You’re probably reading this because you’re thinking of venturing into forex currency trading. Bear in mind that it’s a long road before you can trade confidently and profitably on your own – but the first step is learning as much as you can can about forex markets, and how to take advantage of them. Here are some of the basics you need to know about.
In forex currency trading, you always trade currencies in pairs. That means you buy one and sell another. For example, if you lived in the United States and you bet that the dollar was going to lose value against the British Pound, you would buy the pair GBP:USD. Conversely you could say you sell the pair USD:GBP. The result is the same: you’ve sold some of your own currency and changed it into another.
Of course, if you want to sell JPY:GBP and you live in America, you don’t have to go and first buy some Japanese Yen to sell – these are all ‘borrowed’ from your stock-broker. This is where some of the fees you pay when you trade forex come from. If this sounds a little confusing, you should try getting a practice account using forex simulator trading, which works exactly like the real thing but you use imaginary money.
Forex investments, or contracts, that are made using forex trading platforms are always geared, usually by a factor of 50, 100 or 200. This means that while you may have deposited $100 into your trading account, you have access to $20,000 worth of forex (with gearing at 200x). This is what makes forex trading so profitable, and also so risky. With a $10 investment at 200x gearing, you can easily make $100 in a few hours if the price moves up by 5%. You can’t get that kind of return anywhere.
Forex Trading Platforms
The days of investors phoning up their broker and placing orders are long gone. These days most trades are executed using sophisticated desktop software, they could get the forex trading software at, which can manage a lot of the hard thinking for you. You can also find strategies for them online and plug them in, so they trade the way you want to. You can even go as far as to install a trading robot. Most trades are actually executed by robots, and the average time a trade is held is just over a second.
This doesn’t mean, however, that you don’t have to do any strategising or work out any numbers – you still need to have a good understanding of technical analysis in order to make any kind of informed decision. If you can’t look at a chart of candlesticks with some filters on it and reliably predict the movement of the currency, you need do some more reading and practicing