Information For Amateurs On Foreign Exchange Trading
The foreign exchange market is one of the largest and most successful markets globally trading over $5 trillion each day. The market is traded not only by individual and retail traders, but by banks, corporations and hedge funds as well. Due to this allowance for any trader, the forex market has increased interest among investors and the lay person.
Unlike various other investment markets, the forex market has no central base making it an over-the-counter trading industry with different exchanges in different countries. This decentralisation allows for greater competition among the trading brokers, which allows retail traders to receive the best prices possible. The foreign exchange spot market has 24-hour operating times for 5 days per week where traders are allowed to trade any currencies. Furthermore, the currencies can be traded on the same or different days – it is all dependent on the trader’s choice.
Foreign Exchange Trading Happens In Pairs
To engage in foreign exchange trading a trader must understand what a trade is and how it takes place. All trades are conducted in pairs where a trader works with two currencies simultaneously. A single trade occurs when he buys one currency and sells another at the same time. The initial currency in the pair is known as the ‘base currency’, and the second in the pair is the ‘counter currency’. The value the pair indicates shows the amount of counter currency the trader needs in order to buy a single unit of the base currency. This is the procedure when one is buying, if one is selling currency the opposite applies.
The most frequently traded currencies in the forex market are USD/JPY, USD/CHF, EUR/USD and GBP/USD.
Begin With A Demo Account
Many novice traders enter the market immediately after purchasing a trading account. This is a mistake. It is true that they will make profit on trades, but they will also incur detrimental losses due to a lack of industry knowledge. Rather, begin with a demo account until you have attained some understanding of forex trading.
These demo accounts or practice accounts can be obtained from online trading firms. Certain firms allow beginner traders to download this software and utilise this platform in order to experiment with the market while learning about the FX market and industry. This software allows you to run live accounts using real money and is the same software the firm’s live traders use.
The software enables individuals to choose specific currency pairs, decide on the level of risk, track the times and dates of the placed trade, and decide on the length of time you wish to remain in and exit the trade. You will also have the option to limit or end trade orders.
Attending Demo Account Webinars
Often the online trading firms who offer these demo accounts host demo account webinars, or online seminars. These webinars are generally run by professionals within the field such as financial strategists or expert traders. It is advised novice traders attend these events as they are highly informative and will contribute greatly to your trading knowledge.