How to get started with Forex trading: The basics
A newbie in the field of Forex trading needs a place to start. To be honest, those who have what you can call a ‘no sense of direction’ upon entering the world of Forex are faced with nothing but sheer failure. To be honest, before actually getting down to making a successful trade in the most volatile and liquid market, it is necessary for you to pay attention to certain bits of preparations that are totally important. Knowing about the much-dreaded Forex market is essential, and practicing with a demo account certainly helps. These are actually the basics of entering the Forex market. Opening an account with a highly reputed broker and getting acquainted with the various market terminologies and trends also sets you one step ahead of the game. However, to give you a bit of a head start, discussed below are certain basics that you should understand if you want to trade in the Forex market in a successful manner:
What’s the exchange rate?
At large, the Forex exchange rate is the value of a certain world currency with respect to another world currency. It represents the amount of quote currency (second currency while quoting currency pair) that is needed to achieve the precise amount of base currency (equal to 1 monetary unit of exchange).
How do I actually indulge in trading currency?
Forex trading is done in various loads like the macro lot, which is around 1,000 units of a currency. The mini lot is 10,000 units of the base currency. A standard lot is 100,000 units. There are three sessions in which the actual trades need to be carried out. These are inclusive of the European trading session, Asian trading session and United States trading session. The main currencies of each market are traded during these market hours, and what you need to know is the basic fact that various currency pairs have additional volumes during certain sessions.
Pairs and Price Interest Point
Forex trading is done in pairs where a trader can buy one currency and sell another. On the whole, the Forex market is quite unlike the stock market where only a single buying and selling transaction of stocks is carried out. All currencies are priced out to the fourth decimal point. The term ‘PIP’ stands for Price Interest Point, and typically, it is considered as being the minimum increment of trade. One pip in a micro lot corresponds to only a 10 cent move in the price where losses are easier to manage. One pip in a mini lot represents one dollar, and ten dollars in the standard lot.
How do I gain knowledge about the Forex market?
The first and fore-most task of an online trader is to get to acquire a basic insight into his very own trading details and strategies. For this reason, it is highly recommended for you to acquire a detailed Forex trading education before actually starting to trade in the live market. Various types of books are available in the market that will help you greatly in this regard and will help you gain profits in all your trades. If you don’t have any past knowledge and experience about the transactional condition of currency trading, then Forex trading is going to turn out to be a difficult task for you. You must understand the basic Forex terminologies like exchange rate, long position, short position, bid price, ask price, spread etc.
Start Trading With a Forex Demo Account:
Begin with a Forex Demo Account. Beginners fail to succeed due to lack of practice and experience, discipline and knowledge. Forex Demo Market sharpens and improves your skill before you enter the real market of Forex trading.
Money Management Approach:
Experts suggest not risking more than 2-3% of the total trading account in the Forex market. Money Management approach should be done in such a way so that a trader can continue in his field in a long-run even in critical and adverse conditions.
Observe The Trend:
While Forex trading a trader must give proper attention and follow the trend of the Forex market in order to attain his desired goals. You can maximize your chances to succeed by observing the trend or by making your own trend.
Educate Yourself about the Leverage
Leverage is both useful and harmful. One can make a large trade even with a small capital .Most brokers allow leverage from 50:1 to 400:1. The result can be disastrous if it is not utilized properly. Forex trading is thus an excellent choice for people with low capital to earn huge profit.
Familiarize Yourself with Reading the Charts
To know about the different types of chart before starting to trade is absolutely essential. The working of the charts should be clear in the mind. Time frames allow us to understand the nature of the market. Short time frames provide an idea about the movement of the market minute to minute while the larger ones give us a general idea about the larger trends. Before starting forex trading one must give ample time to study the charts and analyze the market.
Research Different Brokers
Before actually making an account and starting to trade, researching different brokers is necessary to find the one that is suitable for you. The ones with more than ten years of experience should be preferred in this regard to be honest. Also, look at the different products offered by the broker and reviews about them. This will make sure that you have a smooth experience while conducting your trades in the Forex market.