Hello, world! So, each of us would yell when the Internet appeared! And the internet brought us forex. The rest is in this post.
Let’s see what is Forex trading. Well, some can say that it is basic stuff and belongs to ancient times. Lucky you, if you are one of them. Opposed to the majority of forex participants, ordinary people don’t know what the ForEx exactly is.
So, let try to explain it. This article is for you who don’t know what Forex is.
A word – the internet. It is crucial. But, it isn’t quite true. In this endeavor, in trying to explain what is a forex, we should start from the beginning. If you have traveled, you probably already have a forex trading experience.
What? When? When you buy the currency of your destination country while paying with your own currency.
That is forex trading. The world of trading.
It is basically about Forex trading: Forex traders buy and sell currencies for profit or to protect investments. The forex market is the world’s largest financial market. And since trading is between market participants, there is no “open” or “close” of the market except on weekends.
Some opportunities present themselves to people who keep up with news and events, while others require patient analysis. You might like trading the major currency pair or even you might have knowledge about the exotic currencies.
Traders create their own power and decisions to their trading and, over time, build their own trading style.
That is one of the advantages of Forex. Even more, you can sit in front of your computer but, at the same time, you are present all over the world. The forex market, or simply the FX market is the most traded on the financial market in the world. Some like to think of the forex market as the “Big Kahuna” of financial markets. The forex market is, from a certain point of view, a crossroad for international capital. The intersection through which global commercial and investment flows must move.
This is the place where all international trade flows. Let’s break down the Forex trading!
What is Forex trading?
It is similar to your vacation pocket money. Forex trading always involves two currencies. The base currency is the one you are buying or selling, and its price is given in the quote currency:
Base currency/Quote currency
One Euro costs $1.136512 (the date is December 12, 2018, in my example).
This is the point where trading begins.
Let’s say that you believe the EUR will rise in value relative to the USD. You buy EUR 100,000, paying $136,512 from your trading account. And the EUR indeed rises a great deal, to 1.500000 at the end of the day. Therefore, when you close your position by selling the EUR 100,000, you receive $150,000 earning $13,488. What do you think?
This is impossible? Well, yes and no.
Is possible to earn a lot in Forex trading?
Of course, this kind of price jumping is pretty impossible. But smaller rises are very possible. Maybe not in the case above, but on some other currency. You might ask, where can you get $136,512 n the first place? The answer might be that you have $3,000 in your trading account and your broker enables you to borrow $100 for each US dollars in your account.
That is margin, 100:1. With this margin, you can enter forex positions with values of up to $300,000. But, what happens if the Euros didn’t rise? And instead, it fell to 1.050000 at the end of the day?
Therefore, when you close your position by selling the EUR 100,000, you receive $105,000. Well, you lost $31,512.
How to access to Forex market?
You access this market using a trading platform provided by a broker. Most of the investors can trade Forex with the proprietary platform Advanced Trader or with the popular MetaTrader 4 or 5. Or some other platform, as the broker can develop their own software.
When you have selected your trading platform, familiarize yourself with the available spreads and tools.
You’ll have to find some trustworthy broker that has a free demo account. That enables you to try everything using virtual money. Try the charts and indicators, and explore orders, which are automatic trades based on your expectations, used to open or close positions at predefined price points.
What to pay attention to in the Forex trading?
There is one thing you have to be aware of. We, in Traders Paradise, have some suggestions for you.
Trading Forex can be extremely risky. However, you can take precautions to try to minimize those risks and their impact. In forex, there are three important skills you must develop to help you manage your trading risk. That is: analyzing, anticipating, planning In the first place, you have to protect your account with stops, limits, and other order types.
There are a number of order types, such as the trailing stop, if/then, and order cancels.
Set the proper levels
Some could say that setting a stop is an art and they are probably right. But you need to be sure that your stop is set. So that your trade can handle smaller jumps and drops in price while protecting you from loss if the market doesn’t go your way. A stop that’s too tight could lead you to reenter the market. That could cause you to get stopped out again.
That may cause more damage to your account balance than if you entered a stop that was too wide or if you had no stop at all. You must know how to handle your emotions. Sometimes, your mindset at the time can cause more damage than research you didn’t do.
You are a trader, so try to stay objective and calm. Even if you have a losing trade, resist the urge to enter another trade outside of your trading plan. Never attempt to win your earnings back.