropriate.

Some commonly asked questions, that this article applies to include:

  • How to start forex trading from home?
  • How to start forex trading online?
  • How to start forex trading business?
  • What is required to start forex trading?

What’s the first step in How To Start Forex Trading?

With such a large number of brokers and trading platforms out there, it can be tough to choose as sometimes a fancy website or marketing advertisement could mask the important aspects that clients should consider when choosing a broker, and while conducting proper due diligence.

Before we get into the details of trading and platform selection, the first step is to work with a company that has established solid credibility, whose management team have a verifiable background in the industry as well as reputation on the regulatory side, and a firm that is financially well-capitalized and stable.  Reading the entire customer agreement is also a smart approach to understanding the legality of the contract that you may enter into with your broker, like any agreement, and will govern the basis for your relationship from that perspective.

In addition, last but not least the firm should have an edge on technology development, whether it be new innovations, or proven established methods, or a combination of both, in order to provide clients with the best value and quality.

Finally, customer service and the support that traders need has to be attainable easily. For these reasons, Forex Blog recommends the online brokerage  WorldWideMarket (WWM) as the firm fits the above mentioned criteria.

Setting up a Forex Trading Demo Account or Live Account

Using the example with WWM as your broker, via the company’s website a free forex trading demo account can be created literally in just a few seconds. Clients can choose either the company’s own AlphaTrader platform, or the MetaTrader4 platform which is one of the most widely used in the retail Forex market. Opening a live forex trading account also involves an instant creation process thanks to worldwidemarkets.com administrative technology. The company also caters to professional clients through its UK-based operations, regulated with the Financial Conduct Authority (FCA) as can be seen on the following website: worldwidemarkets.co.uk

AlphaTrader FX Trading PlatformWhen choosing the platform, the demo account can be created by submitting your name, email and phone number, and country you are based in, then chosing a username, and the account is created instantly, and the software can be downloaded to your computer. A copy of the registration confirmation will be sent to the email you provided, and the user name, account number and password should be noted so that you can login after saving the installation files, and running the platform for the first time.

After installing the software, it’s a good idea to review the toolbar within the platform interface which contains main navigation sections, and will help you become accustomed to the layout and design and available tools and options. Speaking with a support representative at this part of the demo account process can greatly expedite the learning curve and accelerate your understanding of key platform components and how and when to use them.

By following the approach described  herein on how to start Forex trading, the understanding obtained from the points in this article can serve as a basis for building your knowledge base  further, as you make progress through your Forex journey.

The demo is used to understand the software not judge hypothetical performance seriously

It’s critical for traders to understand that the purpose of a Forex trading demo account is to understand how the software works, do some test trades to be sure you are comfortable with your ability to create orders and establish and close market positions, as well as manage the risk using stop-loss and limit-orders, as well as other pending orders that can help you enter/exit the market if it reaches a specified price or level.

Forex Office WorkersOne mistake beginners make is they associate their results in a demo account with their level of skill or ability to replicate those results in a live Forex trading account with real money.

This can work both ways, whether with profits or losses.  Keeping in mind, the demo account uses a fictitious balance (i.e. fake or virtual money) and is just for demonstration (e.g. hence the abbreviation “demo”) purposes, whereas a live account is the real thing, with actual funds deposited by the trader.

Beware of common pitfalls, as described below

A safer approach is to treat the two experiences as non-correlated, in terms of the potential or expected results. After the demo, if you are ready to moving into a live account, it should be like a fresh start.

For example a demo account trader may have what he or she believes to be phenomenal returns or a positive performance over a given time frame, and get excited about the potential to do this in a live account. This can be a classic mistake and lead to unrealistic expectations of how trading will go in the future when a live account is approached.

Results vary from demo to live, a prudent reason to treat each as a separate experience

Because it’s very likely demo results will be very different from results in a live account, for this reason the way a demo account is treated, should be separate and independent from how a live account is approached, in terms of measuring performance. On the other hand, a trader that has negative trading results of a net-loss on the trades made in a demo, may be discouraged to trading in a live account.

