Forex or foreign exchange market also known Forex Trading market is the largest and the most liquid market in the world, traders include Governments and central government, banks or other business investors and financial institutions, currency speculators, other commercial corporations and individuals, retail forex traders. Each day, more than 4 trillion dollars are been exchanged.
Forex Trading involves a market where traders come to trade currencies, it is the buying and selling of currencies at determined prices. I bet you getting a little confused on the buying and selling of currencies, well don’t be because I am here to break it down. The first thing you need to know is that to make money you have to use the money, you have to be ready to go through risk.
Buying and Selling Currency in Forex Trading
The more money you use to purchase currency, the more money you can make. You probably understand that you have to buy and sell currencies in Forex Trading. However, more importantly, you have to invest in yourself. In Forex Trading, you’re effectively borrowing the first currency in the pair to buy or sell the second currency.
Forex traders exchange currencies based on their expectations, they take a look at the economy and predict a fall or rise in the value of money, and then if there is going to be an increase in the value of currency, they buy it and if there is going be a decrease in the value of currency they already have, they can quickly sell it, it is like betting on the value of currency against another. A single pound on Monday could get you 1.19 euros. On Tuesday, 1.20 euros. This tiny change may not seem like a big deal, but think of it on a bigger scale.
For example you hear on news that there is going to be a devalue in US dollars and you think there will be a rise in EURO, you can buy the EUR/USD currency per low and then sell it at a higher price to make profit, If the trade moves in your favor (or against you), then, once you cover the spread, you could make a profit (or loss) on your trade.
In Forex Trading, most Forex traders focus on the 4 major currency pairs (i.e. EUR/USD, USD/JPY, GBP/USD and USD/CHF) it is clear that currency trading is easier to follow. Forex traders are more focused on staying up to date on the economic and political news of the countries in question so that they can know which currency to trade.
HOW TO BE A SUCCESSFUL FOREX TRADER
It takes a lot of training to master Forex Trading, patience and experience to become a successful trader, all successful trader have perseverance, good behavior, and knowledge. The Forex Trading market has become one of the most in-demand markets for investors, money managers and those who want to increase their income. However, it takes a lot of experience, time and risk management to become a professional trader and avoid losing money.
To be a successful trader you must first learn how to control your feelings to the Forex Trading market in case of any losses during trading, you should always be prepared for otherwise, you will lose your money sooner or later from being so greedy or being so hesitant. So remember, always stop yourself from falling prey to your emotions, and always be focused.
Every successful business in the industry has lost money at one point or another. In Forex Trading Beginners are usually advised to have this in mind. However, even if you are ready to lose some money, be cautious about it. Always do a lot of research before investing in any Forex trend by weighing up the pros and cons of the trade.
Rules in Forex Trading
- Always ask questions from people who are more experienced and if you also have friends who also invest, ask them what they are doing, and why they are doing that, or you can get a professional Forex trader to train you on how to best go about Forex Trading. There are very many trainers who advertise their services online and always sure to make informed choices at all times.
- Secondly, the charts you see of pairs are highly unpredictable so you should try to learn the language so you can react to any outcome. For an instant, you will see that EUR/USD reacts totally different in comparison to that of the JPY/USD.
- Thirdly, do not start your Forex Trading with thought that you are going to quickly get rich, try to understand the Forex Trading very well because it takes a lot of time, focused to get to the top you just have to be determined, and always be aware of what is happening in the Forex Trading market.
- Fourthly, don’t be self-controlling, do not over trade and over leverage your Forex Trading account. Leverage is a double-edged sword and make you gain a lot of money or lose a lot of money
News Effects on Forex trading Market
Even if the news affects the common currency between these two pairs (USD), each chart will respond in a different manner and with different volatility. So it’s not just with fundamental factors or technical analysis that we get a grasp of the market; it’s much more like you are learning an artificial intelligence language.
The main point which you should understand to be a successful trader is that you should not depend only on fundamental or technical analysis. You should use both when considering pair behavior and the suitable style of Forex Trading that fits you and this pair. Eventually, you will work out a strategy for each pair and get what you seek from each opportunity you see in the Forex Trading market. This takes a lot of effort but all you have to do is to master this ability and be a professional.
KEY FOREX TRADING TERMS
There some terms used in Forex Trading
PIP meaning “percentage in point” which can also be referred to as “point” it is equal to the minimum price increase of a Forex trading rate. The most common pip is 0.0001
It is the market price that always consists of 2 figures, the first figure is the bid which is the selling price, and the second the ask price which is the buying price.
The ask price is the price you can buy a currency at and also the price the market is ready to sell currency to you at. It is the price visibility at the right side of a quote. It is also known as the offer price,
The bid price is the price you can sell a currency pair at for this particular currency. Bid price is always lower than the ask price. And the difference between the ask and bid price is the spread
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