Making money with forex is not a dream: 5 essential points every beginner must know, learn to invest from scratch

“Can Forex Investment Really Make Money?” This is the most common question asked by many newcomers to the financial market. The answer is: Yes, but only if you understand the rules, control risks, and have patience.

The forex market is the largest and most liquid financial market in the world, with an average daily trading volume exceeding $6 trillion, far surpassing the combined total of futures and stock markets. Because of this, it attracts investors from all over the globe. In the past, forex trading was mainly controlled by financial institutions and high-net-worth individuals, but with the development of the internet, ordinary investors can now participate easily. Today, about 30% of forex trading comes from retail traders, including various derivatives such as Contracts for Difference (CFD), which has led to an exponential increase in retail forex investors.

However, it’s important to note—while there are many opportunities in the forex market, the risks are also significant. Statistics show that 70%-90% of individual investors experience losses in forex trading. This doesn’t mean forex investment is unfeasible, but it emphasizes that investors must possess correct knowledge, mindset, and risk management skills. This article will analyze how to play forex trading in five core dimensions.

Step 1: Understanding the Three Ways to Invest in Forex

For those new to forex, the first step is to clarify the available investment channels. In simple terms, forex investment can be divided into three levels:

1. Currency Exchange — The Most Basic Forex Transaction

In daily life, when you travel abroad, you need to exchange your local currency for the local currency. This is the most fundamental form of forex trading. For example, when going to Japan, you exchange New Taiwan Dollars (NTD) for Japanese Yen (JPY). At that moment, you are participating in the forex market.

Characteristics of this method:

• Minimal profit (only from the exchange rate difference, usually very small)
• No leverage, lowest risk
• Highly liquid, can be exchanged at any time
• Suitable for people with travel or international payment needs

2. Foreign Currency Fixed Deposit — Balancing Risk and Return

Want to preserve value or hedge? You can open a foreign currency fixed deposit account at a bank. This is the most basic spot forex transaction—buying and selling foreign currencies to earn exchange rate differences and interest income.

Advantages:

• Banks offer various terms, relatively low risk
• Enjoy both exchange rate difference and interest income
• Ideal for beginners new to forex investment
• Larger transaction volume with guaranteed liquidity

Note: Different banks have different minimum deposit requirements for various currencies, and early termination may result in some loss of interest. It’s recommended to use idle funds that are not needed in the short term for fixed deposits.

3. Forex Margin Trading — High Leverage, High Risk, High Return

This is the so-called “Forex trading,” the main battlefield for professional investors. Margin trading allows you to control larger trading amounts with a smaller principal, analyzing exchange rate trends to profit from the buy-sell spread.

Features:

• Low entry threshold (as low as $50)
• High leverage (commonly 50x, 100x, 200x, etc.)
• 24-hour trading, long and short positions
• Risks and rewards are amplified simultaneously

Step 2: Deep Understanding of Leverage and Margin—The Key to Success or Failure

Many beginners lose money mainly because they don’t understand how to properly use leverage and margin.

( What is leverage?

Leverage allows you to control larger trades with a small amount of capital. For example, 20:1 leverage means depositing €2,000 can buy 40,000 units of EUR/USD. It sounds attractive, but the risk is doubled.

) What is margin?

Margin is usually expressed as a percentage of the total position size. For example, a 50:1 leverage corresponds to 2% margin, 100:1 to 1% margin. Different ratios correspond to different risk levels.

The impact of leverage on returns—numbers speak

Suppose you deposit $1,000 and trade EUR/USD. If the price moves 5%, see how different leverage affects the outcome:

See? The same 5% market fluctuation, with 200x leverage, your profit or loss is magnified 200 times. This is the double-edged sword of leverage—it amplifies gains but also losses, and intensifies the psychological pressure of the investor.

( The biggest danger of margin trading—liquidation

Liquidation occurs when your losses reach the total margin, and the system automatically closes your position, wiping out your principal instantly. This is a nightmare for many beginners. To avoid this, you must learn to set stop-loss and take-profit points and reasonably control leverage. Experienced traders usually keep leverage within 10:1.

Step 3: Recognize the Pros and Cons of Forex Investment—Are You Ready?

Before investing real money, you need to objectively assess whether forex trading suits you.

) Advantages of forex trading

• Two-way trading mechanism: You can go long when bullish and short when bearish, providing profit opportunities regardless of market direction
• 24-hour trading: The forex market is open 24 hours, allowing participation in any time zone
• High liquidity: Global market with an average daily volume over $6 trillion, no worries about fund withdrawal
• Relatively low costs: Over-the-counter structure results in lower trading costs, usually zero commission
• Market transparency: Data is open and transparent, making market manipulation difficult for large institutions

Risks of forex trading

• High leverage risk: You may lose all your capital or even incur debt
• Market shocks from news: Economic data, policy changes, geopolitical events can cause sharp volatility, often unpredictable
• Psychological stress: Requires making every decision yourself and handling market fluctuations
• Need for professional knowledge: Not just buying and selling; understanding macroeconomics, technical analysis, and risk management is essential

Core question: Are you suitable for forex trading?

