Forex Trading for Beginners
The Forex market is the biggest financial market in the world. It has an estimated trading volume of $5.3 trillion per day. The sheer size of the Forex market is amazing when compared to the New York Stock Exchange which has only $22 billion daily trading volumes. Unlike the stock market, the Forex market is decentralized and electronic. This allows any trader in the world to buy and sell currencies over the counter through brokers. This article will share some basic information about Forex Trading for Beginners.
How does the Forex market work?
Different currencies are paired together to form what we call a currency pair. For example, the most commonly traded currency pair in the world is the EURUSD (Euro paired with the US Dollar).
Traders trade Currency Pairs in rising and falling markets. This means there are endless opportunities for profit.
It is important for beginner forex traders to understand that not all currency pairs are created equal. We strongly advise to only trade pairs formed with the major currencies of the world. These currencies include the US Dollar, British Pound, Euro, Japanese Yen, Canadian Dollar, Australian Dollar and New Zealand Dollar.
How does the Forex market move?
There are tremendous amounts of variables which causes individual currencies to either strengthen or weaken. Currencies move in cycles, and can move from strength to weakness and from weakness to strength. These changes can happen instantly and good traders keep track of these cyclical changes.
When one currency in a currency pair strengthens or weakens it will affect the direction of that currency pair. It can cause the direction of the Currency pair to go upwards, downwards or sideways. With the help of Forex Trading Strategies a trader can speculate on the possible directions currency pairs might move. If they speculate that a currency pair will go up they can buy that currency pair. Similarly, if they speculate the currency pair will go down they can sell that currency pair.
We use the word ‘speculate’ as there is absolutely no certainty to guarantee which way a currency’s value will move. However with detailed fundamental analysis and technical analysis the highest probability of the direction can be established with a varying degree of accuracy.
Good Forex trading strategies will normally use all of these elements. Combining these elements can give an indication of which direction a pair is most likely to go. Understanding market direction can be very intimidating for a beginner. Luckily, there is many user-friendly trading systems that simplifies Forex Trading for Beginners.
How can a person trade in the Forex market?
Technology has made it very easy for individuals to participate in the Forex market. Most brokers allow traders to download trading platform software such as MetaTrader 4 for free. Through the broker and a trading platform an individual can trade in the Forex market with the click of a button.
Apart from technology, brokers also offer leveraged accounts. This means that traders with very small capital amounts can trade and participate in the Forex market. For example, with a leverage of 500-to-1 a trader can trade quite large volumes with as little as $200 in their account.
However, leverage is a very dangerous thing in the wrong hands. We do not encourage traders using excessive leveraged accounts. We advise that beginner traders get good Forex education and proper Forex Training before they even think about trading in the live markets. The market is an unforgiven place and without education a trader will eventually lose all their trading capital.
Due to the huge trading volumes in the Forex market there are almost always enough liquidity to execute orders. This means when a trader executes a trade instantly by clicking a “BUY” or “SELL” button . The liquidity in the Forex Market not only helps when opening orders but also when closing orders. This is because there are always enough participants to allow you to get out of trades with the click of a button.
The above information is a very short introduction to Forex Trading for beginners. It provides a very broad idea of what the Forex market is and how they can participating in it. As always, we strongly recommend that any beginner trader invest in Forex Trading Courses or get a Forex trading coach before they risk any real money in the Forex market.
Also, be very careful when you make your selection on where to get your Forex training. There are many scammers out there. If it sounds too good to be true then it probably is. Please read our article “Forex Trading is not a get rich quick scheme” for more information about this.