How to start forex

Most successful traders develop a strategy and perfect it over time. Some focus on one particular study or calculation, while others use broad spectrum analysis to determine their trades.

No deposit forex bonuses

Getting Started in Forex, how to start forex.

Technical analysis and fundamental analysis are two of the oft-used strategies in the forex market. Technical analysis is by far the most common strategy used by individual forex traders, which we'll explain in further detail below.

Getting started in forex

The forex (FX) market has many similarities to the equity markets; however, there are some key differences. This article will show you those differences and help you get started in forex trading.

If you've decided to take a stab at forex trading, access to currency markets has never been easier with a wide range of online brokerage platforms offering everything from spot trading to futures and cfds.

Key takeaways

Before you settle on a forex broker, carry out your due diligence and make sure you are choosing the best option for yourself.

Look for low spreads and fees from a provider in a well-regulated jurisdiction that offers a suite of tools and access to leverage, among other factors.

Once you've chosen your broker, study up on basic forex strategies and how to properly analyze currency markets.

You may want to start with a demo account to try your strategy out and backtest before risking real money in the market.

Choosing a forex broker

There are many forex brokers to choose from, just as in any other market. Here are some things to look for:

Lower spreads save you money!

Low spreads. The spread, calculated in "pips," is the difference between the price at which a currency can be purchased and the price at which it can be sold at any given point in time. Forex brokers don't charge a commission, so this difference is how they make money. In comparing brokers, you will find that the difference in spreads in forex is as great as the difference in commissions in the stock arena.

Make sure your broker is backed by regulatory agencies and a reliable institution!

Quality institution.Unlike equity brokers, forex brokers are usually tied to large banks or lending institutions because of the large amounts of capital required (leverage they need to provide). Also, forex brokers should be registered with the futures commission merchant (FCM) and regulated by the commodity futures trading commission (CFTC). You can find this and other financial information and statistics about a forex brokerage on its website, the website of its parent company or through the financial industry regulatory authority's brokercheck website.

Get the tools you need to succeed!

Extensive tools and research. Forex brokers offer many different trading platforms for their clients – just like brokers in other markets. These trading platforms often feature real-time charts, technical analysis tools, real-time news and data and even support for trading systems. Before committing to any broker, be sure to request free trials to test different trading platforms. Brokers usually also provide technical and fundamental information, economic calendars and other research.

Leverage your bets!

Wide range of leverage options.Leverage is necessary in forex because the price deviations (the sources of profit) are merely fractions of a cent. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. For example, a ratio of 100:1 means your broker would lend you $100 for every $1 of actual capital. Many brokerages offer as much as 250:1. Remember, lower leverage means lower risk of a margin call, but also lower bang for your buck (and vice-versa).

If you have limited capital, make sure your broker offers high leverage through a margin account. If capital is not a problem, any broker with a wide variety of leverage options should do. A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage (and therefore less risk) may be preferable for highly volatile (exotic) currency pairs.

Make sure your broker uses the proper leverage, tools, and services relative to your amount of capital.

Account types. Many brokers offer two or more types of accounts. The smallest account is known as a mini account and requires you to trade with a minimum of, say, $250, offering a high amount of leverage (which you need in order to make money with this size of initial capital). The standard account lets you trade at a variety of different leverages, but it requires a minimum of $2,000. Finally, premium accounts, which often require significantly higher amounts of capital, let you use different amounts of leverage and often offer additional tools and services.

Broker actions to avoid in forex trading

Sniping or hunting. Sniping and hunting – defined as prematurely buying or selling near preset points – are inappropriate acts committed by brokers to increase profits. Unfortunately, the only way to determine the brokers that do this and those that do not is to talk to fellow traders. There is no blacklist or organization that reports such activity.

Strict margin rules. When you are trading with borrowed money, your broker has a say in how much risk you take. As such, your broker can buy or sell at their discretion, which can be a bad thing for you. Let's say you have a margin account, and your position takes a dive before rebounding to all-time highs. Even if you have enough cash to cover, some brokers will liquidate your position on a margin call at that low. This action on their part can cost you a significant amount of capital.

Be sure to conduct thorough due diligence prior to selecting a broker! Once you've decided, signing up for a forex account is similar to getting an equity account. The only major difference is that for forex accounts, you are required to sign a margin agreement. This agreement states that you are trading with borrowed money, and, as such, the brokerage has the right to intervene in your trades to protect its interests. That said, once you sign up and fund your account, you'll be ready to trade.

Defining a basic forex trading strategy

Fundamental analysis

If you think it's difficult to value one company, try valuing a whole country! Fundamental analysis in the forex market is very complex, and is often used only to predict long-term trends; however, some traders do trade short term strictly on news releases. There are many fundamental indicators of currency values released at many different times such as:

These reports are not the only fundamental factors to watch. There are also several meetings where quotes and commentary can affect markets just as much as any report. These meetings are often called to discuss interest rates, inflation, and other issues that affect currency valuations. Even changes in wording when addressing certain issues—the federal reserve chairman's comments on interest rates, for example—can cause market volatility. Therefore, two important meetings for forex traders to watch are the federal open market committee and humphrey hawkins hearings.

Simply reading the reports and examining the commentary can help forex fundamental analysts gain a better understanding of long-term market trends and allow short-term traders to profit from extraordinary events. If you choose to follow a fundamental strategy, be sure to keep an economic calendar handy at all times so you know when these reports are released. Your broker may also provide real-time access to this type of information.

Technical analysis

Technical analysts of the forex analyze price trends, similar to their counterparts in the equity markets. The only key difference between technical analysis in forex and technical analysis in equities is the timeframe, as forex markets are open 24 hours a day. As a result, some forms of technical analysis that factor in time must be modified to factor in the 24-hour forex market. These are some of the most common forms of technical analysis used in forex:

Many technical analysts combine these studies to make more accurate predictions. (i.E., the common practice of combining the fibonacci studies with elliott waves.) others create trading systems to repeatedly locate similar buying and selling conditions.

Finding your forex trading strategy

Most successful traders develop a strategy and perfect it over time. Some focus on one particular study or calculation, while others use broad spectrum analysis to determine their trades.

Most experts suggest trying a combination of both fundamental and technical analysis in order to make long-term projections and determine entry and exit points. That said, it is the individual trader who needs to decide what works best for him or her (most often through trial and error) in the end.