If you only plan to be a part-time investor with a “just for fun” attitude, it’s better to give up. Forex trading requires full commitment, systematic learning, and continuous improvement. Successful traders possess efficient capital management skills, disciplined trading plans, and strong psychological resilience.

Step 4: Choosing the Right Currency Pairs—Where Should Beginners Start?

There are over 180 currencies worldwide, but only a few dozen are commonly traded in forex. Based on characteristics, currencies can be divided into four categories:

Policy currencies (prices determined by national policies and economic conditions): USD, EUR

Safe-haven currencies (used to hedge risks): JPY

Commodity currencies (affected by major commodity exports): AUD, CAD, NZD

Emerging market currencies (more regulated): CNY

Beginners are advised to start with the first three categories. Here are the top ten currency pairs by trading volume, accounting for nearly 90% of the forex market:

1. EUR/USD — 27.95%
2. USD/JPY — 13.34%
3. GBP/USD — 11.27%
4. AUD/USD — 6.37%
5. USD/CAD — 5.22%
6. USD/CHF — 4.63%
7. NZD/USD — 4.08%
8. EUR/JPY — 3.93%
9. GBP/JPY — 3.57%
10. EUR/GBP — 2.78%

Why choose high liquidity currency pairs?

• Narrower spreads (lower transaction costs)
• Faster order execution, less slippage
• Richer news and market analysis
• More stable price movements, manageable risks

Conversely, highly volatile currencies (like some emerging market currencies) may offer more trading opportunities but come with higher risks. For beginners, starting with EUR/USD, which has high liquidity and moderate volatility, is recommended. As experience grows, gradually explore more volatile pairs.

Step 5: Choosing a Trading Platform—Regulatory Licenses Are the First Line of Defense

This is extremely important: always choose a regulated trading platform.

Major global regulators include:

• FCA (UK)
• ASIC (Australia)
• NFA (USA)
• MiFID (EU)
• CySEC (Cyprus)

Why is regulation so crucial? Because there are many forex scam platforms. Common scams include:

• Impersonating well-known brokers
• Inducing investments via social media
• Promising high returns (“steady 20% monthly”)
• Unwithdrawable funds on blacklisted platforms
• Manipulative operations like forced liquidation, signal providers, or unauthorized trading

When choosing a regulated platform, verify:

1. The authenticity of the official website
2. The validity of the regulatory license (check on official regulator websites)
3. Whether client funds are segregated and protected

Advanced Strategies: 7 Trading Tips Every Beginner Should Know

1. Study Market Fundamentals

Factors influencing exchange rates include interest rate policies, economic data, political stability, central bank decisions, cross-border capital flows, etc. To become profitable, you must learn to interpret these signals.

2. Fully Utilize the Advantages of Two-Way Trading

Go long when bullish, short when bearish. Even in bear markets, you can find profit points—this is an advantage of forex over stocks.

3. Recognize the Double-Edged Nature of Leverage

Leverage not only amplifies profits but also losses and your inner fears and greed. Successful traders require long-term systematic learning and training.

4. Start with Small Lot Sizes

Trade with the minimum lot to keep risks manageable and accumulate experience. This is the right way to reduce account pressure and grow gradually.

5. Develop a Trading Plan and Stick to It

Avoid frequent strategy changes, but adjust appropriately when market trends shift. The plan should be flexible, but execution must be disciplined.

6. Always Remember to Set Take-Profit and Stop-Loss

Define clear entry and exit points. For example, set a discipline like “exit all positions when profit reaches 20%,” and execute immediately when reached—don’t wait for higher returns.

7. Practice with Demo Accounts First

Demo trading allows you to test strategies and hone skills in a risk-free environment, helping you identify shortcomings before real trading.

Summary: Core Principles of Forex Investment Education

The key points of forex investment education can be summarized into five dimensions:

1. Understand Investment Methods — From simple currency exchange to complex margin trading, progress step by step
2. Master Leverage and Margin — Critical parameters that determine profit and risk
3. Recognize Advantages and Disadvantages — Assess whether you have the psychological resilience to bear risks
4. Choose Suitable Currency Pairs — Start with high liquidity, low volatility options
5. Select Regulated Platforms — Regulatory licenses are the first line of protection for your funds

Final advice: Forex trading offers opportunities to make money, but it is definitely not a quick path to wealth. It requires knowledge, patience, discipline, and psychological strength. Before investing real funds, all beginners should thoroughly learn, practice repeatedly with demo accounts, and only proceed once confident in their risk control and trading discipline.

Remember—survival in the financial markets is more important than making money. Protecting your capital is the foundation of long-term success.