FOREX trading is one of the most popular forms of online trading. It doesn’t matter what you do for a living; You can do FOREX trading full time or part-time using the Internet. Forex trading offers opportunity and can generate large amounts of money while substantially reducing risk compared to other investments. You need to have in mind that if you are trading forex as a beginner, there is a lot you need to learn.
And as a beginner, you should be aware of the vast opportunities this exciting market offers. However, before you begin your journey into the world of Forex trading, there are three forex facts you should learn. These are;
- What is the forex market?
- How can you make money from it?
- How can you protect yourself from losses?
There is plenty of information on forex trading online and in stock trading magazines. This information will inform you how the market works, what is going on, who is making money, and how to get in on it yourself. Understanding these facts will help you progress from a beginner to an expert.
What is the forex market?
Forex trading is an exchange of one currency for another. Essentially, a forex trader is a dealer in foreign exchange. When you buy or sell some foreign currency, you speculate whether it will appreciate or depreciate against the dollar (US Dollar). The more specific term for this type of trade is the “foreign exchange market.” Forex currencies are classified into major and minor pairs. Some of the main forex pairs include EUR/USD, USD/GBP, and the minor pair the EUR/JPY and GBP/JPY.
What are some of the factors that influence the forex market?
Forex market factors can be identified in almost every corner of the world, affecting one currency or another. This makes Forex a global market that is open 24 hours a day.
As such, it is imperative to know how to trade Forex. And to do that, you must understand how the forex market works.
There are fundamental factors that affect the price of a currency pair. These are;
- Political stability
- Economic growth rates
- Monetary policies adopted by the central banks of different countries
- Interest rates imposed by the central banks
- Exports and imports made by countries
Understanding Forex Market for Beginners
Forex can be an exciting and potentially profitable market to trade, but it’s important to remember that the Forex market is very different from the stock or futures markets. Here are a few things you need to know about Forex trading before you jump in:
1) Leverage – The leverage in the Forex market is typically much more significant than traditional markets. Some brokers offer leverage up to 1:500 on select products.
2) No Stop Loss Orders – Most brokers do not allow customers to place stop-loss orders in the Forex market. This is because speculators use stop-loss orders and are not technically meant for investment purposes.
3) Margin – Margin requirements are typically much higher in the Forex market than other tradable instruments. Currency markets can change direction quickly, so caution is always advised when trading currencies with any amount of money.
4) Regulations – The Forex markets have been under scrutiny for several years due to risk management and regulatory issues. A few countries have even banned their banks from trading Forex altogether.
5) Trading Times – The Forex markets operate 24 hours a day, five days a week (from Sunday night through Friday morning).
Commonly Used Terms in Forex for Beginners
All the concepts and terminologies used in Forex trading can be overwhelming for beginners.
There are many indicators to learn, terms to remember, and a seemingly endless list of things you need to consider when you place your trades.
Every forex trader needs to know the common forex terminologies. Traders and investors use these terms when they trade in the Forex markets. Here’s a list of common foreign exchange terms and what they mean:
Spot Market – This is where trades are made for cash or for a short time.
Spread: Spread is the difference between the buying and selling rates of a currency. A low spread is desirable because it means you are getting more bang for your buck when trading.
Broker: A broker is an intermediary between a trader and the market. They offer the trading tools, liquidity, and price to trade.
Taker/Maker: A taker takes orders from other traders on an exchange, whereas a maker puts their own on the market.
Long/Short: When you take a long position in something, you expect the price to go up, so you profit when it does. You expect the price to go down with a short position, so you benefit when it does.
Candlestick chart: This type of chart used by technical analysts shows the high, low, and closing prices for a security over a specific period (typically one day).
Trading tips about forex for beginners
You can make money on forex trading. It takes time and patience to learn forex trading, but it is a viable source of income for those willing to put in the work. The following tips will help you avoid costly mistakes that new traders make.
Keep it simple
When you’re just starting in Forex, you should take all of the available lessons and advice that you can get and then narrow them down to a few that suit your specific needs. When it comes time to make a move, keep it simple to execute your plan successfully.
Start with a demo account
If you are a beginner and trading in the currency markets, you should start with a demo account. A demo account will allow you to experiment and learn without risking your hard-earned cash. Most brokers offer free demo accounts, so there is no reason not to take advantage of this opportunity.
Treat it like a real account, but never risk any money you can’t afford to lose.
Be aware of trends
It’s essential to keep an eye on the trends in the world of Forex trading, as this can help you figure out when to buy or sell particular currencies or commodities. If the prices are constantly falling for an extended period, this may indicate that a downward trend is in place, and it’s time to sell what you have. On the other hand, if prices are going up frequently for a long time, this indicates an upward trend and may be an excellent time to consider buying to profit from these gains. Keeping track of the operating cash index will allow you to know when to buy and sell to take advantage of trending patterns.
Use a Mobile Phone
You can now trade on your mobile handset thanks to Metatrader 4 or ‘MT4’, a complete forex trading platform. MT4 provides all the necessary tools and indicators you need to trade successfully.
And if you are trading stocks on MT4, then many indicators can help you analyze price action, such as moving averages and candlesticks. You can use candlesticks to identify possible patterns, such as a pin bar that can signal a reversal in price action.
Forex for beginners can be a great way to make money online. And to get started, your first investment will be defining your trading strategy. You can take many different approaches, and only practice will teach you which method works best for you.
Consistency, patience, and most of all emotional intelligence will help you achieve your goals, don’t overtrade, and never let your fear or impatience influence your trading decisions.