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How to Trade Forex

What is Forex trading?

Forex is shorthand for foreign exchange. What you are trading is currency, speculating on one nation’s currency against the value of another with the aim of making a profit as they fluctuate. If the US Dollar is expected to becoming stronger against the Euro, you could buy Dollars at the current lower price, and make a profit by selling once it gains against the price of the Euro. The changing exchange rate between two currencies is what allows you to make a potential profit. Some of the most common pairs of currency to trade are the US Dollar (USD) vs Canadian Dollar (CAD), USD vs Euro (EUR), EUR vs Great British Pound (GBP), USD vs GBP, and EUR vs Japanese Yen (JPY). However, you can pair many other combinations, all of which will be available via your online broker.

I’m really busy, how can I find time for Forex trading?

Currency trading’s greatest asset is its ease of use, and the plethora of platforms and 24/7 nature of the market make trading simple to do in one’s spare time. The liquidity of the market makes it easy to conduct trades whenever you have a free moment, whether that may be over lunch or in the evening after work. You can enter and exit a position within seconds, and most reputable trading platforms help you to make smart decisions quickly.

I don’t have a lot of money – how can I start?

The liquidity of the Forex market means that brokers can offer a large amount of leverage. This, in turn, means that individuals can enter the market and control large positions with relatively little money. This ease of entry is what makes currency trading so attractive to people who may not have the funds required for productive stock trading; you can enter the market with as little as US$50. Most reputable brokers have practice accounts, with which you can learn the ropes without any risk at all, and many also allow traders to open accounts with very little money. This allows beginners with low funds to begin trading and learn through constant practice. However, traders should still understand how leverage works and be cautious with it; mistakes mean large losses so becoming familiar with the risks and benefits is crucial. Make sure to use your chosen online broker’s training videos and support systems so that you understand the process and risks.

I don’t think I know enough to do well. How can I become more experienced?

Online brokers and trading platforms make it as easy as possible for beginners to learn the ropes and allow very low minimums to get started. You can also begin with practice accounts using virtual money, called demo accounts, in order to learn via regular practice and steadily improve before putting your own money into an account. This is an advisable route for all beginners; become familiar with the trading platform and the technical aspects of trading before you start making trades with your hard-earned cash. Reputable brokers have 24-hour online support, with experts available to offer advice and answer questions. Anyone can learn to trade well – put in a bit of extra time to ensure you don’t blindly enter trades. What will also help you tremendously is to learn commonly used terms as quickly as possible – PIPs, Base Currency, Quote Currency and Currency Pairs are all terms that your broker should have laid out in an easy-to-learn fashion.

Some trading platforms can appear intimidating, with plenty of charts, numbers, and graphs that may look too complicated at first glance. Don’t let this scare you; the best platforms and brokers will have good training videos, tutorials and online support to help you understand what everything means. The learning curve only looks steep, but you will become comfortable with the layouts quicker than you think.

Where do I make trades?

There is no centralized market for trading currency, as there is for the stock market. You can trade from your mobile phone or a laptop, wherever you have access to the internet as long as you have software to access the markets – popular software is MetaTrader4 (free) and JForex.  Reliable online forex brokers also have mobile apps and signals delivered by text message, making quick trades possible from any location at any time.

How can I improve my trading skills?

Choose a broker that has a lot of training material available, through videos, FAQs, demo accounts, live support, and online tutorials.  If the broker is going to give you free forex signals, then this will give you guidance so you don’t need to jump straight into technical analysis.  The only way to become an expert is to utilize the available tools and to practice. The wide availability of reliable learning tools makes it possible for anyone to learn how to trade effectively and avoid large losses. As you improve, brokers also offer escalating accounts with added benefits and perks. All of this helps to make you increase your profits and decrease losses.