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If you are new to Forex trading, then there are a number of pointers you need to remember to ensure that you trade only on the right currencies.
Through the course of this guide we will detail: what Forex is, how it works, how to trade successfully… essentially everything you need to know to make your transition into Forex trading every bit of the success you want it to be.
Short for the ‘Foreign Exchange Market’, Forex trading is all about buying and selling currencies. Over $3.2 trillion exchanges hands every day, making it one of the largest financial markets in the world.
No other market can confidently say that they trade currencies 24 hours a day. Offered through a singular global network, the accumulation of the US, Australia, New Zealand, Hong Kong, Singapore and the UK ensures that the Forex market continues trading 24/7.
For one of two reasons:
Although 85% of daily transactions involve trading with the Australian dollar, the British pound, the Canadian dollar, the Japanese Yen, the Swiss Franc and the US dollar, you can choose to trade on any of the following currency pairs:
What you will often see on the Forex market is 2 numbers i.e. 115.37/115.40.
Now when USD’S, EUR’s etc get involved it gets a bit more complicated. To explain it in its most simplest terms, lets use the following example of USD (1)/JYP (115).
Here USD represents the base currency (which is always 1), whilst the 115 for the JPY stands for the amount of Yen needed to equal one US dollar. With us so far?
Using this example should the currency quote go up it means the dollar has appreciated in value and if it has goes down, then the opposite has occurred.
With most platforms you will come across 2 specific routes: Forex Fundamental analysis and Forex Technical analysis.
It is true that when it comes to the Forex market you need to be aware of what is happening around you. Why? Because currency pairs are seriously influenced by supply and demand in reflection of:
Your goal as a trader is to use this information to help spot which currency will rise/fall in value against another and make a bid.
You can go either way. On the one hand you can choose to bid on a currency which you think will rise in value, whilst on the other you can bid on a currency which you think will fall.
It is easy to get confused with leverages as they play an important role in your trading strategy.
First of all, should you choose to trade with $100, you will not receive $100 worth of that currency. Instead this figure will be multiplied by a leverage that will give you sums of up to $40,000.
Now this isn’t real money that you can take away straight away. The key to leverage's is understanding the profit percentages you will receive when the currency fluctuates and moves in your desired direction.
Important points to remember…
There is a lot to take in when you are first starting out on the Forex trading market, and it won’t be easy becoming as profitable as the top traders you see on the web (well, not straight away).
To be a success you need to be prepared to put in a lot of work as well as ensure that you remain dedicated, disciplined and committed to expanding your knowledge base in money management.
That is why we thoroughly recommend that you first sign up to a course; read tonnes of eBooks, research your platforms and the background of your broker first before you sign, and open a demo account.
It is important that when you take that first step to trading you are 100% confident that your trading strategies will work. Practice, practice, practice… before you begin trading with real money.
To help, here are a few quick reminders:
Top Trading Tips
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Remember if you're new to FOREX to use one of the demo accounts to learn how that software works and familiarise yourself with the market. FOREX trading can involve significant financial risk even for experienced traders.