GETTING STARTED WITH FOREIGN EXCHANGE TRADING

This article is set to teach the beginners an appreciation of foreign exchange trading. It is not the whole aspect of what you need to know when trading in foreign exchange. You will need to visit our blog after you may have read this article for detailed knowledge build in respect of foreign exchange trading.

Trading on foreign exchange currency is the world largest international currency trading. The usual traders that you see taking part in this trade are mainly Bankers and Professional Accountants.

If you are to trade on online foreign exchange currency, you are expected to go through a MT4 brokers who is your consultant or an advisor. Nevertheless, there is no rule that prevents you from learning the ropes.

The foreign exchange currency market is a financial marketplace where sellers and buyers meet to transact. The world largest banks dominate the foreign exchange currency market, and to buttress this point,

a survey in the Wall Street Journal Europe revealed that the 10 most active traders in the foreign exchange currency market form about 73% of the total trading volume of the market. This is a testimony to the fact,

it is a huge market and the world’s largest international currency trading. However, the remnant of 27% of the market is involved in the trade for the purpose of speculative trading with a view of building up their

investment which they intend to liquidate sometimes later for the aim of taking profit. The currency may either decrease or increase in value, which is relative to a wide range of currencies. You are to note that,

all foreign exchange transactions are based on the pairing of currencies with others. For an example, the Euro may be strong against other currencies, but traders will restrict their trading to only one currency. You may just concern yourself with only, for example, Euro/USD. Do not forget the market is global, and as earlier mentioned, the volume is very large and vast. The following are the benefits derivable for the large corporate investors in the foreign exchange market:

1. Huge liquidity: - there is as much as $4Trillion per day. This means that there is always an availability of trader who is willing to trade with you.

2. All currencies of the world that is free are traded in. It does mean that you may trade the currency you want at any time.

3. 24 hours and 5 days a week. This means that, during these five days of the week, it does not matter the time of the day, you will always have traders to transact with.

4. Operations are globally based. It then means that you can choose who trade with from any part of the world at any time.

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You may be thinking, what benefits are there for small traders like you. Do not fret, the following are what you get in trading in online foreign exchange currency.

  • A dynamic and rapidly changing market: - this is a market that is constantly changing and creates an avenue for you to make money.
  • There are well-developed mechanisms to control risk and enhance the safety of your invested fund.
  • There is the ability to go either long or short. This is explained to mean that you can make money either when the market is rising or falling. It is your decision at this time and ability to be able to identify that period.
  • Leveraging trading: - This is also explained to mean you can benefit from large trading volume even with your relatively low capital outlay.
  • There are lots of options for zero commission trading.

HOW DOES THE FOREX MARKET WORK?

Do remember that the market is all about trading in foreign exchange currencies and it works on the pairing of one currency against the other. An example of currency pairing is the Euro against the United States of America Dollar. It is denoted as this Euro/USD. The basic tool for trading in foreign exchange is the exchange rate itself. It is expressed as a ratio between the values of the paired currencies such as Euro/USD equals 1.4086. This value which is referred to as the “Forex rate” means that one Euro will be worth $1.4086.

The rate is always expressed to 4 decimal places. You must not forget this basic fact. Also, the base currency is always coming first, while the paired one is the second. In the example of Euro/USD, the base currency is the Euro and the paired is the USD. Your trading or buying currency is, therefore, the EURO.

The rightmost digit of this ratio is often called a “PIP”. This is explained in this example, a change from EUR/USD = 1.4086 to EUR/USD = 1.4088 would be referred to as a change of 2 pips. One pip, as you may later come about, is the smallest in foreign exchange currency trading.

IS TRADING IN FOREIGN EXCHANGE CURRENCY RISKY?

Trading in online foreign exchange currency is totally a speculative activity. Therefore, for the fact that it is speculative, it then means that there is an element of risk involved. It is on this understanding; if you are not prepared to lose your money, do not invest that money which you know too well, a loss of it will have a devastating effect on you.

In order to reduce or minimize your loss on the foreign exchange trading, then you owe yourself a duty of searching the internet for tutorials that will afford you the basic knowledge required by you to trade. Again, it is advisable for you to set the limit from the beginning the loss you can contain.

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