Forex trading considerations to remember

Open a demo account and paper trade until you can make a consistent profit. Many people jump into the forex market and quickly lose a lot of money due to taking on too much leverage. It is important to take your time and learn to trade properly before committing capital.

Trade without emotion. Don't keep "mental" stop-loss points if you don't have the ability to execute them on time. Always set your stop-loss and take-profit points to execute automatically, and don't change them unless absolutely necessary.

The trend can be your friend. If you go against the trend, make sure you have a good reason. That's because you have a higher chance of success in trading with the trend because the forex market tends to move in that direction than the other.

The bottom line

The forex market is the largest market in the world, and individuals are becoming increasingly interested in plying their trade in FX. However, there are multiple considerations to take into account before you begin trading, such as being sure your broker meets certain criteria and understanding a trading strategy that works best for you. One way to learn to trade forex is to open up a demo account and try it out.

How to start trading forex (4 steps)

Welcome to the world of forex. There might be many reasons why you are reading this article. It could be that your friend or acquaintance mentioned about how they trade and perhaps even make a living by trading forex. Whatever your reasons may be; this article will give you an overview of the forex markets and how to start trading forex … and perhaps make money for yourself.

Step 1. What is forex?

Step 2. Learn forex basics

Step 3: find a forex broker

Step 4: start trading

Step 1. What is forex?

Forex, or foreign exchange is an unregulated market, also known as OTC (over-the-counter) and is the biggest market with average daily turn-over that runs into billions. It is even bigger than the US stock markets. Although due to its OTC nature, no one can really give the correct numbers as to the forex turnover. But nonetheless, forex is indeed a big market and thus allows many market participants. From your neighborhood bank to specialized investment companies, to your friend; the forex markets always offers a piece of the action whoever you are and wherever you are (even from your home).

The basic concept of trading forex is very simple. You trade or speculate against other traders on the direction of a currency.

So, if you believe that the euro is going to rise, you would BUY the euro, or SELL the euro if you think the euro would fall. It’s as simple as that.

Step 2. Learn forex basics

Before you get ready to deposit your funds and start trading there are some important points you must understand, each of which are outlined below.

Forex brokers: in order to start trading forex, you will need to trade with the help of a forex broker. There are many forex brokers out there today who allow you to open a forex trading account for as little as $5. The forex broker is the one who facilitates your buy and sell orders and also allows you to research into the markets (also known as technical or fundamental analysis) to help you make more informed decisions… and of course allows you deposit more funds or withdraw your profits when you want to. ( click here to see our forex brokers rating )

Trading platform:you need a trading platform from which you can place your trades, which are then sent to the broker for settlement. Also, a trading platform is essential for you to conduct your technical analysis and also to see the current market prices. Most retail brokers offer the MT4 (short for metatrader 4) trading platform, which is free of cost. You can also open a demo trading account and practice trading with virtual money to gain the experience required before trading with real money.

Forex trading hours:while you might have heard that the forex markets never sleeps, it actually does. Firstly, you won’t be able to trade on weekends (saturday and sundays). But for the rest of the week, the forex market operates 24 hours a day. This is due to the fact that forex trading is global. At any point in time, you will always find an overlap of a new market session while the previous market closes. What time of the day or which market session you trade plays a big role if you are an intra-day trader or a scalper. This is another vast topic, which we will cover at a later stage. ( click here to learn more about forex trading hours . )

Now that you have a basic overview of the forex markets, here are some final pointers to remember before you start trading for yourself.

What is a pip?:pip is a measure of change in a currency pair’s value and is the 5 th decimal. For example, if EURUSD changes from 1.31428 to 1.31429, the change is denoted as 1pip (1.31428 – 1.31429 = 0.00001). When you trade, the more pips you make, the more profit you have. Ex: buying EURUSD at 1.31428 and selling (or closing your trade) at 1.31528 would give you 100pips in profit. ( read more about forex PIP )

Reading quotes: forex quotes are presented in a bid and ask price (both of which vary by a few pips and from one broker to another). The bid price is the price at which you can buy and the ask price is the price as which you can sell. So, a EURUSD quote would look like this 1.31428(bid)/1.31420(ask).

What is a spread?: spread is nothing but the difference between the bid and ask price. So in the above example, for 1.31428/1.31420, the spread would be 8 pips. ( read more about forex spread)

What is a leverage?: leverage is the amount by which you can request your broker to magnify (or increase) your trade value. Leverage is often quoted in ratios such as 1:50, which means that when trading on a 1:50 leverage, your $100 is magnified to $50000. Leverage is a big topic in itself and it is recommended to read this article to learn more. Leverage is important both in terms of making profits as well as managing risks and therefore, your trades.

What is a lot?: A lot is a unit by which you place your trade. In financial terms, a lot is also referred to as a contract. There are preset lots (or contract sizes) that you can trade. For example a standard lot is nothing but 100,000 units (known as 1 lot). ( read more about lot)

Reading charts: the ability to understand and read the charts is very essential to trading. Depending on your approach, you can choose between a line, bar or candlestick charts and trade accordingly (for example trading based on candlestick patterns). ( read more how to read forex charts)

Placing orders (how to buy and sell): in forex trading, it is possible to either buy or sell any currency pair. Most trading platforms, give you this option. You buy when you think that price will go up and you sell when you think that price will fall. There is a common terminology used in forex trading, which is buy low, sell high; which is an important point to remember. ( read more how to place orders with MT4 )

Order types: besides buy and sell, another point to remember the types of orders. There are two basic order types: market orders and pending orders. When you click on ‘buy’ or ‘sell’ you are basically buying (or selling) at the current market price. A limit order on the other hand tells the broker that you want to buy or sell only at a particular price. ( read more about types of forex orders)

Step 3. Find a forex broker

forex how to start - Find a Forex Broker

As mentioned, there are many forex brokers today and therefore it can get confusing on how to choose the forex broker that is right for you. To briefly summarize, remember the following points while choosing a forex broker:

Look for a forex broker that is regulated

See if the forex broker offers a minimum deposit amount

What is the leverage that the broker offers

What is the minimum contract size that you can trade

Bonuses and the terms and conditions (see on our site list of forex deposit bonuses and forex no deposit bonuses)

Deposit and withdrawal types as well as the terms and conditions

Trading methods that are allowed by the broker

We can also help you choose a forex broker by reading our article how to choose forex broker

Step 4. Start trading

Finally, now that you have selected a forex broker to trade with it is recommended to first open a demo trading or a practice account. Most forex brokers offer unlimited demo trading account (but will be deactivated if not used for 30 days). This is a good way to get acquainted with the forex markets and also help you to understand your trading style (scalper or intra day trading, swing trading, etc) and approach (fundamental or technical analysis). You can search for various trading methods and systems or you can develop one yourself when you have a good understanding of technical or fundamental indicators.

