Forex trading is daunting and can get difficult. Below is a guide to help beginners understand and learn how to trade from scratch.
Although the modern forex market has been introduced in the 1970s at Bretton Woods, it rouses into popularity in the later years. The online forex trading hype escalated in the 21st century due to the upswing accessibility of technological devices and the internet. Moreover, advertisements seen through various channels stirred up the curiosity and interest of many people in this market.
If you took interest in forex trading because you see it as a means of earning money quickly and easy, then stop. Setting up unrealistic expectations is the common mistake of many trading neophytes. It can be your source of income, but it is not a shortcut to get rich.
Forex trading, also known as foreign exchange (FX) or, forex is a process of changing one currency to another. The foreign exchange market is where trading of currencies occur. According to the Bank for International Settlements, the volume of daily forex trading can reach up to $ 5.1 trillion.
How to begin forex trading? Check this forex trading 101 to help you get started in this venture.
No. 1: Set Your Expectations
It is important to clarify and determine your expectations before trading. Understand that trading currencies are a competitive and risky market. You might lose your capital when you are not careful. If you want to enter this industry as your source of income, make sure to learn how to trade.
No. 2: Learn the Basics
Traders use a wide variety of terminologies that are foreign to a non-trader. Learn these basic terminologies so you won’t get lost while trading. Examples of the common and basic forex terminologies every rookie must know are the following:
- Pip– It is the short term for ‘percentage in point’ and the smallest price movement of any exchange rate. It is the fourth and final number after the decimal point (0.0001), except for the Japanese yen, which only has two decimal points. Thus, if a bid price for the EUR/USD pair is 1.15667 to 1.567 7, the difference is 1 pip.
- Spread– It is the difference between the purchase price and the sale price of a currency pair.
- Leverage– It is the ratio that defines the loan amount (margin) that traders are allowed to use to access large trading capitals.
- Margin– It is a minimum deposit and a requirement for trading.
The above terms are only some of the basics you need to learn. You can check out more about this through online platforms like the Evil FOREX.
No. 3: Find a Legit Forex Brokerage
Forex traders use forex brokers to maximize their profit and reduce losses when trading. A forex brokerage provides platforms, technical support, and coaching to help beginners understand this market. They help traders navigate the right trading decisions through accurate data analysis and rendering effective strategies.
Beginners can find trustworthy and legit forex brokers through reliable online sources like the evilFOREX. Such sources provide an in-depth review of top-performing forex brokerage in the market. Thus, before you start trading, make sure to consult this platform and ask the experts.