This should not be confused with advocating against testing a strategy on a demo, but instead meant as to warn traders that even if the results are great or terrible, apply that same strategy to a live account should be done on a fresh clean start with no major correlated expectations or performance.

For example,  When a trader is ready to trading in a live account, a strategy used in a demo account  could be applied on a smaller scale by reducing the contract sizes  by a factor of 10 for example, which would still enable the performance to be judge on a percentage basis but with only risking 1/10th of the amounts used in the demo -and keeping in mind it will be real money and not virtual monopoly money.

Transitioning from a demo account into a live account

So trading 100,000 units of currency in a demo could translate to trying the same approach in a live account but with 10,000 units of currency instead, or if 10,000 units were traded in a demo – then in the live account even as small as 1,000 units can be traded in order to ease into trading a live account using a strategy that was being tested first in a demo.

Again, regardless of the results in the demo, if a trader is confident to apply them in a live account, since the results will likely differ, its best to trade it as a separate experience accordingly.

How To Start Forex Trading Using The Correct ApproachIn short, since live trading results are the ones that really matter, positive or negative trading results that occur in a demo should be taken lightly. Even the performance in a live account, whether overt 100 trades or 1000 trades, if occuring in a short period of time like a few days, weeks or a month or two, they might not be meaningful enough to draw a longer term conclusion, and make a more serious decision.

For this reason, some trades will apply a specific strategy or set of strategies over a several month period such as 10 months, in order to measure volatility and  risk and reward rankings and other measures of the overall returns over that time period,  while vetting a trading methodology or Forex system and building a potential track-record.

It’s not about one success, its how trading performance measures on-average over time

In order to succeed at anything in life over a long period of time, qualities of success or effective action need to be repeated over and over, as time passes. Even if success is consecutive, what often matters is the average results or how well people do most of the time, even despite occasional failure. The items described above with regards to trading strategies and measuring results and the differences between a demo and live account when considering the question of how to start Forex trading are just the beginning and tip of the iceberg.

This may all sound overwhelming for someone starting, but its good sometimes when getting ready to dive into a subject to get an idea of what lays ahead, before starting, so going back to the question of where to begin, traders should review all aspects of the Forex demo account, as this will be a great tool to speed the theoretical learning as well as practical application process , both at the same time. This approach can be complemented by reading material, whether a book, or more articles on Forex Blog, or your brokers’ website, but doing it concurrently while using a demo seems most efficient.

How to create the best Forex trading strategy

Forex Trading Strategy ApproachNext is to develop a Forex trading system tailored to your unique goals and financial and life circumstances, since there is no best one-fits-all trading system, it is something that must be created just for you and mostly by you – by answering key questions that will help you determine how the system will be controlled and what rules will be in place to manage risk and decide on reward levels, and the process to govern deciding when, where and how to trade, and how often.

Before we conclude, let us recap below some of the main themes from this article that can help you be on your way to taking the next steps with a greater level of confidence and understanding of some of the risks involved.

Recap of Key points to How to Start Forex Trading:

  • Conduct proper due diligence on the broker and platform provider
  • Register for a free demo account and install it to your computer
  • Explore the software interface and understand how to navigate it
  • Speak with your account representative to speed the learning process of trading
  • Read the customer agreement when opening a live Forex account
  • Make sure Forex trading is suitable for your financial circumstances
  • Create a detailed trading system based on your specific goals
  • Treat the demo account results independent from live trading expectations
  • Ease into a live account using smaller trade sizes, and judge percentage returns instead, then increase when/if merited.

Forex Blog has written in detail on the subject of developing a Forex trading system, although as mentioned since no one system will work for all, much of the details need to be prepared by the trader. Therefore, using materials found on forexblog.com, such as a free forex trading tutorial pdf, and speaking with a representative from worldwidemarkets.com, for example,  could help traders be on their way to learn how to start Forex trading both in a demo, and then in a live Forex trading account.

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