How to start investing in forex: A beginner’s guide

forex trading

You may have heard severally people saying that forex is highly volatile and is a risky investment to get into.

Although, the statement is partly, forex, can only get crazy and very risky if you have not developed some virtues like self-control and very high discipline.

There are people who are making millions of dollars using this type of investment and if you cultivate the discipline needed you can join the club. However, as a newbie, there are some tips to keep in mind if you want to be a forex expert. Here are some of the important tips in the forex world:

  1. Understand what is forex

Do you know what really this investment mean? Well, most newbies are just attracted to forex because of the great history they hear successful people giving. However, if you don’t have a thorough knowledge of exactly what forex is you will end up making huge losses and eventually losing your capital.

In simple terms, we can say that forex is the act of exchanging currencies. Basically, you will be dealing with USD, Euros, CAD, JPY, and other popular currencies. The reason why people say that this investment is risky is because of the volatility of currencies.

In understanding forex, you will need to know the factors that will affect your investment and when not to trade with a certain currency. Of course, you can make moneywhen you know the parameters that govern the forex world. Factors like political instability, trade wars, UN meetings, wars, elections, and others can easily affect the forex market. You have to be updated always with the global news and the anticipation of many traders.

  1. Understand the terms used here

This will make your life easier when trading. Some of the words you will have over and over again include quote currency, base currency, ask price, bid price, pip, and spread. Bid price refers to the price that your broker is willing to buy the money you are holding. Base currency refers to the currency that you are holding most in US dollars, Euros, Japanese Yen, and others.

Quote Currency refers to the currency that you will purchase. Ask price refers to the price your broker will ask for in exchange to the currency you are holding. Spread is that difference between the bid and ask prices. This is where the broker gets his commission. Pip refers to the percentage in point which is the smallest measurable value of your money.

You can then get informed by reading forex materials. There are various books and online videos that can help you become better in forex as a beginner.

  1. Choose a broker

Here you have to be careful about the kind of the broker you choose. There are thousands of brokerage firms out there that will hunt you to win your trust, as usual, there are genuine ones and illegitimate ones that will advertise themselves as the best but in the real sense, they will make your investment go to the drain.

You need a brokerage firm to help you make accurate trades and get some financial services. It is always advisable to conduct thorough research on a certain broker before entrusting them with your trade. Go for a reputable broker who will help you make better profits in your bid price. It is crucial you go for a broker with multiple outlets in their customer services.

  1. Have an understanding of the global economy

Forex involves currencies of different countries across the globe. Your profits will be based on your accurate prediction of the global economic movement. You have to understand how to check at the value of your base currency and the quote currency and how to convert them without making a loss. Do some research on the political climate, GDPs, and other factors of the countries in which you want to purchase their currency. This will give you a lead and a direction to follow.

  1. Now you can make your trade

This will not be difficult if you have chosen the right broker and you have decided which currency you are going to buy. There are many trading platforms based on the type of broker you have chosen.


Forex has its risks and benefits which you need to understand even before making your first trade. You need to keep reading about the world economy and the emerging forex news to know the direction you are going to follow in your trading.