Forex stands for international currency market where you can buy and sell currencies in pairs. Although still a young market compared to other financial markets, it’s the most attractive and available to individual traders. Every day’s turnover exceeded an amazing four trillion dollars. This sum exceeds three times the total turnover of all stocks in the world. Like every market, Forex has its own assets for trade, and these are currency pairs.
How to earn money on Forex?
Trading currencies is made in pairs, one against the other. For instance, buying USD for AUD and quoting USD/AUD means the quote of USD against the Australian dollar.
The market is relying on the leverage effect. In fact, a trader can start trading with $100 000 by only depositing $100 bucks. How is it possible? Thanks to the leverage, obviously. You can borrow the money from the broker, and that operation stands for leverage in trading. This effect multiplies the size of your account and can be seen in ratios from 1:100 to 1:1000.In our case, $99 900 represents the borrowed sum, e.g. the leverage you use to have greater exposure on the market. Your investment is only $100.
One Forex lot is usually 10 000. When you use ten lots, it means $100 000 in total. By trading with such large sums on the market, the slightest fluctuation in the price of the currency can bring you a profit. For investing 100 you can earn $100 if only the price fluctuates for one pip; for instance, movement of 0.01, 12750 into 12850 is 100 000 x0.01 comes to $1000.
Where does one start trading Forex?
The best thing you can do when you start trading Forex is to open a demo account. It’s a special and very useful tool designed for beginners. It works in a way that you don’t have to deposit real money on the account to start trading. It allows traders to practice without risk and stress. Once they get confidence, it’s time to start trading more seriously.
The experience you get from a demo account is amazing, while on the other hand, you don’t risk your hard-earned money. Some brokers even offer real money bonuses while you are just trading on a demo.
Finding the broker
Finding your reliable broker is one of the most important steps you will make during your trading journey. Here is why? If you are new to the market, you will be paid with so much information about the brokerage services from all around the globe.
And all of these might look ok to you. However, never forget, it’s just like choosing your banks. You entrust your money, and it’s crucial to know whom. Before opting for brokerage service, peruse the brokerage reviews, such as invcenter review, to see amounts of information about their trading practices.
It’s not enough sticking only to one review. Make an effort and read more of them comparing what they have in store. Of course, you finally pick the one that is in line with your trading plan. And, of course, the one that is regulated and transparently operates the business in your country.
Creating the trading plan
A trading plan is an indispensable tool when you enter whatever market you choose. In Forex, you must make notes about exit and entry points, times of the day you entered and closed the trades, the amount you expect to win or lose daily, monthly and even yearly. Also, make sure to make a list of currency pairs that attract you the most, be it stable or exotic currencies, and enlist the factors and events you will follow to make better trading decisions.