Forex Trading Basics
If you’re a beginner that just got into investing in currency, you probably don’t know yet what are the best ways to make money. Forex, or Foreign Exchange Market, is the biggest market in the world, it has the most liquidities and it’s available worldwide, not just in one single location. Since people from all over the world trade on it, the market is open 24 hours a day during the work week, making a pause only during the weekends. Forex trading is one of the most popular ways of making money.
Another name for it is FX and the market does just what it says, it allows investors and traders to exchange currencies for one another. While this is a market, there are no goods being traded here. The currencies themselves are the ones which are exchanged and the entire thing is more of a barter, not a trade. The Forex trading is done in currency pairs all the time and you’re basically using the purchasing power of one currency to get another currency. The exchange rate at the time of the trade decides just how much of the other currency you’re getting. You could trade USD for EUR, or you can use Japanese Yen to get Swiss Franks. The market gives you the possibility to sell or buy any currency in the world, as long as it’s a free currency, not a fixed one. Though there is a huge number of currencies which can be traded here, there are certain pairs of currencies which are preferred by investors, thanks to the power of the economies of the countries which issue them. The four biggest currency pairs which are traded the most on Forex are the Euro to US Dollar, the British Pound to US Dollar, the US Dollar to Japanese Yen and the US Dollar to Swiss Franc. Most of the Forex traders like trading in juse these currencies, to keep things simple. There are some though, which will analyze the market and will adapt, using whatever currency gives them the better chance at a nice profit.
Demand and supply is important here as with any other type of trading and since companies from all over the world need other currencies for their importing or exporting, they end up buying or selling currency at all hours during the day or night, depending on the timezone that they’re in. It doesn’t matter what time zone you’re in, you can trade on the Forex market non-stop, for five days a week. The only time when the Forex market closes is during the weekends.
The Forex market is the biggest one in the world and there is an astonishing number of trades being done on it every single day. This market is actually around 30 times bigger than the biggest financial markets. There is a huge number of trades being done and since you can trade with so many different investors, you will always find a good deal. Investors find the Forex market quite attractive and for good reason. This market can make you rich or it can make you lose a lot of money, depending on how good you are and how you can predict the trends of the exchange rates.
Besides the many opportunities, the Forex market has some advantages for investors, which other tools of trading don’t offer. One example would be that on Stop orders there isn’t any slippage when the Forex market is open.
If you’re looking to get started with Forex trading, you should pick a forex trading platform which is available online. You can use these online systems to help you get started, as they come with helpful tutorials and trading alerts which should make your job easier.
Strategies
As a beginner you need to decide what strategy you want to follow. Are you the type of investor which invests with a long term goal or do you want to get your money out as quickly as possible? Short or long term, is a decision you should make, depending on the money you have, your temperament and any other factors which might be unique to you. Both methods can be very profitable, so it’s up to you to decide which one will work best for you and your personality.