How to trade forex on Trading212?

Trading forex on Trading212 is an excellent way for both beginners and intermediate traders to access the global currency markets. Whether you’re looking to make short-term trades with scalping strategies or hold positions for longer through swing trading, understanding how to trade forex on Trading212 is key to success.

By the end of this article, you’ll have a clear understanding of how to trade forex effectively on Trading212.

Understanding Forex Trading on Trading212: CFD vs. Invest Accounts

Before placing your first forex trade, it’s important to understand the two account types on Trading212:

1. Trading212 CFD Account (Contracts for Difference)

• Allows you to trade forex pairs with leverage (borrowed funds).
• You can go long (buy) or short (sell), profiting from both rising and falling markets.
• You do not own the actual currency, just a contract that follows price movements.
• Ideal for short-term trading, scalping, and swing trading.

2. Trading212 Invest Account (Not for Forex)

• Designed for buying and holding real stocks and ETFs.
• Does not support forex trading directly.

If you’re trading forex, you’ll need a CFD account, as the Invest account does not allow access to currency pairs.

Basic Forex Trading Strategies on Trading212

Successful forex trading requires understanding different strategies that suit various market conditions. Below are three of the most commonly used forex trading strategies:

1. Scalping (Short-Term Trading for Quick Profits)

Scalping is a trading style where traders open and close multiple positions within a few minutes, aiming to make small profits from frequent price fluctuations. This strategy is ideal for traders who can monitor the markets constantly and make quick decisions.

• Timeframe: Seconds to minutes.
• How it works: Open and close multiple trades quickly, profiting from small price movements.
• Best forex pairs: EUR/USD, GBP/USD (high liquidity, low spreads).
• Risk: Requires fast decision-making and low spreads to be profitable.

Example

A trader might notice that EUR/USD fluctuates between 1.1050 and 1.1060 over a short period. By buying at 1.1050 and selling at 1.1058, they secure an 8-pip profit. They repeat this process multiple times throughout the day to accumulate gains.

Pro tip: Use the 1-minute or 5-minute chart to spot fast price movements.

2. Swing Trading (Holding Trades for a Few Days to Weeks)

Swing trading is a medium-term strategy where traders hold positions for several days or even weeks, aiming to profit from price swings rather than small fluctuations.

• Timeframe: Hours to days.
• How it works: Hold trades for longer periods based on trends.
• Best forex pairs: USD/JPY, EUR/USD, GBP/JPY.
• Risk: Requires patience and higher stop-loss levels to account for market fluctuations.

Example

A trader spots an uptrend in GBP/USD and buys at 1.3000, setting a take-profit target at 1.3200. Over the next five days, the price gradually rises, and their trade closes with a 200-pip profit.

Pro tip: Use moving averages (e.g., 50-day and 200-day) to identify trends.

3. Trend-Following Strategy (Riding Market Trends for Profits)

This strategy involves identifying a strong trend (uptrend or downtrend) and placing trades in the direction of the market movement. Trend traders avoid going against the trend and instead look for pullbacks as entry points.

• Timeframe: Days to months.
• How it works: Identify a strong uptrend or downtrend and trade in that direction.
• Best forex pairs: EUR/USD, AUD/USD, GBP/JPY.
• Risk: Requires trend confirmation to avoid false signals.

Example

If EUR/USD has been moving upward for several weeks, a trader will wait for a slight pullback before buying. If the price retraces from 1.1200 to 1.1180, they enter a buy position, targeting higher prices as the trend continues.

Pro tip: Use the Relative Strength Index (RSI) to confirm entry points.

Risk Management Tips: Avoiding Big Losses

Proper risk management is essential to avoid wiping out your account. Below are the key principles every forex trader should follow.

1. Never Risk More Than 1-2% of Your Account Per Trade

• If you have $1,000 in your account, keep your risk per trade under $20.
• This prevents one bad trade from significantly affecting your capital.

Example

If trading EUR/USD with a 50-pip stop-loss, adjust your trade size so that a 50-pip loss equals only 1-2% of your account.

2. Always Use a Stop-Loss Order

• A stop-loss prevents large losses by automatically closing your trade at a set level.
• Example: If you buy GBP/USD at 1.2500, set a stop-loss at 1.2450 to limit potential loss to 50 pips.

3. Avoid Over-Leveraging

• High leverage magnifies both profits and losses.
• For beginners, using low leverage (e.g., 1:10 or 1:20) is safer.

Example

A trader using 1:500 leverage risks losing their entire capital on a small market movement, while a trader using 1:20 leverage has more protection against large losses.

Final Thoughts

Trading forex on Trading212 is a great way to enter the forex market. By choosing the right trading strategy, managing risk properly, and avoiding common mistakes, you can improve your chances of success. If you’re new to forex trading, start with small trades and focus on learning market movements before increasing your position sizes.

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FAQs

1. Can I trade forex on Trading212 Invest? 
No, forex trading is only available on Trading212 CFD.

2. What is the minimum deposit to start trading forex on Trading212? 
The minimum deposit is $10 for bank cards/e-wallets and $100 for bank transfers.

3. Does Trading212 charge commissions on forex trades?
No, but Trading212 makes money through spreads, which vary by currency pair.

4. Can I trade forex on Trading212 without leverage?
Yes, you can choose 1:1 leverage to trade without borrowing funds.

5. Is forex trading on Trading212 good for beginners?
Yes, but start with a demo account to learn before risking real money.

6. Can I trade forex 24/7 on Trading212? 
No, forex trading is available 24/5, meaning it is open from Sunday evening to Friday evening, following the global forex market hours.

7. What are the best forex pairs for beginners on Trading212?
Major pairs like EUR/USD, GBP/USD, and USD/JPY are best for beginners due to their low spreads and high liquidity.

8. Can I use Trading212’s demo account for forex trading? 
Yes, Trading212 provides a demo account where you can practice trading forex without risking real money.