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Forex, FX or Foreign Exchange is a currency trading system where you buy one currency while selling another currency at the same time. The trade is run in exchange at the over-the-counter market. Unlike the stock market or the futures market, there is no centralized location where forex trading is done. Electronic network and telephonic communication is the primary way to trade currencies. Forex trading is a highly profitable business proposition.
Daily, millions of dollars change hands and most of the time forex traders earn profit for ‘speculation’. Being the most traded market in the world, the daily average turnover of forex is 3.2 trillion USD. For beginners in forex trading, you have to acquaint yourself with certain systems and manners in which trading is conducted. Here is what you need to know:
- Your first step would be to choose a successful forex broker. Every trader has its own criteria for choosing a broker. Moreover, every trader has its own way of working with forex so you need to make sure that you understand the broker’s methodologies before signing with him.
- Your second step is to open a demo account with the broker. Every established broker will offer a minimum 30 days trial account for a new forex trader. In this trial period, you have access to understand the forex market and also explore it with play money. You don’t invest anything and you do not make any profits in this trial period. If you wish to continue after trial period, you have to invest real money. Basically, the trial demo account helps you to get a grip on forex trading.
- Your third step is to practice reading forex charts. Forex systems and software is largely automated these days so you may not feel the need to learn reading charts but in the long run, it will prove beneficial for you. You have to learn to read charts with different time frames and different kinds of forex charts. Charts with shorter time frame will let you know market movement minute-by-minute; and charts with longer time frame will let you know market movement over longer market changes.
- Your fourth step is to learn about market leverage. Forex trading is always carried out using leverage. You can earn more profits if you can use market leverage better. Your forex broker can give you market leverage anywhere between 50:1 ratio and 400:1 ratio. You need to understand leverage concepts before you invest real money in this trade. To this purpose, you can utilize the demo account best.
- After you have acquainted yourself with forex trade and its core concepts, your fifth step is to make the first live trade. It is common to feel all nervous and excited at the same time. Use the technical knowledge you learnt in demo account practice and invest the first time with real caution.
These points may seem a bit too much for a first time forex trader but there are thousands of videos and tutorials out there to make your first step into forex smooth.