Foreign exchange, as you might already know, is the process of changing one currency into another. It might be done for a number of reasons such as trading, commerce, tourism, etc. Currencies are usually traded in pairs.
So, when you go to exchange one currency with another, you can speculate whether a particular currency will rise or fall in its value when calculated against the other. Trade flows, politics, and geographical events influence the value of currencies.
This, in turn, has an impact on the demand for forex. As a result, daily volatility is caused, resulting in newer opportunities for forex traders. If you are a beginner, choosing a forex trading online platform is one of the major steps that can make or break your journey.
As per reports from the Bank of International Settlement, the volume of everyday trading for forex reached around 6.6 trillion dollars in 2019. The forex system has revolutionized the currency exchange market because it helps to create transparency for all the investors involved. It also helps the investors by providing them access to different interbank dealings.
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How Can You Start Trading Forex?
You can follow these simple steps to start your journey with forex. But one thing that I must remind you of is that your learning curve is going to be steep, but that shouldn’t deter you in any way because those who keep at it and are consistent should receive good returns in the long run.
Learn About the Medium
Understanding forex trading is relatively easy. But that being said, it will become easier for you if you have some basic knowledge about the medium. There are numerous online courses available these days, designed especially for beginners. These courses will help you to understand the workings of forex trading in detail.
Setting up a Brokerage Account
For you to start trading, you will first have to open an account at any brokerage. For your information, forex brokers do not charge you anything to open an account. When you are a beginner, it is advisable that you go for a micro-trading account that requires low capital.
Micro trading accounts usually have variable limits of trading. This will allow the brokers to trade with a limit as low as 1,000 units of a specific currency. Such an account will help you understand your own style of forex trading.
Fix a Strategy for Yourself
It is understandable that a trading market cannot be predicted. That being said, having a system will act as a road map for you while trading. Make sure your strategy takes into account the current situation of your finances, the cash amount you can put up, and the risks you are ready to take.
Check Your Position
It is crucial that you check the position you are in every day. Keeping a daily account is necessary as that will remind you of pending positions and also of the amount of cash available to make future trades.
Get Used to These Terms
As a beginner, your first task is to get used to certain terms which are used frequently in the trading market. Before you enter your first trade, understanding these terms will give you a good grasp of the basics of forex trading. Some of these terms are:
- Forex Account – This account will be used to make any currency trades. Depending on the size of the lot, there can be three types of forex account- Micro forex account, Mini forex account, and Standard forex account.
- Ask – It is a term used as a synonym for “offer.” It indicates the lowest price someone is ready to pay to purchase a currency.
- Bear market – This is a market where the prices among the currencies decline. It shows a downtrend in the market. It is usually a result of fundamentally depressing economic situations, such as a natural disaster or financial crisis.
- Bull market – It is a market where the prices increase for each and every currency. It basically signifies an uptrend in the market. It usually happens as a result of good news about the global economy.
These are some of the basic concepts you need to have to start your forex trading journey. Now that you are one step closer to understanding the trading scenario, build your own strategy soon and get on the wagon of trading.