Before cryptocurrencies exploded on the scene, traders focused on a tried and tested avenue for investments, the foreign exchange (forex) market. In fact, Finance Magnates reports that the forex market has experienced over a 40% increase in its trading volume over the past decade, giving it the most significant growth among financial markets.
Foreign exchange trading is an investment strategy wherein an individual gains profit from the fluctuation of one currency against the other, much like conducting currency exchanges during a trip.
Thousands of traders trade forex every day, pushing the daily trade volume over $6 trillion. If you’re interested in getting started with forex trading, here are the key things you need to know:
What is Forex Trading?
Traders can earn more money from one currency against the other based on their country’s inflation rates, interest rates, account deficits, debts, and economic performances. Forex trading is often conducted through the following currency pairs:
• EUR/USD
• USD/JPY
• GBP/USD
• AUD/USD
• USD/CAD
• USD/CHF
• NZD/USD
How Can You Start Trading Forex?
Learn the Basics
Thanks to technology, you won’t need to hire a broker or financial advisor to learn the basics of forex.
Since forex trading can be complicated at the start, Firepipsfx provides forex trading information and educational materials geared towards young investors who want to trade successfully. This platform was founded by forex trader and trainer Jeffrey Benson who provides free forex strategies, analysis, tools, and courses for younger traders who want to dip their toes into forex.
Open a Brokerage Account
Brokerage platforms allow you to buy and sell currencies, and are often essential for serious traders.
Brokerage platforms are essential, and can affect your success in trading. MetaTrader 4 by FXCM is a platform that allows forex traders to set up stop loss orders and control their positions to minimize losses. This platform is also helpful for beginner traders who want to invest in micro lots and follow various trading strategies to get a grip on the fundamentals of forex trading. Opening an account in a trusted platform is one way you can minimize your risks and improve your trading strategies.
Follow a Trading Strategy
If you want to gain high returns from forex trading, you’ll need to follow a strategy that increases your chances of earning profit.
Our article on ‘What is Day Trading Cryptocurrency?’ highlights that scalping is a common strategy among crypto traders because you can quickly capitalize on increased trading volume. Similarly, forex traders can buy and quickly sell currencies multiple times per day, so that you can accumulate small profits regularly. Meanwhile, traders who want a long-term strategy can try position trading, where you’ll buy a currency pair and hold it while it increases its value over time.
Learn When to Buy or Sell
The right trading strategy is crucial, since it will guide you on when to buy and sell your position.
In general, if you’re betting on a currency that is falling in value, The Balance recommends placing a sell order so that you can get returns from your order. Just make sure that you don’t wait for the currency’s value to fall to zero, so that you can avoid losses in your portfolio.
Conclusion
Forex trading makes up a strong financial market, due to its reliability as an investment strategy. Now that forex trading courses and apps are available online, beginner traders can easily learn and engage in the forex market and maximize their investments.
