How Beginners Can Start With Forex Trading

Knowing what you are doing is vital when it comes to the world of Forex trading as a novice. The key among these important aspects of making money in Forex trading is strategy. In this article, we will talk about all of the essential Forex tips for profitable trading.

What is Trading Forex?

Forex trading or the foreign exchange market refers to a part of wider international markets where traders and institutions trade global currencies against worldwide currencies. This is also the primary objective of Forex trading; to make money by predicting whether one currency will be stronger than another.

The aim is to forecast the appreciation or depreciation in one currency and this is where profit happens. A Forex trader’s decision is affected by numerous aspects, geopolitical and economic considerations being among them.

One example of Forex is the trading of the Euro (EUR) against the US Dollar (USD). Suppose the current exchange rate is 1.1500 (meaning that 1 Euro is equivalent to 1.15 US Dollars), if you were to buy 10,000 Euros at this rate, your cost would be $11,500. If the Euro strengthens and the exchange rate rises to 1.1600, you could sell your 10,000 Euros and receive $11,600, resulting in a $100 profit. 

Basics of Forex Trading

There are several fundamental ideas in FX trading that you should be familiar with. If you do not know anything about even these elementary concepts, then your success will be nothing but a dream.

Currency Pairs

The core of Forex trading is the currency pair, and these can be divided into three main types: major, minor, and exotic money pairs.

• The major pairs of currencies are currencies that trade the most on a planet-wide level, such as EUR and USD. Major pairs are very liquid, hence many people prefer to transact within major currencies.
• These minor currency pairs, however, do not feature the USD in their composition and they are composed of other major world currencies including EUR and GBP. These pairs have significant trade volumes despite their non-majority status, and they are therefore considered minor currency trading.
• Exotic currency pairs are the least commonly traded currencies that do not have less  global nature. Some of these currencies are also considered as niche ones and may not be very easy to trade with besides a little liquidity. But, they could bring about large profits.

Bid and Ask

Ask price refers to the bid amount when pegged on a currency, while ask rate is simply what one can pay for that same currency.

A Guide to Picking a Reliable Broker

With these tips, you can make the best decision when looking for a broker in Forex trading.

Compliance

All brokers must be regulated by some form of national financial agency and become licensed. Always consider industry awards and customer reviews as well. 

Features

You should always notice the different characteristics, tools, and trading avenues that a broker in question provides. Ensure that the broker you are interested in is provided with all of your needed features and is also user-friendly.

Fees and Spreads

It is always preferable to choose a broker who does not hide their fees or spreads. You need a broker who is non-secretive and one who you are fully aware of the hidden charge so as not to end up paying unknown.

Trader Education

For the novice person in Forex trading, one may require some assistance. Well, any good broker will have things like educational sections or tutorials and news pages along with advice to get you off on the right foot. It is not just about trading, but also about teaching you how to trade.

Customer Assistance

Any good broker worth its money should have a great customer support system. These support systems should be available to all traders, 24 hours of the day, during the business week. There should be live chat and email functions and in some cases mobile support as well.

Using Demo Accounts for Practice

If you are just starting with trading, then most likely you will not be willing to put real money into the game right from the start. Thus, a demo account may be required.

Many brokers have what are called demo accounts, and these allow you to trade in real market conditions with fake money. This is because you get a chance to try on your trading skills without risking the real cash.

Goal Setting – Keep Them Realistic

Setting clear goals is important when trading. The problem with this is that beginners don’t know what to expect and so they set impossible goals.

This is how you prepare to fail. Don’t set goals that you know are very large. Instead, set small and incremental goals that you can work on step by step.

Create a Logical Trading Plan

Developing an effective trading plan may consist of the currencies that you intend on trading with, and your entrance and exit strategy through trade execution among other considerations.

Managing Risk

One of the most common beginner mistakes in Forex is to ignore risk management.

Risk management is also necessary for long-term success and profitability. Part of this is the ability to calculate your own risk tolerance, that is how much you can afford to lose if in case all goes wrong.

Using stop-loss orders wisely is a smart way to manage risk. These are special commands you place along with your trades. They force a trade to close automatically once it has lost a certain amount of money, therefore cutting your losses and preserving whatever money there is left. 

Always stay informed about events from around the world too, as global events often influence the foreign exchange market.

Final Thoughts

Understanding the basics of Forex is important if you plan on making it anywhere in this world, especially if you plan on the ride being a profitable one. By using good brokers, using risk management to your advantage, and following a logical trading plan, making money is possible.

Here at AAA Trading, both beginners and experts will find useful tools and features that will help you make profits. 

AAA Trading is a reliable CFD broker that is overseen by a variety of regulatory agencies, with the FSA being one of them. It also happens to come with many awesome features, such as tight spreads, great customer support, educational components, demo accounts, and much more!