From the outside forex trading, which is the exchange of foreign currencies, may look confusing and a bit complicated. But the truth is not much is needed to get started; in fact, it only takes just a single afternoon.
Forex trading is an exciting and fastest markets in the world. Because of its potentials, many people have shown interest in the market.
What is Forex Trading
Foreign exchange, also known as forex trading, is simply the buying and selling of currencies to make a profit after their value changes.
Forex is by far the biggest market in the world. It’s larger than every market, including the stock market and other markets.
Because of the high liquidity in foreign exchange, many traders are attracted to it, and this includes both experienced traders and beginners.
Countries currency are valued based on laws, demand, and supply. These means that the value of one currency can be determined by other currencies.
A countries government can also determine the value of there currencies.
However, for most countries, they prefer to float their currency against that of other countries. These keep their money in constant fluctuation.
Forex is a decentralized global market, meaning every currency in the world can be traded in it.
Because the market is decentralized, it’s the most liquid and largest market in the world. Daily, the average volume of the trade exceeds $5 trillion.
Isn’t that fantastic, huh?
If the stocks in the world were put together, they don’t even come close to that amount.
When you look closely at forex trading, you will find a fantastic opportunity waiting to be explored.
What is Forex Market
Every day approximately $5 trillion is traded in the forex market. Because of this, anyone can buy whatever currency they want, in high volumes as long as the market is open.
The foreign exchange trade happens 24 hours daily, five days a week, that is Monday to Friday.
When the Asia and Australia market opens trading begins, the Europe market follows, and it moves to the USA, it reminds there until the market closes.
During summer and winter, the forex market has a different starting time. It starts on Sunday at 9:00 pm GMT, and stops at 9:00 pm GMT on Friday. And during winter it starts from 10:00 pm to 10:00 pm Accordingly.
Because of the trading time, currencies can be traded at any time, be it night or day. Unlike other markets, where unpredicted situations may lead to the downfall of the market, and would result in traders not been able to trade.
But In the foreign exchange market, you will always trade no matter what the situation or downfall may be.
Forex Trading Basics
In the forex market, the most traded pair is the Euro vs. the American dollar, with EURUSD as its symbol.
The currency you are to sell and buy is called the base, and it’s located at left. While the one at the right is known as the secondary currency, and its the one used during transactions.
When selling the base currency, the price is called bid, and when buying it the price, it is called ask. The difference between the two is called a spread.
A spread represents the amount charged by the broker when opening the position. When a particular currency is traded, that currency spread becomes narrowed. But when it is sold less, the spreads become wider.
Whenever there is a change in currency value, it is called a pip.
When it comes to the online trading world, many terms are used daily. Some of these terms are going short and going long, and this means buying and selling.
A bullish traded is one who speculates when the market will rise, and bearish trader, on the other hand, is the trader that is on the defensive side of the market.
Because of that, the movement of the market is described as a bear market and bull market. The bull is when the trade is rising while the bear is when the deal is falling or decreasing.
When trading, the strategy you want to use, depends on what the market trends are. Make sure to monitor all essential daily events, to help you make the right choice when it comes to trading.
Some years back, you will need to call your broker and tell him the actions. However, you can trade from anywhere in the world with your laptop as long as you use trade software.
As long as you are into online forex trading, it is essential to have your trading strategy.
Can you make money by Trading Forex?
There has always been a debate for some time. The reason many people have ever asked this question is, forex investors over the years have failed to achieve the success they have always wanted.
Because of this, many people have come to ask if online forex trading is a viable investment choice.
To answer the question, can you make money trading forex? Over $5 trillion is traded daily in the forex market; because of this, traders are profiting daily from forex.
If profits were not made, over $5 trillion would not be traded daily, and forex would not be accessible.
The right question to ask is not can you make money with forex trading but instead how to trade forex and regularly profit from it.
Just like other investments, foreign exchange trade has its profitability and risk. Knowing the right way to mitigate the risks involved in trading forex will go a long way to help you to succeed and make money with forex.
Sometimes, some people are carried away by the success of other trades, and then put there own money in the market, without understanding how the market works and how to profit from it.
To make money with forex, it requires you to understand how the market works and the factors that determine if you will succeed and make money with forex.
Forex Trading for Beginners
For a beginner, trading forex is simple. All you need to do is buy a currency at a specific price and sell it when the price is higher in other to make a profit.
It is important to remember that another currency determines the price of a currency. For instance, the amount of a US dollar could be measured as two Canadian dollars, when the exchange rate is precisely two, between the currencies.
Have you traveled overseas before? If yes then you have made forex translation.
Take, for instance, if you travel to London and convert your dollars into British pounds. When this happens, the foreign exchange rate between the two currencies will determine how many pounds you will get. Also, remember the exchange rate always fluctuates.
Conclusion
There is no golden rule for trading forex. But some people want a direct answer to all there forex related questions.The most important thing to remember in this article is, to succeed in forex; you should have a strategy, and your winning trades should be more than your losses.
