Forex Trading Complete Guide: From Account Selection to Live Trading

The foreign exchange market is the most liquid financial market worldwide. Operating 24 hours a day, excluding ( weekends ), it allows trading of various currency pairs, attracting many investors. Especially as Korean investors can easily access forex trading through global brokerage firms, interest is increasing. This article will explain the entire process of forex trading step by step.

Forex Trading Accounts, What Types Are There?

Before starting forex trading, it is important to understand which account type suits you. Each account type has different features and advantages and disadvantages.

Advantages of ECN Accounts

ECN(Electronic Communication Network) accounts match trades directly with liquidity providers. Since they do not go through a dealing desk of the broker, there is no risk of price manipulation or order interference. They also offer relatively low spreads and reflect actual market quotes. However, note that instead of spreads, a separate trading commission is charged.

Standard and Mini Accounts

Standard(Standard) accounts are the broker’s basic real trading accounts, usually traded in 1 lot units. They include the broker’s margin within the spread without additional fees, and immediate execution through the dealing desk is common.

Mini(Micro) accounts are options for small investors, with trading conditions similar to standard accounts but with smaller trading units. For example, trading in 0.1 lot units makes it suitable for beginners to gain practical experience with less capital. However, be aware that order execution priority may be lower or execution could be delayed.

Practice First with a Demo Account

Demo accounts allow you to practice trading in a real market environment with virtual funds, without risking actual money. Trading conditions are the same as real accounts, making it useful for building fundamentals. Most brokers allow easy switching between demo and real accounts with just a click.

How to Choose a Trustworthy Forex Broker

To trade forex through a global broker, selecting a reliable company is essential.

Importance of Checking Regulatory Status

When choosing a broker, always verify its regulatory status. Check if it is licensed by major overseas regulatory agencies such as the UK Financial Conduct Authority(FCA), the Australian Securities and Investments Commission(ASIC), etc. Brokers regulated by developed countries including Australia tend to have strict investor protection standards, making them relatively safer. Also, confirm whether they implement segregated client deposit accounts.

Trading Platform and Fee Structure

Ensure they provide widely used trading platforms like MetaTrader 4/5(MT4/MT5) or cTrader. Important features include trailing stops, limit orders, whether trading is available on mobile apps, and an interface that is easy for beginners to use.

Fee transparency is crucial. Even with low commissions, excessively high spreads can increase actual trading costs. Choose companies that openly disclose reasonable fees.

Deposit/Withdrawal and Customer Support

Ease of account opening and deposit/withdrawal procedures are also important. Overly complicated processes can hinder long-term trading.

Finally, assess the quality of customer service. If they support Korean language and operate a 24-hour support team, you can receive prompt assistance when issues arise.

Account Opening Routes for Korean Investors

Using Domestic Securities Firms

Korea’s KB Securities, Kiwoom Securities, Samsung Futures, etc., also offer forex margin trading. If you have ID, a mobile phone in your name, and a bank account in your name, you can open an account non-face-to-face. The advantages include Korean language support and ease of domestic tax reporting.

Global Brokerage Firms

Global brokers also allow non-face-to-face account opening with just an ID. They generally have lower minimum deposit requirements than domestic firms and mostly offer Korean language services. You can trade major currency pairs as well as minor pairs, with more freedom in leverage use.

Funds Needed to Open an Account

Opening a forex trading account is free. However, to start actual trading, you must meet the minimum order amount, which varies by broker. Some brokers also charge account maintenance fees, so it’s advisable to check their website for details.

3 Steps to Effective Forex Trading

Once you have an account, you can start trading in earnest. Following these steps will help you trade more systematically.

Step 1: Choose the Currency Pair to Trade

The first step is deciding which currency pair to trade. Major pairs like EUR/USD, USD/JPY, GBP/USD have high liquidity, low spreads, and minimal price distortion. Conversely, exotic pairs with lower trading volume and higher volatility are not suitable for beginners, so it’s best to avoid them.

Step 2: Analyze Exchange Rate Trends and Develop Strategies

After selecting the currency pair, analyze the exchange rate trend. Fundamental(Fundamental) analysis involves reviewing interest rates, macroeconomic indicators, geopolitical issues, etc., to understand medium- to long-term trends. Technical analysis uses past price and volume data to predict future movements, with tools like support/resistance levels, moving averages, and chart patterns.

In actual investing, it’s best to combine both analysis methods and decide which to focus on based on your trading style. Many brokers provide various free analysis resources for major currency pairs.

Step 3: Execute Trades and Manage Risks

The final step is executing trades and managing risks. Before trading, develop a clear trading plan and set entry and exit points in advance.

Always set stop-loss orders. If losses exceed a certain amount, the position is automatically closed, preventing huge losses. Beginners are advised to trade with low leverage or no leverage to gain experience.

After trading, keep a trading journal to review mistakes and continuously improve your strategy. This process forms the foundation of successful long-term trading.

Considerations When Starting Forex Trading

Forex trading offers high profitability but also involves significant risk of loss. Without sufficient learning and preparation, you may lose your capital, so caution is necessary.

Set a minimum amount of funds for trading and never invest more than you can afford to lose. Practice thoroughly on a demo account before switching to real trading. Also, regularly check market news and economic indicators to respond to market changes.

The forex market provides attractive opportunities, but careful planning and thorough risk management are key to success.