Forex Trading – How to Trade Forex?
Most brokers don’t just allow traders to place trades on commodities, indices, and stocks as you will find that you can trade major currencies in the Foreign Exchange market or Forex as well. Trading in Forex along with your standard Binary Options activities may prove to be beneficial in making a substantial return on your investments. However, if you are new to trading in Forex and how it works, and how to operate its trading platform, the following would give you an idea that may provide insight and prepare you to start trading in Forex.
What is Forex trading?
The Foreign Exchange market, Forex, or even just FX is a decentralized market where participants can exchange currencies. Forex trading involves the simultaneous buying and selling of a base currency for quote currency.
Whether you were aware of it or not, the chances are that you have had taken part in Forex. An example would be if you were ever to go on holiday to a different country and exchanged your money for its currency that action would be considered as taking part in Forex.
However, trading physical currencies can prove to be very expensive as the transaction would also be liable to fees that would more than likely put a dent to any potential profit you would make.
But when you start trading Forex through a broker online, you aren’t precisely buying the physical currency; instead, you are merely placing a wager on whether the currency pair that you’ve chosen would move in the direction you have predicted to their respective values over a while.
How to start trading in Forex
The first step to start trading in the Forex market would be to open a trading account with a Forex broker online. Most Forex brokers have their own set of signup requirements and procedures, so choosing one would need some research prior. Once you have signed in, you will be taken to the broker’s online trading platform. From here, you may opt to trade through a free demo account where you can trade with simulated funds that can’t be withdrawn. This creates a no-risk environment as you to understand and test the trading platform’s function and features.
Of course, if you wish to start trading with real money, a few additional requirements would be needed. Usually, the first thing would be to make an initial deposit into the trading account. Sometimes, most Forex brokers offer bonuses to first-time depositors which you could consider claiming to lock in additional trading value.
After you have made the initial deposit, you will now be able to start trading with real money in a real trading environment where winning trades and financial gains will be yours to keep.
When you trade in the Forex market, you have to pair up any two currencies to set it up. All Forex brokers allow traders to pair up any two existing currencies, with some even extending their lineup to cryptocurrencies such as Bitcoin and Ethereum if you wish to go in that direction.
A fundamental aspect of trading in Forex you’ll soon notice is the currency pair. An example of a currency pair would be USD/EUR where “USD” is the US Dollar, and EUR is the Euro. The currency on the left (which is USD in this example) is the base currency, and the one on the right (which is EUR in this example) is the quote currency. Your actions based on the base currency will result in the quote currency where the activities would either by “buy” or “sell.” In this scenario, “buying” the USD/EUR pair, you will buy the Euro in exchange for the Dollar and “selling” the USD/EUR pair, you will sell the US Dollar in exchange for the Euro.
The decision of what to do with this pair is up to the trader and how he perceives market movement, how the currencies’ exchange rates would change, and how to act upon it in the future. To do so, an appropriate amount of research must be done. Much like Binary Options trading, there will be plenty of reasons that will move the value of the currencies, and there will be a lot of resources online that can help you master the art of profiting out of these movements and how to spot them.
With all that said; hopefully, you now know what the Forex market is, how it works, and how to start trading in it. Remember that it is recommended to gain valuable experience in trading through a demo trading account before switching to purchasing with real money later once you familiarize yourself with the trading platform’s functions.