Forex for Dummies: The Newbie’s Guide to Currency Trading[easy-share buttons="facebook,twitter,google,buffer" counters=1 counter_pos="inside" native="no" fixedwidth="yes"]
Published on May 13th, 2015 | by Joan Makai
Foreign Exchange (Forex) refers to the buying and selling of currencies that takes place in the global market. Not a lot of people know this but Forex is actually the largest financial market in the whole world. In just a matter of minutes, you could double or triple your capital when trading forex but it is also very volatile that you could also lose it, especially if you have no idea what you’re doing.
If you want to venture into currency trading then it’s important that you know how to play your cards right. Not knowing what you’re doing can take you straight to bankruptcy. Check out this simple checklist of the things you should know in order to successfully trade Forex.
- Learn the Jargon
Who are traders and how are they different from brokers? What’s a pip and why is it important? What are EUR/USD, USD/JPY, GBP/USD and USD/CHF? What do they mean when they say ‘figure’ or ‘yard’ or the ‘currency carry trade’? It is hard to get into this business when you have no idea what the pros are talking about so it is important to learn the Forex jargon. Surf the net for Forex articles for dummies and try to learn about these common terms. It will also help to get useful tips from the Forex gurus and seasoned traders.
- Know the Fundamentals of Currency Rates
All numbers in Forex are affected by one thing: the economy. If you see those rich people wearing three piece suits in cafes glued to a newspaper or the TV, that’s because they want to know what’s happening in the world and how those events can affect the economy and their money.
- Strike While the Iron is Hot (and Other Trading Plans)
You’ll hear that being said by so many people in currency trading. Of course, you wouldn’t know when the proverbial iron is hot if you don’t know what’s going on in world economy. For this, take note of the tip above.
Now, there are two very important questions you have to ask yourself before you enter the trade: What will your position size be? And when will you enter and exit the market?
You have to create a solid trading plan which you will follow to the letter when you’re already online, trading.
- Practice Makes Perfect
As much as we’d like to go through every single thing related to currency trading, it’s hard to do it in one go. Besides, your head will be too filled with information which will confuse you even more.
After you have learned the jargon, the fundamentals of currency rates and have a good trading plan, what you need to do now is practice. There are numerous demo accounts online which you could sign up for so that you can start putting everything you’ve learned in action. Practice using these demo account and hone your skills in trading. Once you think you are ready to take on the actual trading then you can begin trading using real currency and trade with a broker you can rely on.