Forex is the largest and most liquid financial market in the world with an average daily turnover of $6.5 billion. This is getting really exciting and the next question to be asked is, how do I get my share of this daily flow of money in the financial markets?
This is known as retail traders, small and big players as well as players participate in financial transactions, low barrier to entry for a profit that provides corporate banks, hedge funds, commercial and Hedger a place at the table of forex trading, which is where I come in.
Are you excited to take on this huge ocean of financial transactions that move around the world every day?
And if yes? we are here with a comprehensive and basic guide on how to successfully conduct forex trading and how to make a profit from currency transactions.
How to start Forex trading
Is Forex Trading right for you?
Trading in financial markets is the only business in the world where the amount of wealth that can be obtained is unlimited! Forex trading can be a huge source of wealth, but like any other business, forex trading has its own unique difficulties, ups and downs, rules and principles that every profitable trader should see.
If you start your forex trading career correctly, it can be a life-changing experience, but if you don’t pay attention to discipline and the principles that are necessary to become a profitable forex trader, it can also be a detriment. your finances.
Starting a career in forex trading requires optimism, discipline, patience and the mindset that forex is not a get rich quick plan. If you have all these qualities now, you are on your way to becoming a successful forex trader in a few months.
For non-institutional and retail forex traders to participate in currency transactions together with major players. They cannot trade directly on the interbank market, but they trade with a registered foreign exchange dealer (forex broker), which acts as an intermediary and liquidity provider for retail traders and investors.
Determine your trading strategies
As a forex trader, it is very important to determine what kind of trading strategy suits your personality and stick to it. This will ensure your smooth sailing trading career. Forex trading strategies are as follows:
Scalping is a special type of short-term trading strategy that involves multiple short-term trades in one day, aimed at turning smaller profits (smaller pips) into a large profit.
Scalping is known as the fastest method of making a profit from the forex market and requires a special understanding of the price movement in the lower time frames (15 – 1 Minute chart) and the traded pair.
Daily trading is the most common trading and the most reliable trading strategy. It involves buying and selling financial instruments on the same trading day, so that all positions are closed before the next day’s trading activities in order to avoid unmanageable risks and negative price gaps that may arise.
This involves taking advantage of a price fluctuation by continuing a trade exposed to overnight and weekend risks for several days. Since trading is usually held for weeks, it needs to be supported by fundamental analysis.
This is a long-term trend that follows a strategy very similar to swing trading, but it is usually held for weeks and maybe months, which requires great patience and discipline. The position trader should be familiar with price increases and corrections in order to know when to exit part of the profit and how to manage the risk using stop loss or trailing stops.
Forex trading terms and terminologies
Getting started with Forex trading is relatively easy when you have the trading platform, but it is much easier when you have the knowledge of important market knowledge, trading terms and terminologies.
Currency pair: It is an offer of the relative value of one currency, known as the opposing currency, against another, known as the base currency.
CFD: refers to the Contract for Difference, which are derivative products that allow traders to speculate on financial assets such as stocks, forex and bonds without having to take ownership of the traded asset.
A CFD trade means that you agree to change the difference in the price of an asset from a point when the contract is open to the time when it is closed.
Commodity currencies: They are currencies that are directly affected by commodity products due to their heavy dependence on the export of their raw materials to generate income.
Currencies such as the Australian Dollar, New Zealand Dollar and Canadian Dollar.
Spread: This is the difference between the purchase price (sale price) of a financial instrument and the sale price (purchase price). The spread is the difference between the purchase price (purchase price) of a financial instrument and the Dec.
Long/short position: A long position simply refers to a buying trade made with the expectation that the price movement will rise, and conversely, a short position refers to a selling transaction made with the expectation that the price movement of a financial asset will fall less.
Pip: Pip means “dot as a percentage” for short. A currency pair represents the smallest change in the exchange rate. Profits or losses during trading are usually calculated in Pips.
Leverage: Retail forex trading uses the leverage provided by a broker to execute market orders and open trading positions that a retail account balance usually cannot to maximize profits.
Exchange rate: The rate at which the currency of one country (the opposite currency) can be exchanged for another (the base currency).
For example, if the GBP/JPY exchange rate is 3,500, it costs 1 Yen to buy 3.50 GBP.
Risk/reward ratio: Predefined loss-to-profit target for a specific trade. The most common risk-reward ratio is 1:3, that is, the trader is ready to risk $ 3 to earn $1.
Risk management: Forex trading requires taking a significant financial risk. Therefore, risk management is one of the most important skills in forex trading, which involves identifying, analyzing, minimizing and reducing risk.