Forex is basically the world’s foreign currency, and exchange clubbed into a single word. It is all about converting one currency into another for varied reasons, including trading, tourism, or commerce. Over time, Forex day trading has become one of the most popular trading styles, especially in developed countries like the USA. A report by the global bank for national central banks stated the daily forex trading volume to be around $6.6 trillion in April 2019.
What exactly is forex day trading?
Forex day trading is simply a process that involves buying and selling currencies within a single day where the trader has to close out positions at the end of the day, repeating the same process the next morning. Traders in the Forex process either buy and sell multiple currencies in a day or even repeat the same operation multiple times a day to make the most out of small market movements.
A beginner’s guide to Forex Trading!
Currency trading can be highly risky and complex due to varying regulations, with forex instruments not being standardized either. Because of the risk of forex trading, it is unregulated in some parts of the world. Hence, it is crucial for beginners first to accumulate themselves with the process entirely before they start investing money for trading purposes. Here, you will learn how to start trading Forex by following a few steps to set you on the trading journey.
Here are the steps you need to follow:
1. Gather all the information you can:
Although not much complicated, Forex trading requires specialized knowledge, without which it can be very risky to invest your money. For example, you must know from the beginning that the leverage ratio is higher for forex trades than for equities. The ones who drive the currency price are different from those who control the equity market. One can find multiple online courses for beginners that will introduce people to the ins and outs of forex trading.
2. Open a brokerage account:
To start with forex trading, one needs to open up a forex trading account at a brokerage. Please note that forex traders do not charge any commission and only make money through the spreads they earn between buying and selling the currencies. Beginners should set up a micro forex account that does not require much capital and has variable trading limits allowing traders to limit their trades to as low as 1000 units. In contrast, the standard account would require one to invest as much as 10,000 currency units.
3. Determine your trading strategy:
While traders can’t predict the market movement all the time, determining a strategy will help you design a road map and set guidelines for trading. Always remember that an intelligent trading strategy considers the reality of your finances and situations. Your trading strategy must consider the amount you are willing to invest along with the risk you can tolerate against that money. One good thing about trading is that it offers excellent returns to those willing to bear the risk.
4. Always keep an eye on the shifting numbers:
You must not take your eye off the numbers at all times, especially at the end of the day. You will probably use software that already provides a regular accounting of trades. You have to make sure that there are no pending positions to be filled out at the end of the day and also that you have enough cash in the account to make trades in the future.
These were a few points you needed to know before you step foot into the forex trading market. Remembering these, you will not at least make mistakes that most beginners make because of insufficient information.