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FOREX TRADING: GENERAL GUIDE
There is a huge variety of business ideas that can be found on almost any financial website on the internet. Most of them promise you a fast, safe, and stable income. For some reason, people do not pay attention to an outdated and familiar business idea, which, in turn, has been helping many people to solve their financial issues.
This is Forex trading. Quite a lot has already been said about the possibilities of this business. However, unlike various other types of income, in this case, you need to be not only a good practitioner but also perfectly know the theory, since Forex is not the kind of earnings in which you can solely count on luck.
The word means "foreign currency exchange." It turns out that trading on Forex is a relatively long-formed international currency market, where world currencies are exchanged every day. The price of these currencies changes every minute, and a lot of money can be made this way.
Now, let's try to figure out the advisability of exchanging one currency for another. Historically, each country has specialized in a particular type of product or service. For this reason, any country in the world is an importer or an exporter. From the school age, many know that exporters export products to other countries, while importers, on the contrary, import. In most cases, imported goods are bought for the currency of the seller's country. Therefore, it is logical to assume that before you buy a product abroad, you need to buy the currency of this country. It turns out that the first reason for the need arising in international currency exchange is precisely the international trade relations between different countries. Trading on Forex makes it possible not only to exchange currency but also to make money on it.
Currently, Forex trading is available to everyone without any special education.
What Is Forex? Its Benefits
Forex is an international exchange platform where the main commodity is currency. The Forex financial market is used to buy and sell currencies at market rates. The market and prices are influenced by a number of factors:
- Interest rates
- The economic growth
- Supply and demand
- Political events
Recently, foreign exchange manipulation in the market has achieved a new, higher level. Transactions are made as a one-time purchase and sale of two currencies. These currencies are called "currency pairs." They consist of the base currency and the quote currency. Among the main advantages of Forex, we can list the following:
- Availability. Transactions on the exchange are carried out every day, except for Saturdays and Sundays. Forex itself is a round-the-clock market, as trading activities do not ever stop.
- No restrictions. The foreign exchange market operates according to the laws of supply and demand. There are no restrictions on trading.
- High variability. This factor can lead to large profits in minutes. Along with this, there are risks that should be taken into account during trading.
- Affordable prices of operations. There are no fees for transactions. There is a market spread (small difference between price and sell). Due to the absence of fees, the cost of transactions is significantly lower compared to other markets.
- The principle of marginality. Due to it, it is possible to trade with small start-up capital. You can open deals for both Sell and Buy. The trading currency is not linked to the deposit currency.
How to Choose a Broker
To get started, you need to choose a broker. Companies provide technical means of trade and information support. There are scammers among Forex brokers. In order not to stumble upon fraud, it is important to take your choice of a broker seriously. Many have opened accounts with Alpari, a reliable company that has existed for over 20 years. Here are the factors to consider when choosing a broker:
- Security. This is the most important criterion. There should be a personal identification procedure, as well as comfortable and reliable conditions for depositing and withdrawing funds.
- Study programs and training accounts. Their presence is a big plus for novice traders.
- Broker reputation and experience. It is important to consider the execution of orders, the year when the broker was founded, and the number of open client accounts.
- Software. For convenience, the ability to use the application on a smartphone is required, but not all brokers provide it.
- Maintenance cost. The percentage of transactions in the market is charged regardless of the success of the transaction. For some brokers, it is no more than 0.005%, while for others, it is about 0.1%. In this case, it is worth discovering what the cost of withdrawing funds is.
- Support. At the very beginning of the journey, it is important to receive timely answers to any questions that arise.
Additionally, before choosing a company, you can familiarize yourself with the rating of Forex brokers. It is compiled based on the results of monthly analytics, taking into account the above criteria.
How to Trade Forex Online
After researching the available brokers and trading strategies, you can proceed to creating a trading account. It resembles a regular debit bank account. The only difference is that the funds in the account can be used to enter the financial market. There are the following types of accounts:
- Demo Forex account (training);
- Cent account. It involves trading small amounts. The monetary unit is a cent;
- "Micro". Trading is carried out in dollars, but the lot size is small. The minimum deposit amount is within the range of $ 500-1000;
- "Standard". This is a classic account for people who have been trading Forex for more than one year and can afford to invest large amounts (about $5,000).
You can start trading from scratch (with a demo account). Before opening a regular account, it is recommended to practice for several weeks or months, and only then trade with real money, entering the real market. The amount can be anything. Many people decide to open a cent account with a $100 deposit.
Possible Dummy Mistakes
Do not assume that you can get rich in a few days without any effort in Forex. Many beginners make mistakes due to increased risks, inability to accept losses, and close unprofitable positions in a timely manner. Income from trading directly depends on discipline and the ability to follow the strategy. You should not start trading without theoretical training.