The word Forex means foreign currency. Currency exchanges take place between two countries. A lot of money changes hands every day in the world of currency markets. Forex traders buy and sell currencies in order to make profits.
Forex trading works by buying currencies at low levels and selling them at high levels.
Related: Top online forex brokers
When speculating on whether the value of the US Dollar will go up or down, you buy USD when they’re cheap (when their value is low) and sell them when they’re expensive (when their value is high).
Before you dive headfirst into the world of forex trading, you must know some basics about the forex industry.
Forex Trading Business – Learn the Basics
Before you start actually making trades in the forex market (or any other financial instrument for that matter), it is wise to learn some of the basic rules and terms associated with the trade.
1. Pairs
Foreign Exchange (FX) trading is different from other stock markets in that you trade both buying and selling currencies simultaneously.
You need to buy currency pairings like USD/EUR or EUR/JPY. The current market rates will determine the purchase prices for each pairing.
2. Fix Hours for Trading
Unlike other markets, foreign exchange (forex) trading operations operate 24/7. However, Saturdays and Sundays are closed.
3. Risk Factor
Forex trading involves a lot of risks. If you don’t have enough money to invest, consider whether you really want to get involved.
4. Forex Brokers
You can’t trade currency of your own. You must have to take aid from a broker. You must select a forex broker, and then you have to create an account with them.
The good thing is that you have to put in a lot of money to start an account nowadays. You can start a forex investing account even with a minimum of $5.
All forex brokerages will usually offer you a platform where you can deposit or withdraw funds for currency buying and selling; they will also help you with technical analysis.
5. Pips
Pip is the most commonly used word in the Forex market. It is the lowest denomination of exchange rate change. For example, when the price of EUR/USD swings from 1.5222 to 1.5220, the difference is called one pip (1.52221 – 1.52220 = 0.0001).
6. Spread
Spread is the difference between the buy price and the selling price. It represents the earnings of a broker.
You will be exposed to many different terms when you begin investing.
Working with a broker is a wise choice if you’re just starting out.
Select a Forex Trading Platform
Before finalizing your choice of forex broker, look at various forex forum posts and read customer reviews.
Once you’ve finalized the forex brokerage firm, open a demo or practice trading accounts first. Get familiar with the procedures and then begin investing. Forex Broking firms like, XM, FXTm, etc offer demo or practice trading accounts.
Finally, we advise anyone starting out in the forex market to make sure they have enough capital to cover losses. Forex trading can be very profitable, but it also carries a lot of risks. Don’t start investing any funds here unless you can handle losing them.
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