If you are a beginner who is thinking of venturing into online Forex Currency Trading, this article will guide you in understanding more about Forex Trading and how you can use it to make money. Forex is basically a term used to describe the art of making money by trading currencies against each other.
Forex in another term is foreign exchange. I am sure most of you may have come across this term when you were in a foreign country and you needed to buy some local currency. Foreign exchange market trading has been in existence since mid-1970s until this day. However, unlike in the past, it has evolved to a more flexible form of marketing where anybody can get involved.
With the invention of internet and computers, you can simply sit at the comfort of your home and trade online without having to make a call or consult any bank.
Before you start getting involved in Forex trading, there are important things that you need to know. Forex trading is a gambling sort of game with a win and lose situation. You should only invest in Forex trading if you are ready to learn about Forex to understand how it works and how to run the game safely.
Important: Do not ever invest blindly in Forex trading, unless you have adequate knowledge and skills on how to go about doing the trading. What I am trying to say is only get involved once you have mastered the basic principles of how Forex trading functions. Make sure you have acquired adequate trading knowledge before going into the Forex market.
What is Online Forex Currency Trading?
For you to get started and understand better about online Forex trading, you should first familiarize yourself with some of the most commonly terms used such as; Forex, online Forex brokers, jargon, trends, indicators, instruments, base currency etc.
Forex trading is a huge business and there are millions of people from all over the world doing this kind of business. The daily world transaction on foreign trade is estimated to be around 1-3 trillion, which is a big market that no other type of business can ever come close to those figures.
How to Make Money with Forex Trading?
If you want to make money by doing forex trading, then you have to understand the basics of currency trading. Forex trading is determined by supply and demand. The rates of exchange depend on supply and the demand of the currencies.
These rates are not fixed and they fluctuate many times in a day, depending on trade. When there is an increased demand in certain currency, it is expected that there would be more people selling that currency, which increases the currency price.
To get started on Forex trading, you need to have a reliable online Forex broker. There are many available online Forex brokers who can help you in buying and selling different currencies and in return, you will pay a small commission to the brokerage company from the trade that you make.
This is the reason why you should be very careful when selecting an online Forex brokers. If you end up with the wrong brokerage company, you would most probably lose all your investments.
Upon finding a reliable online forex broker, you need to sign up for a new account then fund your account. Most brokerage companies offer different ways of funding your account, so you will not have problem finding the right way to fund your account.
After depositing funds in your account, you can now use the fund to do Forex trading. Any amount of profit you make will automatically be added to your account and you can withdrawal it anytime you want.
Forex Trading Currencies
Forex trading involves dealing with different currencies, which are paired together. There are four main currency pairs that you will find; British Pound and USD (GBP/USD), Euro and USD (EUR/USD), USD and Japanese Yen (USD/JPY), USD and Swiss Frank (USD/CHF).
From the paired currencies, the first on the line works as the commodity and the second one is the money. For example, if you decide to choose Euro and USD as your trading pair, you will buy Euro against USD and when selling, you will sell Euro against USD.
Making money by Forex trading involves understanding currencies and knowing when to buy and when to sell. Selling currencies at higher rate than the buying price, is the only way of making money in Forex trading. How can you then know when to buy and how can you be able to predict the market outcome?
Learning Forex Trading
Predicting Forex trading outcomes lies in understanding the basic of Forex trading. There are two methods that are used to predict the market outcome;
- Fundamental analysis
- Technical analysis
1. Fundamental Analysis
This is a method that is used to predict the movement of currencies prices in the future. This kind of prediction is made by looking at the economical, political and any other incoming important economical event/news that may have a positive or negative impact on trading and involve the most developed countries like USA, UK, Germany and Japan.
For an example, if there is news that the economic situation of a certain country has improved, most people will start buying the currency of that country. This in turn will make the currency price to go higher due to increased demand.
2. Technical analysis
This is where you predict the direction of prices by use of price chart analysis and other analytical tools. These tools are what we call the indicators. Having technical analysis knowledge should be a must for anyone who wants to get involved in Forex trading. It may take you a few months to learn about technical analysis but in the end, it is very much worth the time and effort.
The good thing is that, there are readily available free materials on the internet. If you are determined and focused, learning can be very easy and an enjoyable experience. If you are planning to become a professional in Forex trading, you will need to have proper knowledge on both technical and fundamental analysis.
Lastly, if you want to get involved in forex trading, keep in mind that forex trading involves taking risk. There is possibility that you could lose your money but on the other hand, if you take your time to learn and understand how Forex trading operates, you can make a lot of money.
Forex trading is not like investing in stock market or something of sort. You do not need a lot of cash to start trading in Forex markets and if you know how to play your cards right, you can make a decent living by trading currencies at the comfort of your couch at home.