Getting into FOREX trading is actually very easy. In this guide, I will show you how you can start trading currencies on the foreign exchange market. The trade Forex Market has nearly $6 trillion in revenue every day. Forex is one of the most profitable investment vehicles today, but it takes hard work to be a consistently profitable trader.
To be a day trader is a job. Just like the most profession it requires education and practice to get there. Trading even requires a proper mindset, the right habits and balanced daily routine.
Let`s dive in…
Find Broker and Open Account
You will transfer your money to your broker`s bank account, so you have to be extremely considered. I suggest you deal just with well-regulated brokers. A good broker must be registered and regulated by a financial authority. You can choose you in the country but I suggest you consider political and legal risk as well.
Take your time and compare a few brokerages regarding trading costs, platforms and mobile applications. Also, look into products/instruments to see what you can trade forex.
Learn the Basic Jargon at least
LEVERAGE simply allows traders to control larger positions with a smaller amount of actual trading funds. In the case of 50:1 leverage (or 2% margin required), you have control on a $100 position with $2 from your balance.
For example, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1.
MARGIN is the amount of money needed as a “good faith deposit” to open a position with your broker. Margin is being expressed as a percentage of the full amount of the position. For example, most FOREX brokers say they require 2%, 1%, .5% and so on.
In trade forex, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1. You’re now controlling $100,000 with $1,000.
SPREAD represents two prices: the buying (bid) price for a given currency pair, and the selling (ask) price. Traders pay a certain price to buy the currency and have to sell it for less if they want to sell back it right away.
SWAP rate is defined as an overnight or rollover interest (that is earned or paid) for holding positions overnight in foreign exchange trading. The payment is based on the difference between the interest rates of the base and quote currencies. It can be negative or positive So, is it like you will be losing or winning some sort of money for holding overnight positions.
Install Trading Application
Your broker will provide you a trading application. I vote on MetaTrader 4. This a great and very well developed trading platform. Of course you can choose any other platforms, they all stand for the same reason, to access the market. In our case we need access to the Foreign Exchange market in order to trade currencies.
From the website of your brokerage, you will be able to download the application. Follow the instructions the installation wizard will take you through all steps. Once you are ready the application will start most probably by itself.
Now you just need to log in to your trading account with the login credentials what you have received from your brokerage. Enter the details and check if you are connected. There you go, you are already on the market.
The most trading application has option to customise outlook such as colours and so on.
Pick a Your Currency Pairs
This is crucial to pick the right instrument. An instrument is a currency pair. I mean the right pair what is the most suitable for you. According to WorldAtlas there are 180 in currencies which are being use in 195 countries in the world. It is impossible to get familiar with all. Consequently it must be clear you have study currencies you are already familiar with.
To study a currency you have to study the economy. But a currency pair has a quoting and a base currency.
Set Trading and Money Rules
Buy Sell Close – Trade
BUY a currency pair if you believed that the base currency will strengthen against the quote currency, or the quote currency will weaken against the base currency.
Your profits will rise in line with every increase in the exchange price. Every fall in the exchange price below your open
SELL a currency pair if you believed that the base currency will weaken in value against the quote currency, or the quote currency will strengthen against the base currency.
Your profits will rise in line with each point the exchange price falls. Every increase in the exchange price above your open level will net you a loss.
LIMIT & STOP ORDERs