Conclusion:

Forex trading is one of the most active and dynamic ways to trade the financial markets. At the heart of everything, it is the basic fluctuations in currency values which drives everything else. Learning to trade forex and understanding the forex markets can give a good foundation to trading other markets such as derivatives or equities.

How to start as a forex trader (7 steps)

Do you want to start trading forex but you don’t know where to begin? Check out this video to find out how to start as a forex trader!

How to start as a forex trader

Please note that this article may contain affiliate links.

How to start as a forex trader – script

This video is broken down into 7 steps to becoming a forex trader. Let’s dive right in!

1. Find a reputable broker

There are important points to consider when choosing a broker. Such as:

What is their software like? You want to make sure that they offer a high-quality software platform, ideally metatrader4.

As well as a powerful platform, you want to make sure that your broker offers excellent support.

Fast trade executions

Low-spreads.

I started as a forex trader by signing up to my broker which is oanda. Oanda offer both a free demo account as well as a live trading account. I have found them to be great and they are based in the UK.

2. Use a demo account

As mentioned above, oanda offer a FREE demo account and I highly recommend starting in a demo. Because it would be incredibly risky and unnecessary to start off as a forex trader using real money in a live environment.

This means starting using paper money whereby there is nothing to lose but you can use the time to develop important skills, knowledge and experience for trading. Starting in a demo allows you to build major skills for trading including;

Technical analysis

Risk management

Trade management

Trading strategies

Whilst you are using your time wisely practising in a demo, this will allow you to build your trade plan.

3. Create a trade plan

I have a free downloadable trade plan, click here to download a copy. This is my personal trade plan for forex and also includes a template where you can create your own trade plan.

Having a trading plan is essential if you want to take your trading seriously and if you want to become a professional trader. In addition, a trading plan gives structure to your trades. Remember that if you are not following a trading plan, then essentially you are gambling.

A trading plan can consist of; strategies, time-frames, indicators, processes, risk management and targets. It allows you to monitor your performance and review your trades which is massively important to help you to improve and grow as a forex trader.

4. Education

Education is essential for trading. There are many key topics to research and study to become a forex trader. These include:

Technical analysis involving; candlesticks, chart patterns, identifying trends, channels, pivots and trendlines.

Riskmanagement; risk is everything when it comes to trading.

Trademanagement; calculating entries and exits.

Tradingpsychology; a major factor in becoming a successful forex trader.

5. Major currencies

When starting out trading forex, it is important to stick to trading the major currencies, because these tend to be the most volatile, as they usually have the most volume for trading.

Major currencies: GBP, USD, CHF, AUD, NZD, JPY, CAD & EUR.

6. Start small

A great tip is to start small and to remember that trading is not a race, it is a marathon. It is important to take your time through each stage of your trading journey. In addition, give yourself plenty of practice in the demo. Furthermore, take your time studying and gathering vital experience trading. When you are ready to trade with real money, certainly start small and use low risk per trade during your transition to real money.

7. Be disciplined

Finally, it is important to be disciplined. Whenever you trade in the demo, it is important to carry out your practice seriously and to treat it like real money, because it is not a game. If you treat trading like your job, then you are more likely to succeed long term.

How to start as a forex trader – conclusion

Find a reputable broker

Use a demo account

Create and follow your trade plan

Educate yourself and build your knowledge

Trade the major currency pairs

Take it slow and steady

Be disciplined and keep your focus

If you follow all of these points, then you are well on your way to becoming a consistently profitable forex trader, and I wish you the best of luck!

free forex trading plan by Mindfully trading

Ready to become a successful trader?

You have successfully subscribed!

You can unsubscribe anytime. For more details, review our privacy policy

How to start forex trading (the right way)

Disclaimer: when you buy through links on our site, we may earn an affiliate commission at no extra cost to you. How we make money.

If you want to start forex trading, you are beginning a journey that can be life changing, economically speaking. And starting something so powerful that it has the capability of changing your financial future for the better can be both exciting and scary at the same time.

The steps you take to start forex trading can be very difficult. Your journey could take years of toil and hard work. But YOUR path to trading forex profitably does not have to be hard, long or scary.

If you have the right reason for trading forex, choose the correct path, adopt the right mindset and follow the right plan… you can be trading forex profitably very quickly.

This page is detailed, so I suggest reading the page all the way through once, and then use the table of contents to revisit specific sections later.

Why start forex trading?

This is important, but not talked about very much. What is your “why”? Why do you want to start forex trading?

Whenever you start something that requires any effort (even as low as 1 minute a day, 4 days a week), you need to have a strong why. You need to be sufficiently motivated. Otherwise, you run the risk of giving up and sabotaging your success.

Yes, I know, you want to start forex trading to make money. That’s true… but that is not the “why” I am talking about. (and frankly, focusing on “making money” will probably lead to failure… but more on that later).

Your “why” needs to be specific and very important to YOU.

I trade forex because it is a MAJOR part of the wealth plan blast off . Forex trading is what allows me to make up for lost time by outperforming other investment opportunities. It is what allows me to accumulate wealth faster so I can achieve lifelong financial security.

In short, forex trading allows me to build the wealth I need, in the time I have.

You see, I desperately want financial security. Circumstances beyond my control made it hard for me to make money, save money and get ahead. And after years of struggling to make ends meet, I became determined to change the direction of my financial future.

I know working harder and saving more is not going to get me there. I NEED to put my money to work to make more money. And because I got a late start, I need to outperform other investment returns.

That is where forex trading comes in.

So as you see, achieving lifelong financial security is very important to me. And I can’t do it without forex trading.

Knowing this… do you think I’m going to stop trading forex? Spoiler alert: I won’t.

Think about your “why”, and make sure it is strong enough to keep you on the path toward YOUR goal over the long term.

How to start forex trading for beginners

As a beginner wanting to start forex trading, you have a decision to make. You have a choice, and how you choose will most likely determine your success or failure.

