For someone who is just starting out, foreign currency trading can seem like a daunting or somewhat complex endeavor, but once you get hold of the basics, it gets a lot easier. Your first task is to understand the foreign currency trading basics such as the key buzzwords and foreign exchange trading terms and get a grasp of how the market behaves, what drives market movements among other things.
Obviously the most attractive thing about Forex is the promise of making it big in a relatively short time frame, the market is so dynamic that it is possible to make fast money because foreign exchange rates can rise and fall rather quickly, however with the promise of huge gains comes the risk of big losses as well, since the market can be very volatile, it is also very easy to lose a lot of money quickly.
As most of us may have experienced, especially if you’ve had to make purchase of foreign currency for a trip or vacation, exchange rates are in constant flux. For instance there was a time i planned a trip and exchanged a thousand dollars into British pounds, as it turned out, i couldn’t make the trip, so i had to exchange the money back and it turned out that i actually made a profit, this was way before i started trading Forex and this piqued my curiosity and began my journey into the world of currency trading.
Traders deal in currencies hoping to turn a profit on every trade, but they don’t go through all the hassles of exchanging money at the bank, instead they deal through a broker. Today most Forex transactions are now processed online. Forex trading and stock trading share a lot of similarities, for instance there both have the same potential to trade in margins, this simply means that with a small balance deposited at your broker you can control much larger deals.
On the other hand, a key difference between trading currencies and trading stocks is that unlike stocks, you can easily trade currencies in other countries other than where you currently reside. This is what makes the Forex market international, this means you can execute trades in any two currency pairs regardless of where in the world you reside. Due to differences in time zones, the market is open 24 hours every weekday from Monday morning in Australia to Friday afternoon in New York.
In the market every country’s currency is represented by 3 letters: USD for the US dollar, CHF for the Swiss franc, GBP for the British pound, JPY for the Japanese Yen, EUR for the Euro, AUD for the Australian dollar, JPY for the Japanese Yen and CAD for the Canadian dollar. The rate of exchange between a currency pair can be expressed this way: GBP/CAD 2.19. This shows you that to buy one British Pound you will need 2.19 Canadian dollars.
If you are new to trading foreign currency, then you will be needing a good broker or investment management company that can be trusted. It will be absolutely worth it to do a bit of digging around, you can check online in forums or communities such as Reddit to find the companies that have lots of recommendations, also be sure to find out how long the company has been operating in the market and make sure you read through the terms and conditions of service so that you can be certain of what your liabilities are.
Another thing you should do when starting out is engage a bot that can trade for you, see our list of best Forex trading robots. A Forex trading bot is an automated software that can execute trades on your behalf. The Forex trading bot will execute trades on your behalf based on preset rules. There is usually the option of starting out with a demo account, with a demo account you can test out the whole system for a bit before you allow it execute trades with real money. There are lots Forex bots out there and most of these bots come with full instructions for newbie Forex currency traders. You can check out our list of the best Forex trading robots software.