If you have a plan to start Forex trading then this the article you need to read. This is because it acts as a guide on how to go about this market successfully. With a turnover of over one trillion dollars per day, Forex trading is among the largest markets in the world. It involves currency pair trading by several participants from insurance banks, large investment banks and individuals. Just like any other market platform, it has people with diverse experiences from top-notch traders to amateur traders. Currency trading is flexible and it allows for 24-hour trading from any part of the word. As a beginner, follow the following steps?
Step 1: Familiarize with Forex Trading Basics
1. Learn basic Forex terminology
a. Base currency: This is the currency one is holding or spending.
b. Quote currency: This is the currency one is going to buy.
c. Exchange rate: This informs you how much to spend in quote currency to buy base currency.
d. Long position: It implies that you need to purchase the base currency and sell the quote currency.
e. Short position: Implies that you need to purchase the quote currency and sell the base currency.
f. Bid price: This is the price at which the broker is willing to purchase or buy the base currency you are holding.
g. Ask price: It is the price at which the broker sells the base currency in exchange for the quote currency. always, the ask price is higher than the bid price.
h. Spread: This refers to the difference between the ask price and the bid price.
i. Pip: This is the least measurable value of currency-movement. A single pip is equivalent to 1/100th of one per cent of your currency. If the USD, for instance, rises by a pip, this implies it rose in value by $0.0001. If your EUR/USD trade shifts from 1.546 to 1.547 for instance, then your currency value has risen by 10 tips
2. Note a Forex quote
Read the 2 numbers on a Forex quote. These two are the ask price on the right and the bid price on the left.
3. Choose the currency to buy and sell
In order to make an informed decision and ensure that you get profit at the end of the day, there are several thongs you need to take into consideration. These include a country’s economic reports, the nature of politics and a country’s trading position. These will help you predict the economy, therefore, make a wise decision in regards to the currency to buy and sell.
4. Learn the way of calculating profits
The parameters used to calculate profits are the exchange rate and the pip. In order to establish the amount your account has decreased or increased in, you multiply the exchange rate by the number of pips that have been changed.
Step 2: Open an Online Forex Brokerage Account
1. Choose a broker
Before beginning Forex trading, you need need to get a brokerage firm that will make you make trades. Many of them also offer extra financial services. The kind of broker you choose will greatly affect your success in this industry and hence you need to be very serious when looking for one. You need to consider its track record and the years of experience, the number of products it offers and the reviews.
It is also very crucial to ensure that it is regulated by an oversight body for guaranteed transparency and honesty. These oversight bodies include the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) in the United States, Financial Conduct Authority (FCA) in the United Kingdom, Australian Securities and Investment Commission (ASIC) in Australia and Swiss Federal Banking Commission (SFBC) in Switzerland
2. Open and activate your account
One can open a managed account or a personal account in one of best forex brokers. managed account means that the broker executes trades for you while for a personal account, you execute them yourself. The next move is to do do the paperwork. The PDF file form can be sent to you by email or alternatively, you can download it.
Finally, activate your account. Normally, you will receive an email with the account activation link from your broker. Click on this link and follow all instructions to get to get started.
Step 3: Begin Trading
Trading involves analyzing the market, determining your margin, placing your order and finally watching your profit and loss. The technical analysis, fundamental analysis and sentiment analysis are the different methods to analyze the currency market. The orders that a trader can place include stop orders, limit orders and market orders.
Forex trading is a lucrative undertaking and is fairly easy to begin as you have noted. The above steps are enough to make you a pro in this industry, therefore, note each one of them seriously.