Most beginners don’t even know they have a choice. So, this could be enlightening.

A lot of people want to become a “forex trader”. They want to be a person with the knowledge, discipline and skill to look at a forex chart and correctly predict what is going to happen next.

They think the way to achieve this goal is to study all the different aspects of trading, learn hundreds of trading strategies and spend hours each day practicing on a demo account for months or years. (sounds exhausting).

The beginner trader believes that if they study, learn and practice long enough, they will eventually be the kind of person that can look at a chart and make split second decisions that leads to more money in their account. In short, they will be a “forex trader”.

Their success is determined by how knowledgeable and skillful THEY are.

If you think this is the path to being a profitable forex trader… you will most likely fail.

Another path is to just learn a simple trading strategy that has already been strategically designed to be profitable over the long term. Simply learn the rules… and follow the rules.

Option 1: make your success about “you”, and try to “become” a profitable forex trader through years of struggle.

Option 2: make your success about the trading strategy, and just follow the rules of a strategy that is strategically designed to be profitable.

Which option do you think has a better probability of success? Choose wisely.

Forex trading blast off 2.0

Build the wealth you need in the time you have with strategically designed forex trading

Accumulate wealth faster, create multiple income streams & secure your financial future in 1 minute A day

Start forex trading with the right mindset

If you start forex trading with the wrong mindset, you greatly hinder your chances of success. It took me years to figure this out, so I know what I am talking about.

Forex trading should NOT be about making money.

Forex trading SHOULD be about wealth accumulation.

I’ll admit it. I got into forex trading because I wanted to make money. If you look at this snapshot from google trends, I got serious about wanting to trade forex around where the “lots” note is.

At that time, forex was a hot topic because there were a lot of people selling strategies, automated forex robots and signals services. Unfortunately, most of the unscrupulous marketers were framing forex as “easy money”, “quick riches” and “the fastest way to millions”.

But look at what happened next. Forex trading became “less” popular.

My theory about why popularity dropped is because people got interested in forex for easy, quick and unrealistic riches. Or, they wanted to make consistent, predictable income month after month.

(this theory is strengthened when you see how popular forex trading is now… during a worldwide pandemic and economic hardship where people are desperate and uncertain about their economic future).

But when they figured out forex trading can’t turn $500 into $1,000,000 in a month on autopilot, or make thousands of dollars consistently each and every month… they lost interest.

And that is unfortunate, because they are missing out on the true potential of forex trading… wealth accumulation.

While most investors would be happy with 7% average annual returns, here is what following a simple trading strategy can accomplish on 3 different accounts:

- - 2352% profits over 5 years (470.4% average yearly gains)
  - 2113% profits over 5 years (422.6% average yearly gains)
  - 2794% profits over 5 years (558.8% average yearly gains)

So, while forex trading might not be able to turn you into an instant millionaire, it is one of the best wealth creating opportunities in existence.

But many people don’t see the forest for the trees.

However, if you abandon the “make money” mindset, and embrace the “wealth accumulation” mindset… you’ll have much better success.

Start forex trading from home

A lot of people that want to start forex trading have regular jobs. They already have a busy lifestyle.

But then they pursue imitating the methods of trading of professional traders. This requires sitting in front of the charts for hours on end, day and night. They feel they need to keep up with economic news and try to predict how it will move the market.

I think this is the wrong approach.

There is a difference between being a professional trader and being an at home trader. And quite frankly, being an at home trader has its advantages. (as a matter of fact, it is one of the reasons I can beat other investment opportunities).

Instead of trying to imitate the pros, embrace being an at home trader instead. This forces you to keep things simple. It also makes you fit forex trading into the time you have.

In a way, concentrating on trading forex from home forces you to adopt a way of trading that is much more likely to be profitable over the long term.

Here are the only things you need to start trading forex from home:

- - Computer
  - Internet connection
  - Broker account
  - Metatrader4 platform (free from your broker)
  - Strategically designed forex trading strategy
  - 1 minute a day, 4 days a week

As you can see, starting to trade forex does not have to be difficult. But just because you adopt an approach that is simple to learn and simple to trade does not mean it is not profitable.

Here is what would have happened if you started with a $2,000 investment in each opportunity over the past 5 years. One of my accounts beat the S&P 500, apple, google, netflix and amazon COMBINED.

That means I was able to make more money than all the others combined… with 5 TIMES less investment.

Not bad for trading forex from home, right?

How to start forex trading step-by-step

Since we are talking about “how to start forex trading”, I’m going to assume you are a beginner and don’t have a lot of experience. I want to break down, step-by-step how to get started.

Don’t worry, it really is quite simple.

» choose A broker

In order to participate in the forex market, you’ll need to have a broker account. I’ve gone over some recommendations and what to look for here: best forex broker to use

» create A demo account and download A free metatrader4 platform

The first thing you should do is learn about the trading platform. In my opinion, all a demo account is good for is learning how to perform trading tasks on the platform.

I show you everything you need to know in my course. And you don’t even need to learn how to place trades, because I’ve included scripts for easy, perfect trade placement. But if you want to know more about the platform, go here: beginners guide to metatrader4

» learn A strategically designed forex trading strategy

Pretty obvious what I am going to recommend here…

Forex trading blast off 2.0

Build the wealth you need in the time you have with strategically designed forex trading

Accumulate wealth faster, create multiple income streams & secure your financial future in 1 minute A day

» fund your account

If you are going to make real money trading the live markets… you need to fund your account. The trading strategy is easy to learn and simple to trade, so you don’t need to spend years practicing on a demo account.

Funding your account will depend on the broker you choose. It is a very simple process.

» start trading

At this point, you just need to follow the rules. At the same time every trading day, you’ll open your trading account and see if there is anything to do.

If there is something to do, complete the task and close your platform. (shouldn’t take longer than 1 minute).

Many times there won’t be anything to do, so just close your platform.

That’s it. You wanted to know how to start forex trading. Well, that’s it.

In conclusion

- - Figure out your strong “why”.
  - Choose to learn a mechanical, rules based trading strategy.
  - Adopt the mindset of wealth accumulation over “money making”.
  - Embrace being an at home forex trader.
  - Start trading… and keep trading over the long term.

We’ve gone over a lot here. I suggest going back over this page again. Use the table of contents for easy access to the sections you want to revisit.

