Trading foreign exchange in the currency market is known as forex trading. It is the largest and most liquid market that rolls through an average daily trading volume over $5 trillion. The lure of making more and more wealth and having high aspirations about the future finance is drawing a large number of people to forex trading nowadays. Needless to say, it is thrilling, fun and a great source of income provided you do it in the right way. So, here in the blog, I am going to share a few tips and advice on how to start foreign exchange trading and build considerable foreign exchange traded fund, especially for the newbies. Read on!
Learn forex trading basics:
Let’s start forex trading with some learning, like learning some of its basic terminologies. Sounds good, right? Base currency, quote currency, exchange rate, long position, short position, bid price, ask price and spread are some of the most widely-used terms in forex trading. The type of currency you spend is called base currency and the currency you buy is called quote currency. A long position means you want to buy the base currency and sell the quote currency and short position means vice versa. The best way to learn more about these terminologies is to read forex trading books and journals and do rigorous research online.
Decide the currency you want to buy and sell:
Keep your ears and eyes tuned into the financial news of the country as this will help you to decide the currency you want to buy and sell. For instance, if you feel that the economy of your country is going down, you can sell it in exchange for a currency that has a high market value. Also, keep updates about the election of the country because during the time of the election the currency value appreciates, especially if the winner of the election has a strong fiscal agenda. In addition, read economic reports of the country like its GDP growth, inflation and employment news as they might affect the value of your country’s currency.
Find a good brokerage:
Having a good brokerage by your side for forex trading is really important. Consider these following factors while hiring the services of a forex broker.
- Look for a broker who has a minimum ten years of experience in forex trading.
- Go through the reviews about the company to ensure its credibility.
- For online forex trading, choose a broker with a user-friendly platform since the entire trading process happens through that.
- Find out whether the broker is a full-service brokerage house that offers all kinds of investment products and services along with forex trading.
- Meet a representative of the brokerage firm to determine whether you will feel comfortable working with the company.
- Check the transaction costs and read through all the papers and documents for terms and conditions.
- Find out whether the broking company you choose uses foreign exchange hedge fund to eliminate or hedge their foreign exchange risk resulting from transactions in foreign currencies.
Analyze the market:
Make sure that the brokerage house you choose provides you with technical and fundamental analysis so that you can review charts and historical data to predict how the market will move. You can also do a sentiment analysis to analyze the mood of the market and figure out if it is bearish or bullish. The rest you need to leave up to a good guess that can influence your trading.