What is Forex Trading (Beginner’s Guide)

Forex Trading

Although sophisticated, the basic fact about forex trading is that it deals with the buying and selling of currencies for profit. While the prices for everyday commodities are constant in a month, two months, a year, or even more, the values of currencies are not stable.

Values of currencies fluctuate several times in a minute, and probably a thousand times in an hour.

This fluctuation is known as volatility. The volatility of currencies makes it very risky to trade, but also profitable.

How Does Forex Work?

You are expected to trade two currencies in exchange of one for another. Based on price, people make prediction of the appreciation or the depreciation of the currencies you trading, and they earn or lose according to what the market turns out to be.

Once you have made your predictions, move on to place your order by choosing the “buy” button. With time, you can see your prediction materialize or dwindle. Once you make a fair profit from your speculation, then you can close your trade.

What to Do

Get a Forex Trading Platform

It is true that where you trade at can determine the success of your trade. You should carefully choose your trading platform because it determines your success level, the regulation determines how much trade you can make and under certain circumstances and the platform charges.

  • Now, if you want to choose a forex trading platform, the first thing to consider is if it is regulated by appropriate authorities. It is safe to choose a broker with FCA and CySEC regulations.
  • You should also make sure to select a broker whose payment/funding option is the same as your payment mode.
  • Investigate the trading fees and commissions charged by trade on the platform you are speculating to be a part of. While many forex trading platforms would usually charge a commission of you trades in percentage, some others are commission-free. It is best if you went for such.
  • As a beginner, you would need answers and helps. So, it is advisable to choose a platform with excellent customer support and relations services.

Understanding Forex Charts

Forex charts are essential tools for forex trading. They help you to understand the dynamics of the market and to be able to identify specific indicators of rising or falling currency values at given times. Forex charts provide insights into what goes on in the market.

Price charts should be your friend as they indicate the performance of currency pairs in a given time. The price chart shows the performance of a trading pair, exchange rate, and length of time of the exchange rate.

While trying to trade as a newbie, there are things to put to mind.

  1. Set your stop loss. Stop-loss is a level you set for your trade just below the support level. It is advisable to set the stop loss at a level where support break is at. Setting this limits your potential loss.
  2. Find your profit point. Predictions are not to be made blindly, use the available tools, including price charts, to make informed decisions about where to place your bid.
  3. Don’t rush your trade. Be intentional with your trades; don’t be in a hurry to withdraw. Set your entry and exit points on the chart and stick to it.
  4. Trade with little amounts. Since you are just starting, it is advisable to trade with small amounts until you are familiar with the market and can go solo and big.

Another way to trade currency nowadays is with cryptocurrency trading and automatic trading softwares. Both the forex cryptocurrency market are separate. The forex exchange is protected by a centralized government while the cryptocurrency market is hosted online and backed by a peer-to-peer authentication process.

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