Forex trading blast off 2.0

Build the wealth you need in the time you have with strategically designed forex trading

Accumulate wealth faster, create multiple income streams & secure your financial future in 1 minute A day

To your wealth,
edward lomax

Forex trading is the “wealth building engine” of my wealth plan. But trading forex is not the only way you can use investing to secure your financial future.

How to get started investing & accumulate wealth faster

Put your money to work and become wealthy (even if you get A late start)

C чего начать?

Начать торговлю на рынке форекс легко, тяжелее начать торговать с прибылью. Многие рассматривают форекс как азартную игру, исход которой определяет удача. Но это не так. Форекс – это валютный рынок, который, как и любой другой, работает по законам спроса и предложения. Понимание этих законов, знание основной терминологии и торгового процесса – теоретический минимум, который нужно усвоить перед тем, как начать торговать на форекс.

На старт – изучение теории

Даже если вы с ужасом вспоминаете свои учебные заведения, пройти хотя бы краткий теоретический курс форекс трейдинга придется. Заключать сделки вслепую – худшее из возможных решений.

Чтобы немного упростить задачу, мы собрали профессиональную лексику трейдеров на странице терминология. Здесь – основные определения и понятия форекс торговли. Многие из них подробно раскрываются в разделе статьи о форекс. Если у вас появится конкретный вопрос, обратитесь в нашу службу поддержки с помощью чата или электронной почты support@justforex.Com.

Торговля на рынке форекс – как занятие спортом. Необходимы постоянные тренировки.

Внимание – торговля на демо-счете

Чтобы начать торговать на форекс без вложений и наработать торговые навыки, нужно открыть учебный счет. Демо и live счета имеют одинаковые торговые условия и один и тот же поток котировок. Разница между ними заключается в том, что на учебном счете вы торгуете виртуальными средствами. Соответственно, риск потерять инвестиции из-за неблагоприятного колебания рынка отсутствует. Подробнее о демо-счетах от justforex вы можете узнать на этой странице.

Торговля на рынке форекс – как занятие спортом. Необходимы постоянные тренировки, чтобы не потерять форму и продолжать в том же темпе. Поэтому заключайте сделки каждый день, анализируйте новости, которые могут повлиять на движение рынка, пробуйте разные торговые стратегии и разрабатывайте свои собственные. Очень важно не стоять на месте и ждать попутного тренда, а анализировать и изучать все возможности и все ситуации.

Прибыльная стратегия торговли на форекс включает знания, практические навыки анализа и торговли и полный контроль над эмоциями.

Марш – переходим на реальный счет

Когда вы достаточно натренировались – на автомате заключаете сделки в платформе, торгуете в прибыль, ориентируетесь в рыночной ситуации – переходите на реальный торговый счет.

Будьте готовы к тому, что убытки возможны, так же как прибыль. Прибыльная торговля на форекс в демо-режиме не означает успех на реальном рынке, поскольку психология торговли на свои деньги значительно отличается от "игры" в демо режиме.

Обычно вы сами решаете, с какой суммы начать торговать на форекс – в начале торгуйте небольшими депозитами, чтобы научиться контролировать свои эмоции. Никто не может заключать только прибыльные сделки. Учитесь спокойно принимать убытки и проводить работу над ошибками.

Прибыльная стратегия торговли на форекс включает знания, практические навыки анализа и торговли и полный контроль над эмоциями. Демо-счета – отличный инструмент обучения, где каждый может побыть трейдером без риска, но и без настоящей прибыли. Поэтому не задерживайтесь на этом этапе долго, переходите на следующую ступень работы и заработка на валютном рынке.

How to start trading forex online

There are tons of great ways to make money online. You can earn an income from wherever you want, whether that’s working a remote job or buying and selling online. One such form of buying and selling is particularly worth trying — trading foreign exchange (forex).

Trading currencies has always been a viable — if difficult — way to make money. But, as with so many other things, the internet has made it that much easier; to learn and to practice, and to trade forex itself online. Here, we break down everything you need, from learning to trade to finding the best trading platform.

Study

Given the stakes — your money, time and welfare — trading forex online isn’t something you can just work out as you go along. You need to understand how markets and currency pairs work, what influences them and how to assess risk. You need to consider your trading strategy, too.

Going into trading blind, you won’t learn through experience, you will just lose your money. But by studying well, you can give yourself a good foundation for when you start trading. And you will know whether you will follow fundamental analysis, swing trading, position trading, or other strategies.

There are loads of different ways you can study on your own using books, blogs, online courses, videos and tutorials. If you are at school or university, you could seek out a business, finance or economics teacher or professor for extra help. Studying well gives you the best chance to thrive trading forex.

Organize your money

When you are starting to trade, this should be one of the first things you think about. How much money are you willing and able to use? This also means, how much money are you willing and able to risk losing?

Forex is not a guaranteed moneymaker, however lucrative many people say it is. In fact, only a relatively small portion of traders are making lots of money trading. Trading can take a long while to master and you are subject to the vagaries of the market, which means you always risk a big loss.

Happily, depending on the broker you use, you don’t need all that much money to open a trading account. It can be as little as $10. Margin trading allows you to trade smaller amounts of money, which naturally means a lower return.

But, the more money you want to make, the more you may need to risk. If you are starting out from a low base, start small and work your way up as you start making more money.

Find a good trading platform

Finding the best trading platform as a beginner is really important. Each broker and platform varies, and you need to consider the broker that runs the platform, as much as you need to assess the platform. Make sure that when you are choosing your platform, the broker is fully regulated.

Take time to browse your options before choosing. For a beginner, it is best to choose a platform that includes a demo account. Using this, you can practice and simulate trading in real-world market conditions using virtual money. This enables you to trade in realistic, market conditions to hone your skills, without risking your own money. And then once you have a good sense for trading, you can start trading properly in real markets.

Conclusion

Trading forex can be a great way to make money online, while others find it to be an enjoyable hobby, too. Make sure you consider these three steps before you start trading online and you’ll be ready to get started.

How to start trading forex for beginners

Forex trading is a great way to earn money. It offers convenient market hours, high liquidity, the ability to trade on margin, and much more. No wonder why people want to start trading forex, but what is forex trading?

Forex trading, or also known as foreign exchange, also known as FX or currency trading, is the largest decentralized financial market in the world. It works by simultaneously buying one currency while selling another.

