How to Trade Forex

Extra Money While You Learn to Trade

It can be difficult to learn how to trade forex, but don't worry, we at ForexBonus.com.au have pulled together this handy guide to Forex Trading and a list of Forex Bonuses to help you maximise your trading funds while you put your toe in the water!

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How to Trade FX

If you've even been abroad on holiday, chances are you've had to exchange money for some foreign currency. Now, one thing you'll always notice when you visit a bureau de change is the price.

Depending on the day or even the time of day you visit the kiosk, the exchange rate will be different. This movement is something we've all become used to over the years and simply accept as part of the game. Indeed, whether it's an incident in the news, political changes or the time of the year, something and nothing can affect the value of a particular currency.

While most of us will be happy to watch these movements from afar and try to get the best exchange rate before we jet off on holiday, there are some who like to make some money from it. Technically known as forex trading or FX, the process of investing in certain currencies and their potential price movements has become an industry in its own right over the last few decades.

In years gone by, forex trading was only something those with large amounts of money or connections to brokers could do. However, thanks to the advent of online FX trading sites, individuals can now trade like the pros. Very similar to online sports betting in its set up, forex trading online allows everyone to join the action regardless of how big or small their bankroll is.

Naturally, you can't simply jump into the action and start trading like a pro. You need to learn the basics. However, with a few simple concepts in mind and a couple of nudges in the right direction, you can actually make some serious cash as an online FX trader. With this in mind, we've put together a quick guide to forex and how you can trade like the pros.

Forex Trading in a Nutshell: It's All About Buying and Selling the Right Pairs

In simple terms, online forex trading is the process of investing in a currency pair in the hope that one side of the pair will either increase or decrease in value. To put it another way, you want to predict which currency will become stronger against the other, buy the former currency and sell the latter. When you invest in a forex market, you are buying one currency and selling another at the same time.

For example, let's say you choose the currency pair AUD/USD. In this instance, you're investing in the relationship between these two currencies. As you'll know, the value of a currency can fluctuate depending on a number of factors and it's these changes that you are speculating on. So, in the AUD/USD pair, you're putting your faith in the base currency, which is GBP (the base currency is always noted on the left of the pair). Now, at this point, you have two trading options:

1. You can "buy" the currency pair if you believe the base currency will get stronger against its counterpart.

2. You can "sell" the currency pair if you believe the base currency will get weaker against its counterpart.

So how does a base currency become weaker or stronger? As the currency markets trade with each other (on a huge scale), this activity affects the price of the base currency. So, if the price of AUD/USD fell, it would indicate that USD is getting stronger while AUD is getting weaker. Conversely, if the pair's value was increasing, it would mean AUD is getting stronger in relation to USD.

When you enter a forex trade, you'll see a live price for each currency pair and it's your job to decide whether the price will increase (in which case you'd "buy") or decrease (in which case you'd "sell"). In general, you can stay active in a trade for as long as you like, so the key to victory is picking the right side of the equation, but also knowing when to end the trade and cash out (or cut your losses)

Things to Consider Before You Start: Learn How to Talk the Talk

Before you can start trading forex like you're the Wolf of Wall Street, you'll need to get some basic concepts and terminology committed to memory. To help you get acquainted with the fundamentals of forex, here are some of the things you'll need to think about before you initiate your first trade:

Currency Pair = As we've said, a pair is the two currencies you're investing in. The currency on the left is known as the base and this is the one you're technically "selling". The currency on the right is known as the quote and this is the one you're technically "buying".

Exchange Rate = This is the price you'll have to pay to purchase base currency.

Long Position = You take this position when you want to buy the base currency and sell the quote currency.

Short Position = You take this position when you want to buy quote currency and sell base currency.

Bid Price = This is the price at which a broker is willing to buy base currency in exchange for quote currency. In other words, the bid is the best price you'll sell your quote currency on the market.

Ask Price = This is the price a broker will sell base currency in exchange for quote currency. The ask price is the best price at which you'll buy from the market.

Spread = The spread is the difference between the bid price and the ask price.

Pips = The value of a currency is expressed in pips which are basically numbers behind a decimal point. For example, one pip equals 0.0001, two pips equals 0.0002 etc. A pip is the smallest unit a currency can move, so the value of your investment is basically dependent on these micro movements in price.

Leverage = Because currency is traded in batches worth millions, you won't be able to afford to participate in the market like the big boys do. However, thanks to online FX trading sites, you can use leverage to increase the value of your stake. In a nutshell, you're buying a small percentage of the overall action. For example, if a forex site was offering 100x leverage, it would mean a AU$10 stake would be multiplied by 100 to generate your market position. In effect, leverage allows you to bet using AU$10 instead of requiring much, much more.

