Foreign currency exchange or Forex can be a productive and profitable venture. This can happen only if you know very well how you must trade Forex. Just like any business you pursue, you need to start by understanding the basic concepts of Forex trading.
Knowing about Forex is actually simpler than what novices think. There are many resources available on the web where you will find materials that teach about trading Forex.
Basic education. This comes without the need to mention. You would need to at least know the basic concepts of Forex trading before you can actually participate in it. Some of these concepts on Forex trading are:
• Trading hours. Forex is a virtual global market that is not limited by the geographical borders. Market hours in various locations may overlap with one another. One market may close in one location, but there will always be open markets elsewhere. Remember, though, that the market will always be closed during weekends starting from Friday at 21:00 GMT up to Sunday at 21:00 GMT.
• Trading pairs. A pair refers to the two kinds of currencies you are trading with each other. A trader, you can buy/sell the first currency (base currency) through the second one (quote currency).
• Leverage. It refers to the load given by the broker to the trader that helps the latter in trading higher volumes. Your leverage can be calculated by multiplying your desired amount to make by the leverage provided by the broker.
Practice. Just like in any field of study, you would need to be able to put into practice all that you have learned. In Forex trading, this is just very important. You first need to get the feeling of being a trader, using demo accounts, before actually participating in real trades. Demo accounts are offered for beginner traders to set up so that they can use a simulated environment on trading currencies. These demo accounts are typically free of charge. You can use the simulated trading accounts as long as you like until you feel comfortable with the market and your own trading approach.
Actual Trading. After using demo accounts to practice your knowledge and skills, you should then open your own live market account. In here, you can expect of trading the real thing, with your money being put on the line for investment. This is where you will need to be really cautious and mindful about what you are doing. There are wins and there are also losses, but if you will follow some tips from experts, you will definitely have a better time trading and exchanging currencies to earn money. Below are some guiding tips you can follow.
• You need to know what your needs and risk tolerance are. Carefully study and assess your personal goals in participating in this market.
• You have to create a plan for the goals you want to achieve. When you have determined what you want to achieve by trading Forex, then work out a plan for it. You need to have a timeframe and backup plan.
• Carefully choose your broker. You could work hard and seriously in trading, but if your broker is unreliable and fraud, then all your efforts will be wasted. Know the kinds of client a broker wants to work with.
Determine if the software used actually meets your needs and expectations. The customer support service of the broker must also be excellent.