Forex traders expect the currency they bought to increase in value against the currency they have sold. Then they can close the position for a profit.

This may sound not so easy to understand if you are a beginner, and that’s precisely why you should keep on reading. In this article, I will share with you how to start forex trading if you are a beginner.

How to start trading forex?

Forex trading offers traders a lot of possibilities and allows them to achieve excellent results in this market. And nowadays, the number of people who want to become part of the trading world keeps on getting more significant.

The FX market gives traders the ability to trade 24 hours a day, through different channels all over the world. Transactions can take place in many various forms.

Every day currencies are exchanged for other currencies. Did you know that the average daily forex trading volume is about $5 trillion per day, while the securities market trades about $22 billion per day?

However, there was not a single experienced trader who was not a beginner when he or she first started trading forex. Every successful forex trader now was once in your shoes. Not knowing where to start from, nor knowing what he or she should do to become a forex trader.

So, if you are a beginner and you want to learn how to trade forex, it’s essential to begin with understanding the basic terminology that is used in the forex market. Keep on reading to learn more about some of the basic forex terminology that you will encounter on your trading journey.

The more you learn about the FX market and the basics of forex trading, the better

The very first thing new traders need to do to become successful forex traders is to understand basic forex terminology. Let’s take a look.

Understanding the basics of FX terminology

Base currency – the type of currency against which exchange rates are generally quoted. In other words, the currency which traders want to spend.

Quote currency – the second currency quoted in a currency pair in forex trading. In other words, the currency which traders want to purchase.

In forex trading, traders can sell one currency to purchase another.

Exchange rate – the value of one currency expressed in terms of another. In other words, the exchange rate gives you information about how much you have to spend in quote currency to purchase base currency.

Example: EUR/USD = 1.2600, then 1 euro is worth US$ 1.2600.

Long position – when your goal is to buy the base currency and sell the quote currency.

Short position – when your goal is to buy the quote currency and sell the base currency.

Bid price – the price at which the market or your broker will buy a specific currency pair from you. At the bid price, traders can sell the base currency to their brokers for the best price at which traders are willing to sell their quote currency on the market.

Ask price – the price at which the market or your broker will sell a specific currency pair to you. At the ask price, traders can buy the base currency from their brokers for the best available rate at which traders can buy from the market.

Bid/ask spread – the difference between the bid and ask the price.

Example: EUR/USD = 1.2600, then 1 euro is worth US$ 1.2600.

And if EUR/USD quotes read 1.2600/02, then bid/ask spread is the difference between 1.2600 and 1.2602, or 2 pips.

Pip – t he price move in a given exchange rate.

Learning more about the major forex pairs, their nicknames and how to read forex currency pair quotes

If you are a beginner, learning the terminology used in forex trading won’t be enough.

Before you start trading any currency pair quote, you have to learn more about the major forex pairs, their nicknames, and you will need to understand how to properly read a currency pair quote to decide what currency you want to buy and sell.

So, let’s take a look at the major currencies.

(EUR/USD) – euro/dollar pair, known as the “euro”

(USD/JPY) – dollar/japanese yen also called the “gopher”

(GBP/USD) – british pound sterling/US dollar, often referred to this pair as the “cable”

(USD/CHF) – US dollar/swiss franc also called the “swissie”

(AUD/USD) – australian dollar/US dollar, known as the “aussie”

(NZD/USD) – new zealand dollar/US dollar, often referred to as the “kiwi”

Now that you have seen the major forex pairs, it’s time to understand how to read a pair quote properly. Let’s use the mentioned above example.

[exchange rate] EUR/USD = 1.2600, then 1 euro is worth US$ 1.2600.

The EUR is the base currency, while the USD is the quote currency.

The exchange rate shows traders how much they need to pay in terms of the quote currency to buy one unit of the base currency.

As we can see from the example above, 1 euro is worth 1.2600 U.S. Dollars.

If traders want to sell instead of buying the same currency pair or any other, the exchange rate shows traders how much of the quote currency they will receive for selling one unit of the base currency.

As we can see from the example above, traders will receive 1.2600 U.S. Dollars if they sell 1 euro.

Since traders are simultaneously buying one currency and selling another, the exchange rate is quoted in a pair, just like in our example EUR/USD. When you buy a pair, and the base currency strengthens against the quote currency, then you will profit from the trade.

Also, beginners should understand and remember that the most important thing when buying or selling a currency pair is the base currency.

Learning how to calculate profits properly

Before you start trading forex, you should understand and learn how to calculate profits too.

A pip measures the price move in a given exchange rate. One pip equals 0.0001 of a change in the value between the two currencies.

[pip] if EUR/USD quotes read 1.2600/02, then bid/ask spread is the difference between 1.2600 and 1.2602, or 2 pips.

In the example above, the currency value has increased by 2 pips. However, if the spread is the difference between 1.2600 and 1.2620, then the currency value has increased by twenty pips.

To determine how much your account has increased or decreased in value, and whether you have profited or lost money, you need to multiply the number of pips by the exchange rate.

Learning more about the economy of the country

By learning more about the market and the economy of a country, you will be able to make predictions about the economy.

For instance, if you believe that the economy of a particular country will continue to weaken, which will lead to a decrease in the currency of that country, then you should consider selling the currency. By buying currency from a country where the economy is strong, your chances of preserving your money are much higher.

You should also consider the country’s trading position before investing your money. For example, a country that has goods that are in demand, if more likely to make money by exporting these goods, which will boost the country’s economy.

If the economy of a country is strong, then the value of its currency will be high and stable.

Once you learn more about the FX market and the basics of forex trading, you are ready to open an online forex brokerage account.

Research different brokerages before you open an online forex brokerage account

It is essential to do in-depth research for different brokerages, what they offer, which brokerage is regulated by a significant oversight body, and which not and consider which brokerage is the most trusty one before you open an online account.

Here are some tips on how to find a trustworthy, transparent, and honest brokerage:

Look for a brokerage who has been in the industry for longer than five years.

Read reviews, but don’t let reviews make up your mind.

Look for a brokerage who is regulated by a major oversight body such as NFA in the unites stader or FCA in the united kingdom.

Consider the transaction cost of each brokerage and consult with your bank how much will they charge you to wire money into your forex account.

Once you have decided which brokerage you want to open an online account in, you have to consider what type of account you wish to have. You will have two options.

