Forex trading is the largest financial market in the world frequented by major banks, central banks, currency speculators, multinationals, governments, institutions and other financial markets. The average daily trade in global Forex and related markets is currently more than $3 trillion.
Basic knowledge of the forex market
The market
The forex (FX) market is considered the most significant market globally, with a turnover of more than $3 trillion per day.
Participants in this market are central and commercial banks, corporations, institutional investors, hedge funds and individuals like you.
What happens in the market?
It’s a place where you buy or sell. An excellent example in the forex market is buying euros with US dollars or selling Japanese yen for Canadian dollars. Forex trading is the use of one currency to buy or sell another.
Of course, you don’t need to buy or sell real physical currency: you trade and work with the base currency and it’s any currency pair you want.
“Leverage” is an advantage when trading forex.
In forex trading, the term leverage is used when an investor uses a small amount of money to open a trade with a larger amount. Using a $1,000 to buy a Forex contract with a value of $100,000 is “exploiting” a 1:100 ratio. Invest $1,000 and you can lose the entire amount. But the profit earned can be more than $1000 of starting capital many times.
How to profit from forex trading?
To be profitable, you need to take advantage of market fluctuations when trading forex. Unlike stock investing, where you need to buy stocks, forex trading does not require physical currencies. Open an exchange to buy or sell currency pairs in forex and look for the difference while opening and closing an order.
The forex market fluctuates regularly every day, usually around 1%. When using leverage, that rate of volatility is multiplied several times to several hundred times.
How risky is forex trading?
You can’t lose more than your initial investment (also known as “margin”). The profit you can make is unlimited, but you can never lose more than your deposit. Therefore, you should not use more capital than you can afford to lose while trading.
How to start trading?
First, you need to open an account with a forex broker. Then fund your account on margin to start trading. You can easily open an account on XM.com. XM is a reliable broker, which accepts payments through most major credit cards, Neteller, Skrill, Webmoney. Once you receive your deposit, you are ready to start trading.
You can easily monitor your forex account online, anywhere and anytime. You have complete control to monitor your trading status, test scenarios, change certain terms in forex trading, close trades or withdraw profits.
Advantages of forex trading
Forex trading has some of the most significant advantages as follows:
– The forex market is traded continuously for 24/days.
The forex market is open 24 hours a day (except weekends). Therefore, you can choose to trade at any time.
– The foreign exchange market is highly liquid.
Forex is a market with a trading volume of trillions of dollars per day. Therefore, this market has the fastest liquidity compared to other financial markets.
– Forex is leveraged with high leverage.
Brokers usually have leverage of 50 to hundreds of times. Therefore, you can make a profit with only a small amount of capital when trading forex.
– Forex can use short sell orders.
Unlike stocks, which often have a long-term upward trend, it is only recommended to place buy orders. A currency pair can go up or down every day. Therefore, when trading a currency pair, you can buy or sell quickly.
– Forex is commission-free.
In the forex market, brokers only charge a spread for each trade.
– Forex brokers always provide free demo accounts for traders.
Regardless of whether you open an account on any platform, you can easily open a virtual account for users. Virtual accounts usually provide some free capital to practice trading. With the use of a virtual account, you will have the opportunity to learn forex without risking your money.
