Foreign exchange or Forex is the most widely studied and actively traded financial market in the world. That is why a lot of people become interested and start to wonder about it. Due to its liquidity, volatility, accessibility, relatively low costs upon entry, leverage, and a wide range of currency pairs, it is a popular market among beginners as well as market veterans.
Forex trading volume increased by 40% since 2010 while daily turnover hit $6.6 trillion in 2020.
What is forex trading? It refers to the exchange of different currencies using a system of buyers and sellers. Using the exchange rate’s fluctuating prices, currency prices are traded with the goal of having profits.
Want to know how to get started? Here are some tips for beginners in forex trading.
- Study more as much as you can about the financial market
Step back and learn more about the market before going into it. Research how it works, the trading hours, how you will trade, and other important details to know if forex is really the suitable market for you.
- Trading of Currency Pairs
The forex market is always traded in pairs. The three types are the following:
- Major Pairs- it is traded in US dollars (USD) with another major currency such as Euro or EUR/USD, British pound sterling or GBP/USD and Japanese Yen or USD/JPY. Other major currencies such as the Swiss Franc (CHF), the Australian Dollar (AUD) and the New Zealand Dollar (NZD) can also be pair with the USD.
- Minor pairs- these are currency pairs that do not involve the USD such as JPY/EUR.
- Exotic pairs- these pairs involve a major currency paired with a minor currency such as THB (Thai Baht).
Major pairs exhibit high volume and volatility while minor and exotic pairs have less volume and so have less movement.
- Study How to Analyze Charts
A trading style that depends on historical charts to predict future prices is called Technical trading. You will need to choose and learn a certain trading strategy if you are interested in learning how to read charts. There are a lot of styles and methods and you need to research to identify a strategy that is best suitable to your trading style and goals.
Practice with a sim or a demo account as you learn a trading strategy. Create a practice account in forex platforms since many of them offer it to beginner traders. Using a practice account will help you to feel the market and the price movements. With this, you can practice a trading strategy without placing real money.
- Find a Right Broker
Find a broker that will cater to your trades after mastering your trading with a demo account. Finding the right broker should take a lot of considerations such as fees, trading platforms they are associated with, currency pairs they offer, and customer service.
Forex is One Step at A Time
Trading requires patience whether you are new to trading or just new to forex. Every individual has a different learning time. Some can learn to trade in a few weeks, while some might need a few years. Do not stop answering “what is forex trading”, keep on practicing what you have learned.
Forex Trading is a complex subject matter with many players and many methods of playing. Even the professional traders who trade for so many years keep practicing and make it a point to continue learning.