Personal account – you will execute your own trades

Managed account – your broker will execute trades for you

Once you are ready with this step, you need to fill in the information your brokerage needs to complete and activate your account.

Here are the top three brokers in 2019 and why they are an excellent choice:

Easy-to-use platform and apps

Practice trading forex on a demo account, in an environment with reduced risk

Identify FX opportunities on clear, fast charts as standard, and deepen your analysis with prorealtime

Open an account quickly and easily

You can go long or short

24-hour trading

High liquidity

Trade on leverage

Wide range of FX pairs

XTB

Trade over 1500 global markets

Easy to use, fully customizable

Superior execution speeds

Trader’s calculator, performance statistics, sentiment

Charts trading, market order depth

Transparency

High liquidity

Available to smsfs

Trade on two world-class platforms

FXCM

An easy-to-use platform that is available for desktops, laptops, and mobile devices.

There is a minimum deposit of $300

Real-time updates and alerts for live traders

Access to demo trading accounts

Lots of algorithmic tools

Award-winning provider

Access to a vast number of apps

High levels of education and resources for clients

Email alerts and weekend data options

Access to six different asset classes

Low fees for standard retail accounts

Analyze the market and start trading

The mentioned above pieces of advice will help you become a trader, even if you had no clue where you had to start. Once your account is approved, you can begin trading.

However, to ensure your success, you need to analyze the market, and there are different strategies you could try.

Technical analysis – by reviewing charts or historical data, you can predict how the currency will move based on past events.

Fundamental analysis – by looking at a country’s economic fundamentals, you can use this information to make better trading decisions.

Sentiment analysis – by trying to analyze and predict the mood of the market, you could determine whether the market is “bearish” or “bullish.”

There is one more thing beginners should learn before they start trading forex, and that is what kinds of orders they can place.

Market order – you have told your broker to execute your buy or sell order immediately at a current market price.

Limit order – you have specifically instructed your broker to execute a trade at a specific price or better.

Stop order – you make the stop order once the market price reaches a specified stop price. Once the stop price is reached, stop orders become market orders.

Conclusion

After reading this article, you should be ready to start trading forex and become a successful forex trader in the future. Remember, the forex market is volatile. Therefore, you will see a lot of ups and downs, or as some forex traders like to call them with the trading terms “bearish” and “bullish.” try not to get emotional and stick to your trading plan. Only by analyzing and studying the market will you see profits.

How to start a forex trading business from home

If you are looking to set up your own forex trading business from home, you have come to the right place.

This post will tell you how you can make money by trading currency pairs. If you are a beginner, you must be aware that it involves some amount of risk, but you can learn to do it in an interesting manner and earn an income.

In the forex market, currencies worth US$5 trillion are traded on a daily basis. This means there is an opportunity for you to earn a lot of profits through your forex trading business without the need to invest too much of your hard-earned money. One of the biggest advantages is that you need not meet any formal requirements for starting a forex trading business.

The advantages of forex trading are as follows:

• unlike the stock market, the forex market operates round the clock.
• it is not possible for anyone to manipulate the forex market.
• the forex enables margin trading. This means that you can buy currencies worth thousands of dollars though you may have only less than US$100 with you. This is not possible in stock trading.

As such, all that you need to have with you are a little money, some amount of patience, a personal computer, and a reliable internet connection in order to become a currency trader. Here is how you can start your forex trading from home:

#1: learn the basics of currency trading

It is not easy to learn forex trading on your own through video tutorials. It is, therefore, recommended that you work with an expert to understand the nuances of trading. In addition, you should attend seminars/webinars and read a little bit to in order to sharpen your skills. Reading books on economics and business also helps you to broaden your insight, especially with respect to fundamental analysis. Additionally, you must master technical analysis as well.

#2: organize the trading capital

Fortunately, you are not required to have a large amount of money to start currency trading. This is because of the margin trading feature offered by brokers. You just need about US$10 to set up an account on the broker platform or you can use no-deposit bonus to start trading. However, it is a good idea to start with at least US$1,000 as it will ensure a little bit of buffer if you happen to incur losses.

#3: choose a reliable forex broker

Forex brokers make available online platforms to help you access the forex market and trade. You should go through the terms of trading before choosing any of the brokers. It is important that you work with the right forex broker in order to achieve your financial goals.

You should, therefore, compare the features offered by a few brokers prior to deciding to work with one. Some of the factors to be considered are trading options, terms and conditions, and user reviews. Then choose a broker that best fits your needs. You may also consult with an expert trader for this purpose.

#4: start by opening a demo account

After choosing the forex broker, open a demo account on the broker’s platform. The virtual account may be offered only for a certain specified amount of time period. However, it will give you an idea as to how you can use the trading platform offered by the broker. It will also be helpful in getting prepared for using the real platform. This means that you will not be using real money without testing the broker’s platform through the demo account.

#5: practice well

You cannot learn forex trading on the go. It is important to train yourself extensively so that you are in a position to buy and sell at the right time. You should trade on the demo platform for a few weeks so that the chances of you incurring losses are considerably reduced.

A demo account helps you to learn to implement various trading strategies successfully and develop a trading style of your own.

#6: start trading with real money

Open a live trading account with the forex broker after you have practiced enough and gained the confidence to go live. Actually, you should be able to convert the demo account into a live account. You may have to just deposit the minimum amount specified by the broker.

Some trading strategies will fetch you huge profits, some others will not work for you. The secret to increasing profits is repeating what works for you and avoiding what does not.

Forex trading: A beginner's guide

Forex is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another currency for a variety of reasons, usually for commerce, trading, or tourism. According to a recent triennial report from the bank for international settlements (a global bank for national central banks), the average was more than $5.1 trillion in daily forex trading volume.

Key takeaways

The foreign exchange (also known as FX or forex) market is a global marketplace for exchanging national currencies against one another.

Because of the worldwide reach of trade, commerce, and finance, forex markets tend to be the largest and most liquid asset markets in the world.

Currencies trade against each other as exchange rate pairs. For example, EUR/USD.

Forex markets exist as spot (cash) markets as well as derivatives markets offering forwards, futures, options, and currency swaps.

Market participants use forex to hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, among several other reasons.

What is the forex market?

The foreign exchange market is where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. And want to buy cheese from france, either you or the company that you buy the cheese from has to pay the french for the cheese in euros (EUR). This means that the U.S. Importer would have to exchange the equivalent value of U.S. Dollars (USD) into euros. The same goes for traveling. A french tourist in egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the egyptian pound, at the current exchange rate.