Making Your First Trade: It's As Easy as Finding the Right Site

Now you've got the basics of trading mastered and you know how to talk the talk, the next thing you'll need to do is set up an account. If you've ever joined an online casino or sportsbook, the process of setting up an account to do forex trading is much the same. After finding a relevant site, you'll input your details, confirm your identity and make a deposit.

Once your account has some active funds in it, you then have to scan the lobby for the latest prices just as you would at an online sports betting site. Indeed, the list of currency pairs will look very similar to the in-play markets at the top bookmakers as the price will be constantly shifting.

After you've found a pair that looks as though it has some value, you can then click the "buy" or "sell" buttons next to the list price. At this point, you simply enter your stake and confirm the trade. When the process has been completed, the active trade will show up on your account and you can track its progress in real time. Using these updates in conjunction with any information you can glean from the news, experts or the market itself, you can decide when you end the trade.

After closing the deal, the software will show the difference in pips between the purchase price and the price you closed at. If it's a positive amount, you'll earn money for every pip that has moved up. If it's a negative amount, you'll lose money for every pip that has moved down. At the end of the process, you'll have either increased or decreased your overall balance.

Forex Trading Tips: Learn to Analyse the Market in a Way the Suits You

Just as you need to follow some simple rules and strategies when you're betting on sports, the same is true in the forex world. So, before we leave you to set up your first forex trading account and make some cash, here are four tips you need to keep in mind before you ante up:

1. Focus on the Short Term and Don't Get Distracted by the Bigger Picture

If you are an intraday trader trying to make money, the long-term position of a currency doesn't really matter to you. When you're speculating on the value of a currency pair on day-to-day basis, it's a fact that the market will fluctuate several times in the course of the day. With this in mind, your job is to pick a point in time when it is more likely to go up or down and leave it at that.

Basically, you just have to be involved in the action for long enough to make a profit. Being "right" in the overall outcome of any market can be an expensive luxury. If you can stay active and dip in and out enough times throughout the day, all you have to do is be right more times than you're wrong to carve out a daily profit.

2. Why Are You Picking that Pair?

The reality of forex trading is that people are attracted to movement. When you see a currency pair moving, it's tempting to think "that's an active market and one I should get involved in". While this isn't a mistake, you need to ask yourself the question: why is this pair moving?

To answer this question, look at the news and current events; think about what is moving the markets. Take Donald Trump's presidency, for example, How has the media portrayed it, how are people reacting to it? These things will affect the price of a currency and you need to understand these factors before you ante up. Movement is great, but you have to know why something is moving so you can decide whether it's worth investing in and, more importantly, whether you should buy or sell.

3. What Are You Trying to Achieve?

The goal of online FX trading is to make money, but exactly how much do you want to make? How much time do you want to invest in the process? Is the time spent trading worth the return you're making? Yes, you want to make money, but how do you get to that point and is it worth it? If you don't know what you're really trying to achieve in terms of the grand scheme of things, you need to get this in order before you start trading.

4. What Floats Your Boat?

Forex trading online is like marmite: you either love it or love to hate it. To really get the most out of it, you need to put in the hours and learn all you can about it. From the basics of trading to the daily movements of the markets, you need to look at everything in detail to ensure you get the most out of your time online.

Indeed, you wouldn't load up a sports betting site and start placing wagers on random football teams without looking at some stats. The same is true in the FX world. Simply choosing a currency pair because it's moving won't get your bankroll moving in the right direction. To really profit from the process you need to get involved in it and, importantly, find out what makes you tick.

Maybe you love analysing the hardcore data such as previous market movements and prices. Maybe you're someone that enjoys reading the news and making predictions based on these facts. The method you prefer is the one you should use to inform your decisions. At the end of the day, online FX trading can be tricky. However, if you put the time in and use your own skills to your advantage, you should find that turning a profit is not only possible, but highly enjoyable.


The Very Best Deposit Bonus - AVA Trade

So what is the best Deposit Bonus right now? Our choice is AVA Trade

Five reasons why we like the AVA Trade Deposit Bonus:

  1. It's a great starting Bonus, 100% matched on deposits between $100 and $300 AUD  which is huge for the Australian market
  2. They are regulated by AISC
  3. Zero commission on Forex Trades
  4. The bonus is credited automatically to your account
  5. Profits from the bonus can be withdrawn as cash

Trade Within Your Limits

It's pretty simple, don't be THAT guy, stick to your limits and trade sensibly!