Forex or Forex Trading is a market, also known as OTC (Over-the-counter) and is the largest market in which billions of dollars are executed daily. It’s even bigger than America’s stock markets. But given its OTC nature, no trader can really calculate the correct numbers regarding currency rotation. However, foreign exchange is in fact a large market and is therefore integrated by many participants. From your bank or from large specialized investment firms, foreign exchange markets always offer a piece of the action to whoever you are and wherever you are (even from home).
The basic concept of currency trading is very simple. You trade or speculate against other traders in the direction that you take a currency. Therefore, if you believe the euro will rise, you WOULD COMPARE the euro, or SELL the euro if you are convinced that the euro would fall. It is as easy as that.
Learn the Fundamentals of Currency
Before you prepare to deposit your funds and start trading there are some important points you must understand, each of which are described below.
Brokers of the Forex: To start trading with Forex, you will need to operate with the help of a foreign exchange broker. There are many currency brokers that allow you to open a forex account with just $5 dollars. The forex broker is the one who allows your purchase and sales orders and also allows you to investigate the markets (also known as technical analysis or fundamental analysis) to help you make the best decisions…and obviously allows you to deposit more funds or withdraw your benefits whenever you want.
Trading Venue: You need to have a trading platform from which you can conduct your transactions, which are then sent to the settlement broker. In addition, a trading platform is essential to enable it to carry out its technical analysis and also to view current market prices. Most retail brokers offer the MT4 trading platform (Metatrader 4), which is free. You can also open a Forex Trading demo account and practice trading with virtual money forex to gain the necessary experience before trading with real money.
Timetables of Forex Trading: While you may have heard that currency markets never sleep, you really do. Firstly, you will not be able to trade on weekends (Sundays and Saturdays). But for the other days of the week, the currency market works 24 hours a day. This is due to the fact that currency trading is global. At any time, you will always find an overlap of a new market session while closing the previous market. What time of day or what trading market session plays an important role if you are an intra-day trader or a scalper? Now that you already have an overview of Forex trading, here are some final tips to remember before you start trading for yourself.
Pips: Pip is a measure of the change in the value of a currency pair and is the fifth decimal place. For example, if EUR/USD changes from 1.31428 to 1.31429, the change is called 1Pip (1.31426 – 1.31427 = 0.00001). When you negotiate, the more pips you make, the more benefit you have. Example: Buying EUR/USD at 1.31428 and selling (or closing your trade) at 1.31528 would give you 100 Pips in earnings.
Quotations for the Reading: Forex quotes are presented at a Bid and Ask price (which vary in pips and from one broker to another). The price of the Offer is the price at which it can be bought and the Selling Price is the price that can be sold. Therefore, a EUR/USD quote would look like this 1.31428 (Bid) /1.31420 (Ask).
What is the Spread? Spread is no more than the difference between the price Bid and Ask. Therefore, in the above example, for 1.31428 / 1.31420, the spread would be 8 Pips.
What is an Asset Leverage? Leverage is the amount of capital by which you can ask your broker to expand (or increase) its trading value. Leverage is often quoted in relationships like 1:50, which means that when you trade with a leverage of 1:50, your $100 is magnified to $50,000. Leverage is very important both in terms of making more profits and risk management and therefore its operations.
What is a Batch? Much is a unit by which you conduct your trade. In financial terms, much is also known as a contract. There are pre-established lots (or contract sizes) that you can negotiate. For example, a standard batch is no more than 100,000 units (known as 1 batch).
Tables of the Reading: The ability to understand and read graphics is very essential for trading. Depending on your approach, you have the ability to choose between a line, bars, or candles and trading accordingly (for example, trading based on candle patterns).
Placing orders (How to buy and sell): In Forex trading, it is possible to buy or sell any currency pair. Most trading platforms give you this option. You buy when you think the price will rise and you sell when you think the price will fall. There is common terminology used in foreign exchange trading, which is Buy Low, Sell High; that is an important point to remember.
Types of Orders: In addition to buying and selling, another point to remember is the types of orders. There are two types of basic orders: market orders and pending orders. At the time of clicking on “Sell” or “Buy”, you are basically buying (or selling) at the current market price. On the other hand, a limited order tells the broker that he wants to buy or sell only at a certain price.
Find a Forex Broker
As mentioned, there are many Forex brokers in the market today and therefore you may feel extremely confused about how to choose the currency broker that is right for you. To summarize briefly, remember the following points when choosing a forex broker. Look for a regulated Forex broker, this is extremely important to stay away from scam situations.
- See if the broker sets a minimum deposit
- What is the advantage you have with a broker?
- What is the minimum size of the contract you can negotiate?
- Types of deposit and withdrawal, as well as terms and conditions
- Trading methods allowed by the broker
Finally, now you have chosen a Forex broker to trade with him, it is recommended to first open a demo account or a practice account. Most Forex brokers offer unlimited demo trading accounts (but will be disabled if not used for 30 days). This is an excellent way to be familiar with foreign exchange markets and also help you understand your style of trading (scalper or intraday trading, swing trading, etc.) and approach (fundamental or technical analysis). You can look for various commercial methods and systems or you can develop yourself when you have an excellent knowledge of the technique or fundamental indicators.
Forex trading is one of the most dynamic and active forms of trading in financial markets. The heart of everything is the basic fluctuations in currency values that drive everything else. Learning to trade Forex and understanding foreign exchange markets can provide a good basis for trading other markets such as derivatives or equities.