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of london, new york, tokyo, zurich, frankfurt, hong kong, singapore, paris and sydney—across almost every time zone. This means that when the trading day in the U.S. Ends, the forex market begins anew in tokyo and hong kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.

A brief history of forex

Unlike stock markets, which can trace their roots back centuries, the forex market as we understand it today is a truly new market. Of course, in its most basic sense—that of people converting one currency to another for financial advantage—forex has been around since nations began minting currencies. But the modern forex markets are a modern invention. After the accord at bretton woods in 1971, more major currencies were allowed to float freely against one another. The values of individual currencies vary, which has given rise to the need for foreign exchange services and trading.

Commercial and investment banks conduct most of the trading in the forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors.

Spot market and the forwards & futures markets

There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market, and the futures market. Forex trading in the spot market has always been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading and numerous forex brokers, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future.

More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal." it is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.

Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement.

In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves.

In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the chicago mercantile exchange. In the U.S., the national futures association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement.

Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

Note that you'll often see the terms: FX, forex, foreign-exchange market, and currency market. These terms are synonymous and all refer to the forex market.

Forex for hedging

Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market. Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed.

To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate. For example, imagine that a company plans to sell U.S.-made blenders in europe when the exchange rate between the euro and the dollar (EUR/USD) is €1 to $1 at parity.

The blender costs $100 to manufacture, and the U.S. Firm plans to sell it for €150—which is competitive with other blenders that were made in europe. If this plan is successful, the company will make $50 in profit because the EUR/USD exchange rate is even. Unfortunately, the USD begins to rise in value versus the euro until the EUR/USD exchange rate is 0.80, which means it now costs $0.80 to buy €1.00.

The problem the company faces is that while it still costs $100 to make the blender, the company can only sell the product at the competitive price of €150, which when translated back into dollars is only $120 (€150 X 0.80 = $120). A stronger dollar resulted in a much smaller profit than expected.

The blender company could have reduced this risk by shorting the euro and buying the USD when they were at parity. That way, if the dollar rose in value, the profits from the trade would offset the reduced profit from the sale of blenders. If the USD fell in value, the more favorable exchange rate will increase the profit from the sale of blenders, which offsets the losses in the trade.

Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forward markets, which are decentralized and exist within the interbank system throughout the world.

Forex for speculation

Factors like interest rates, trade flows, tourism, economic strength, and geopolitical risk affect supply and demand for currencies, which creates daily volatility in the forex markets. An opportunity exists to profit from changes that may increase or reduce one currency's value compared to another. A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs.

Imagine a trader who expects interest rates to rise in the U.S. Compared to australia while the exchange rate between the two currencies (AUD/USD) is 0.71 (it takes $0.71 USD to buy $1.00 AUD). The trader believes higher interest rates in the U.S. Will increase demand for USD, and therefore the AUD/USD exchange rate will fall because it will require fewer, stronger USD to buy an AUD.

Assume that the trader is correct and interest rates rise, which decreases the AUD/USD exchange rate to 0.50. This means that it requires $0.50 USD to buy $1.00 AUD. If the investor had shorted the AUD and went long the USD, he or she would have profited from the change in value.

Currency as an asset class

There are two distinct features to currencies as an asset class:

You can earn the interest rate differential between two currencies.

You can profit from changes in the exchange rate.

An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Prior to the 2008 financial crisis, it was very common to short the japanese yen (JPY) and buy british pounds (GBP) because the interest rate differential was very large. This strategy is sometimes referred to as a "carry trade."

Why we can trade currencies

Currency trading was very difficult for individual investors prior to the internet. Most currency traders were large multinational corporations, hedge funds or high-net-worth individuals because forex trading required a lot of capital. With help from the internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets, either through the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance.

Forex trading: A beginner’s guide

Forex trading risks

Trading currencies can be risky and complex. The interbank market has varying degrees of regulation, and forex instruments are not standardized. In some parts of the world, forex trading is almost completely unregulated.

The interbank market is made up of banks trading with each other around the world. The banks themselves have to determine and accept sovereign risk and credit risk, and they have established internal processes to keep themselves as safe as possible. Regulations like this are industry-imposed for the protection of each participating bank.

Since the market is made by each of the participating banks providing offers and bids for a particular currency, the market pricing mechanism is based on supply and demand. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing.

Most small retail traders trade with relatively small and semi-unregulated forex brokers/dealers, which can (and sometimes do) re-quote prices and even trade against their own customers. Depending on where the dealer exists, there may be some government and industry regulation, but those safeguards are inconsistent around the globe.

Most retail investors should spend time investigating a forex dealer to find out whether it is regulated in the U.S. Or the U.K. (dealers in the U.S. And U.K. Have more oversight) or in a country with lax rules and oversight. It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent.

Pros and challenges of trading forex

Pro: the forex markets are the largest in terms of daily trading volume in the world and therefore offer the most liquidity. this makes it easy to enter and exit a position in any of the major currencies within a fraction of a second for a small spread in most market conditions.

Challenge: banks, brokers, and dealers in the forex markets allow a high amount of leverage, which means that traders can control large positions with relatively little money of their own. Leverage in the range of 100:1 is a high ratio but not uncommon in forex. A trader must understand the use of leverage and the risks that leverage introduces in an account. Extreme amounts of leverage have led to many dealers becoming insolvent unexpectedly.

Pro: the forex market is traded 24 hours a day, five days a week—starting each day in australia and ending in new york. The major centers are sydney, hong kong, singapore, tokyo, frankfurt, paris, london, and new york.

Challenge: trading currencies productively requires an understanding of economic fundamentals and indicators. A currency trader needs to have a big-picture understanding of the economies of the various countries and their inter-connectedness to grasp the fundamentals that drive currency values.

The bottom line

For traders—especially those with limited funds—day trading or swing trading in small amounts is easier in the forex market than other markets. For those with longer-term horizons and larger funds, long-term fundamentals-based trading or a carry trade can be profitable. A focus on understanding the macroeconomic fundamentals driving currency values and experience with technical analysis may help new forex traders to become more profitable.

So, let's see, what we have: before entering the foreign exchange (forex) market, you should define what you need from your broker and from your strategy. Learn how in this article. At how to start forex