Fx or foreign exchange is a venture known to stack up to $5 trillion each day, and this number seems to be far ahead of the $22.4 billion yield which securities market trades. The entire venture despite being volatile is also quite exciting for money making. All you need to do is learn about its fundamentals, predict the market using its market analysis tools keeping a cool head and of course, be persistent. This article will tell you facts about how to start forex trading.
So new traders interested in the venture, refer to it closely.
Step 1: how to start forex trading is to understand it properly?
Start off by being familiar with the basic terminologies. Find a good fx educating web site or purchase a book which has detailed explanation along with suitable examples regarding:
- What is fx?
- Factors which influence it
- Base currency
- Exchange rate
- Quote currency
- Long and short position
- Ask price and bid price
- Currencies and its characteristics
- Its spreads
- Fx brokers
- The recommended trading hours
- Best platforms
- Know how about percentage in point
- Order placement (how to purchase and bid)
- Order types
- Ways to read charts like candlestick pattern and Price Action Chart
- Knowing Lot
- Fx quotes and knowing how to read it
- Understanding fundamental and technical market analysis, both theory wise and through some practical experimentations.
If you desire to know the ways of how to start forex trading, being clear with these listed aspects are of utmost importance.
Step 2: how to start forex trade is deciding on what pair you want to trade and when?
Some of the popular pairs which are traded on a regular basis are EUD/US dollar, GBP/US dollar, US dollar/JPY, AUD/US dollar, NZD/US dollar and so on.
Experts say that trading in the middle of the week is always considered to be the best time. The reason being that most of the action happens on Tuesday, Wednesday and Thursday.
Friday is also quite busy but only until 12 p.m. EST and at 5 p.m. EST and the market shuts down. Most exponents consider it to be their half day.
As for the trading, time exponent of currency says that trading in late ASIAN, US or early European sessions namely- 7 p.m. - 11 a.m. The UK and 2 p.m.- 6 a.m. The US are the best sessions.
- Since you are now familiar with all fx fundaments theory wise, you can start to make predictions about the economy.
Example: If you have a firm which believes that the US market will weaken and that it will prove to be bad for US dollar, then it is a clear indication that you should bid your dollar for the currency of another country.
- Next, check for the trading position of a country
Example: In a nation, if you find that there are numerous goods which are high on demand, then the basics of an economy state that the nation will try to export those commodities to foreign countries to acquire a good amount of yields. An advantageous trading will lead to boosting up its economy and as a result its currency value.
- Do not leave out political factors
Example: If elections are undergoing in some country, and if the victor is a candidate who has a stable monetary plan, then the value of the country’s currency will experience an upsurge.
The same can be seen if the government officials decide to loosen the regulations of their economy.
- Go through the latest news and economic occurrences which are taking place
Analyse GDP reports and following news related to inflation, employment etc. as they highly influence the value of currencies.
Step 3: in how to start forex trade is learning the proper techniques of calculating profits
Let’s explain this with the help of an example
- In simple words, a Pip is a measure of the difference between the varied values of a currency.
- 1 Pip measures about 0.0001 variations of a currency value.
- If your currency pair says, GBP/US dollar and its trade shifts from 1.456 to 1.457, it means that its value has increased by 10 percentage in point.
- On multiplying the no. of percentage in point which your account saw changed with the figure obtained will tell you about the increase or decrease of currency value.
Step 4: in how to start forex trading is finding out the right fx broker
With a huge number of fx traders available over the World Wide Web, finding out which one is trustworthy and which one is not, can be quite daunting. This is a crucial step regarding how to start play forex, and so you should maintain extreme caution when hunting one down
Here are some considerations which you as a currency trader-wannabe ought to keep in mind.
- Search for brokers who ask for least amount of deposit.
- Check the leverage margin which they are offering.
- Check out the least contract size with which you can do your trade.
- Check their trading methodologies, their platforms and also the adequacy of their fx mechanisms.
- Find out how good the customer care service is.
- Examine the type of deposit and withdrawal which the broker allows.
- Check for their terms and conditions and also if there are any bonuses offered by them.
- Check their official website and also the customer feedback. This will give you an idea of the efficiency of the broker and whether they are dedicated towards their clients or not.
- Last but most importantly check whether the broker is regulated or not.
The list of regulations which you should eyeball when selecting a broker’s regulations is listed below:
CFTC – Commodity Future Trading Commission and NFA for US brokers
ASIC – Australian Securities and Investment Commission for brokers Down-Unde
FCA – Financial Conduct Authority for UK brokers
SFBC- Swiss Federal Banking Commission for Switzerland brokers
Check for the rest of the regulatory bodies which legalize brokers in different countries.
Step 5: in how to start forex is opening a fx trading account and practice
Safe to say, you will find numerous top rated websites which allow you to open a trading account. This, as per the opinion of experts, is the best and simplest way to learn how to start forex. The environment is very similar to real trading and you even get artificial cash for your trades.
You can familiarize yourself with all the latest fx mechanisms and also get an idea of how the market functions and also the things which you have to notice when you go live.
As you practice with an account, you will also come to know about your strategy as well as the market trading approach namely fundamental or technical analysis.
While practicing with an account, another important thing to note regarding how to start forex is defining your margins.
Example - When trading with $200,000 units at say 1% margin, your selected broker will ask you deposit about $2,000 cash in your fx account. Profits and losses will be added or deducted respectively from that account money.
An expert’s tip - It is advisable to always invest 2% of your money in a specific currency order.
Keep practicing with an account till the point you develop a healthy habit and familiarize yourself trading and its strategies. Confidence and sticking to the trading strategy which works best for you are the keys.
Your emotions should be kept aside. Also, you will face lots of ups and downs so be patient as you will get profits. Just give it some time. Now you know ways for how to start forex trading. Hopefully, the information shared was enlightening enough.