Even investors usually only know currency trading from their vacation trips. The foreign exchange market is many times larger than the stock market. With $100bn being traded on the stock market daily, compared to over $6tn on the forgein exchange markets. In forex trading, traders rely on changes in exchange rates. In this article you will learn how Forex trading works and how you can become a Forex trader too without qualification.
FOREX TRADING – HOW TO USE THE FOREX MARKET
You probably know the counters from your vacation trips where you can exchange money for another currency. If you go to the USA, you will exchange Pound Sterling for US Dollars. If you are flying to Japan, Japanese Yen is the currency of choice. But as a trader you can also trade these currencies from your computer. Huge profits can be made on a day to day basis trading these currencies. All you need to get started is a trading account, small amount of capital, the right education and a mentor.
ADVANTAGE #1: THE TRADING HOURS IN FOREX TRADING
With multi major forex markets across the world means you can trade from anywhere in the world at anytime. Have you ever waited expectantly for the opening price of a share? Forex traders don’t have to wait. With a few exceptions, foreign exchange trading takes place around the clock. And you too can participate in forex trading practically at any time through your Forex broker.
ADVANTAGE # 2: THE LIQUIDITY IN FOREX TRADING
There are also other conveniences: you don’t have to wait long for your order to be executed. Because: The foreign exchange market is by far the largest financial market in the world and offers liquidity in abundance; Every day, currencies with a volume of around six trillion (6,000 billion!) US dollars change hands – a 60 time multiple of the turnover on stock markets.
And if you are now wondering where the heart of foreign exchange trading beats, where the business is brought together, the answer is sobering: Foreign exchange trading spans the entire globe. Foreign exchange transactions mostly take place in over-the-counter interbank trading using electronic systems. In contrast to the stock markets, there is no such thing as “the” Forex exchange.
FOREX TRADING BASICS
This is how Forex trading works with your Forex broker. For example, you expect the US Dollar to rise against the Euro in the near future. In the short term, the chart technique, which is important in currency trading, also speaks in favor of a rising US dollar. And in the medium term, you are convinced, rising interest rates in the US will further weaken the Euro. You are therefore selling Euros against US Dollars. The means to make a big profit, but first there are still two technical terms to learn.
UNDERSTAND LOT AND PIP
They are called Lot and Pip and are the be-all and end-all in Forex trading. A lot denotes the size of the foreign exchange transaction: 100,000 units in the base currency. In the meantime, however, there are also smaller lots: a mini lot comprises 10,000 units and a micro lot only 1,000 units.
Pip, on the other hand, is the smallest possible price movement: unlike paying for goods in the supermarket, where the smallest price change is exactly one cent, the minimum on the foreign exchange market is significantly lower: Currency trading takes place up to the fourth digit after the decimal point (not including JPY).
WHAT TO DO NEXT?
It has never been easier to start trading the Forex markets, with an internet connection, a computer and a small amount of capital, you can learn to trade Forex markets from anywhere in the world. But before you start trading, it’s important to receive a high quality trading education. Financial Markets Online offers an array of courses covering the foundation topics that all new traders need to master before entering the market, all the way through to an advanced level, where traders can look to trade full time with company funds.
Head to www.financialmarketsonline.com to browse through their entire course offering.
