All You Need To Know Before You Start Trading Forex
Forex market is by far the largest financial market in the world with daily turnovers amounting to 4 trillion dollars. The market is open 24 hours a day, five days a week and millions of people all over the world participate in currency exchange on regular basis. With this kind of activity, there are some very interesting opportunities for traders to make money. If you are new to this type of business, but would love to try it out, this article will introduce you to the fundamental principles of foreign exchange and explain what to expect once you start trading.
Trading Forex – All you need to know | Getting started
The first decision you will have to make before you start trading is to choose your broker. Brokers are companies which serve as intermediaries between you and the market, but may even provide you with some helpful advice. There are many elements their offer can have and a lot of them differ when it comes to this. Minimum deposits, leverage rates, payment method and additional features will often be different with different brokers, so you have to check everything out thoroughly to see what fits your needs.
Good brokers often offer ways for new traders to educate themselves through various eBooks, videos and sometimes even webinars. These materials offer more than enough information for any new broker and once you go through that, you can test your knowledge with a demo account which simulates real trading conditions, but with no risk to your own money. Good preparation is extremely important before you start trading for real because it increases you chances for success exponentially.
Trading Forex – All you need to know | Advantages
Because of its immense size, forex market offers some unique possibilities to the traders. First of all, its liquidity is extremely high which means you can count on quickly finding a person to take you up on your proposed trade. People all over the world are trading 24 hours a day and any one of them is your potential partner. This also leads to some very stable prices compared to other markets because the sheer number of traders doesn’t allow speculation or manipulation of any kind. This stability is much appreciated among more experienced traders because it allows for long term planning and much more flexibility with your trading strategies.
Many brokers on the market means that there is a fierce competition among them and each of them will try to get you to open an account with them. This is great for all traders because all costs (deposits, commissions etc) are lowered to their absolute minimum. Beginning your trading career is actually quite cheap, so you can get a lot of value for your money when you’re choosing a broker. Always check what additional features are offered by the brokers and at what price and then compare multiple companies to determine which one is the best for you.
Trading Forex – All you need to know | Important terms
Obviously, if you are completely new to this, some terms and expressions will probably be unknown to you. Leverage is a good example of that because you need it to make some serious money on the market, but if you have never encountered this kind of trading, then you probably have no idea what it means. In short, leverage is a ratio applied to your investment (margin) in order to enable you trading with standard lots. You also have pips, which are fractions of a cent used to show changes in the exchange rates of a given currency pair. Because the pips are too small to offer any real profit, traders use standard lots and leverages to increase the amount of their profit. Then there are shorts and longs which are different types of investments available to the traders and the list just keeps going on and on.
You can check the glossary on our website for more of these terms, but don’t let them discourage you from trading in any way. It’s all part of the learning process needed to become a good trader and once you start researching them, you’ll realize things are indeed very logical and that you can wrap your head around them reasonably quickly.
Trading Forex – All you need to know | Attitude
Be aware that for success in forex trading patience is needed. Since the prices are stable and the volatility of the market is low, there are not too many sudden bursts of asset value which can lead to a quick profit. However, reliability of these prices enables long term planning and some of the prices are so firm that they are sometimes referred to as “value-havens”. There are even some studies that show how those investors who choose lower leverages and are more patient end up with much more money over longer periods of time. Be patient and play it safe and you will eventually end up with a hefty profit.
Trading Forex – All you need to know | Conclusion
In order to be successful, all new traders have to invest at least some time and effort at the beginning of their careers to educate themselves about this particular type of trading. This gives them much better chances to succeed in acquiring profit because they know what to expect and how to deal with it. Once you do that, you will know exactly which style of trading suits you and what kind of broker you want. Don’t let this initial learning effort scare you, because forex market offers plenty of advantages to those who know how to look for them. This market is very firm and stable, the prices don’t change as much as they do in some other forms of trading and you need to know how to take advantage of it. Knowledge, patience and perseverance are the qualities needed for this job and if you have them, all of your efforts will pay off eventually.