In recent years, many people have taken up Forex trading as a hobby and some have even turned it into a living or lifestyle, but what is it and how can you get started?
We’ve delved into the world of forex trading and produced your essential guide on what you need to know:
What is Forex Trading
Years ago, trading was only available to a select few, but in this modern world, it is now possible for anyone to trade from anywhere. Forex trading is short for Foreign Exchange trading. Many people already do it without realizing it!
When you go on holiday you might find yourself looking at how much foreign currency you can get for your local money, and you wait for the best time to buy, when you return you wait for the best time to sell – that is very similar to forex trading!
Choosing the Right Trading Broker
Doing your research before signing up with a broker is important as they’re not all the same. Here are some things to look for when choosing the best currency trading platform. First and foremost, make sure they’re authorized and properly regulated to carry out this activity. A reputable company will give details of where and by whom they are regulated.
The platform should be easy to use, and a good broker will allow you to open a demo account to try it out, some will even offer bonuses when you deposit funds into a live trading account. Check the “spread” offered, the tighter or lower the spread the better. Exceptional brokers will offer swap-free trading which traders of Muslim faith can take advantage of.
More Than Just Forex
A good broker will offer many different asset classes and instruments, sometimes more than 1,000 instruments to trade, for example, you might not be limited to forex trading, you may be able to trade soft commodities such as coffee and sugar or hard commodities such as gold and oil.
It’s important to understand that when you trade like this, you never actually own the asset, so you don’t need to worry about a truck turning up with 10,000 liters of crude oil!
When you place a trade, you are simply choosing if you think the price will go up or down, and the broker’s instruments are designed to follow the asset’s price without exposing you to owning it.
Education – The Long and Short of It
A reputable broker will not leave you to fend for yourself. They’ll have a range of educational tools and may provide some trading strategies to get you started. Some will offer news information and market analysis to help you.
They should explain how the fees and commissions work, as well as introduce some of the terminologies such as “Long” meaning you think the price will rise, and “Short” meaning you think the price will fall. One of the beauties of trading is that you can make money if the price goes up or down.
How Much Do I Need to Get Started?
This will vary, but good brokers will let you open an account with as little as USD 100. That might not sound a lot, but because they offer the benefit of leveraged products, even a small trade can produce huge gains.
The amount of leverage varies but you can expect a good broker to offer anything up to 500:1, meaning that a USD 1 trade is equivalent to trading USD 500, so even with a small position size, a small movement in an instrument’s value can give rise to a huge gain.
Trading on The Move
The best brokers will offer several ways to trade so that you can keep trading wherever you are, even on your lunch break. Look for brokers who offer trading apps as well as web-based options, and trading via MT4 and MT5 platforms.
Trading leveraged products such as Forex and CFDs carries a high level of risk and may not be suitable for all investors. There is a possibility of losing all your initial capital. For full risk information, make sure you read the information provided by the broker.
With just a few clicks of the mouse, you can register with a broker and start your journey, but make sure they are a reputable company. Check testimonials and see if they’ve received any awards, for example, best customer service or best mobile app.