Forex stands for foreign exchange and Forex trading means trading the currencies of various countries against one another. As an illustration, in America the currency in circulation is known as the US dollar (USD) and the currency in Europe is called the Euro (EUR). An example of a Forex trade transaction is to buy Euros and sell US dollars concurrently. The foreign exchange market is open 24 hours from Monday through Friday and you can earn money either by going long or by going short. Going long would mean to buy a currency pair and sell it at a later date while going short means selling a currency pair to start with and buying it later.
Normally, Forex trading is executed through a broker. As a trader, you will have the freedom to pick the currency pair you expect to change and set up your trading position accordingly. In the event you believe that a currency pair, such as EUR/USD, will go up after a period of time, you’ll be able to place a long position and buy the pair. After a period of time, when you see a rise in the pair, you’ll be able to sell the pair and turn a profit. It has to be mentioned that the currency pairs move up and down in terms of points called pips. When your predictions prove to be accurate, you profit from the trade. Nevertheless, there are actually equal odds of loss with a Forex trade. For this reason, it’s quite critical to trade Forex in a disciplined manner.
To begin with, choose a Forex broker who has a very good reputation with many years of experience in the market. Now choose the currency pair you would like to trade. In the beginning, it is much better to opt for EUR/USD to trade Forex. Down the road, you can also choose other extremely volatile pairs like USD/JPY.
Considering that the Forex market is unpredictable and volatile, it is always advisable to start trading with a practice account for no less than a month prior to trading with real money. That will help you in getting experience in the currency market. The price moves and data in a practice account are actually real time; therefore, you will be able to get hands-on knowledge and experience while using the practice account. This will additionally increase your self-confidence when you are trading with real cash.
While trading using a practice account, create your own personal approach with the assistance of current news, currency charts and patterns available on your trading platform. Study significant indicators such as moving average convergence divergence (MACD), moving average price, candle stick patterns and parabolic SAR. These are extremely significant indicators and you should create your trading strategy using these types of indicators. This will boost your chances of making decent money from the marketplace. It’s advised to trade during the busiest hours of the marketplace between 13:00 GMT to 16:00 GMT when the London session and the US session overlap in order to earn maximum profit. Yet be cautious since there are equal probabilities of loss also.
As a result of gaining experience with your practice account, start out with a small investment. Begin trading with the help of indicators and current news events. Don’t panic and keep focused regardless of whether you lose at first. Analyze your approach periodically and make needed adjustments. Over a period of time, you will be able to earn good income with Forex trading.