February 15, 2019 | AtoZ Markets - The concept of trading Forex is quite simple; you aim to make money by buying a currency and selling it when the value rises or by selling a currency and buying it back when the value drops. So where should you get started in this world's biggest market with a daily turnover in excess of $5 trillion?
While Forex trading for starters can be especially tough, it essential to get started by learning the basics.
Start By Learning the Basics
Before you start trading Forex, it is very important to learn the basics. This is probably the first thing you need to understand because Forex trading can become complex for starters as you invest more in the market.
Hence, grasping the basic methodology will provide you the necessary background to understand how market participants actually communicate with each other. For example, you need to understand the following questions;
- Which currency pairs are traded most?
- How are prices determined?
- How can you open a trading account?
These are some of the basics you need to understand as they will offer you an opportunity to get an insight into the world of Forex initially. They can also offer you a good learning platform to actually understand and learn what you must know in the market before you start trading.
Most Traded Currency Pairs in Forex Market
It worthy of note that not all currencies are traded in the global Forex market and there are quite a few of them which actually dominate the trade on the FX market.
Forex market transactions always work in pairs i.e. you decide to trade in which pair you want to get in. For instance, you may be willing to invest in major currency pairs like EUR/USD, GBP/USD or the USD/JPY. Therefore, decide which of the pairs you want to invest in.
What is more, you also need to know and understand the dynamics of the currency pair you have chosen. It is also important to know the risks involved, their historical pricing behavior i.e. the highs and lows attained by the currency pair. Without having this knowledge, choosing a currency pair could be costly.
Opening a Trading Account
There are two types of accounts that you can open for trading; Demo and a Live account. Most of the top online brokers will offer you a Demo account for you to practice and understand how the mechanics of the FX market work.
With a Demo account, you can get as little as $50 in your account to start trading. The overall idea of a Demo account is to help you understand how the software work, how the orders are executed and most importantly, whether the market is transparent or not.
Once you have mastered the art of trading, you can proceed to real live trading, you can open a Live account and start trading. Live accounts can either be opened without a cost or with a fee. Select the one that best serves your purpose instead of opening the one which can cost you money.
Know the Trading Fees And The Leverage
The number one thing that hangs most traders is to fully understand the fees and the correct use of the leverage. Many online brokers would offer you simple pricing methodology; however, pricing can also be based on tiered or slab.
Brokers also offer Forex trading leverage services where you can use more money than you have actually invested. Leverage provides the required liquidity to the investors and helps them to invest without having the money in their account first.
If used wisely, leverage can be effective a strategy to make money in the market but if used unwisely, it can sink your fortunes.
Create Your Trading Strategy
To be a successful Forex trader, you need to develop a trading strategy that works best for you. There are different Forex trading strategies in the market but you must first understand the basic strategies. While some traders focus on one particular study or calculation, others use broad-spectrum analysis to determine their trades.
However, understanding technical analysis is one such aspect of crafting your own trading strategy based upon technical analysis. Most experts suggest trying to understand resistance levels. They can provide you an insight into how the market moves downwards.
That said, it is up to the individual trader to decide what works best for him or her - most often through trial and error - in the end.
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