How to Trade Forex
Forex is what is widely known as foreign currency and exchange which is the process of exchanging one currency for another for a variety of reasons such as in commerce, trading, or tourism. With nearly $6 trillion turnover each day, on a 24/5 basis, the forex market is the most liquid market with the highest volatility. Learning how to trade forex is a rather daunting process, so Forex Trading Factory has broken forex trading down into some basic components to help you get started.
Basic components of forex trading
Forex trading market
Learning how to trade forex involves knowing what the forex trading market is. The foreign exchange market is where currencies are traded, and one needs to understand that currencies are important to most people worldwide as they need to be exchanged in order to conduct a foreign trade or business. What makes this market unique is that there is no central marketplace to make the exchange. Instead, trading of currencies is conducted electronically over-the-counter (OTC), meaning that everybody around the world can do it via their computers rather than on a centralised exchange.
How to buy forex
Once you step into the forex world it is important to know how to buy forex. You can do so in a few simple steps. Firstly, you need to select a currency pair, then you need to analyse the market, read the quote carefully, pick your position, either buy or sell position, enter it, and finally start trading. Following all of the above is vital when making your first trade. Skipping one may result in less successful trades. However, following them all does not necessarily mean that your trades will be successful as there are always risks involved.
Forex currencies
One of the initial steps in understanding the forex market, which as already mentioned is also known as foreign exchange or currency trading, is to be aware of the most commonly traded currencies. Some these are: the USD, the EUR, the JPY, the GBP, the CAD, and the CHF. Each currency pair has specific features that impact its underlying value and price direction compared to other currencies in the forex market. Understanding the factors that affect the currencies’ value is key step in mastering forex trading.
Forex exchange
Foreign Exchange, also known as forex or FX, is the trading of one currency for another. For instance, when travelling in a foreign country one can exchange the USD for the EUR at a local bank. Foreign exchange transactions occur in the foreign exchange market which defines the value, or exchange rate, of most of the currencies. It is important to note that currencies are traded in pairs and there will always be a price associated with each pair.
Steps in trading forex
There are a few easy steps to follow to start trading forex. These include deciding how you want to trade forex, (i.e. via a broker), learning how the forex market works and opening an account. Once you do that you will need a solid trading plan in place which can be achieved through choosing your forex trading platform. Last but not least, your will need to open, monitor and close your first position. Learning how to trade forex is not easy. However, Forextradingfactory gives you a useful guide on how to do so with less difficulty.