Forex trading has attracted so much attention in the past years and the fact that you’re here in my site reading this article means you are also interested in it or at least you want to know what is it and how it works. Here in this article you will learn how to trade forex step by step.
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I am sure you have seen those traders on the Internet who claim forex has indeed worked for them, how it made them rich over night, those traders who will use every opportunity they get to show off the lifestyle forex trading afforded them.
If you you want to know how it works, or you want to know the steps required to start trading then this article will teach you everything about forex trading.
Why people are interested in forex
You can work from home on your pajamas, or anywhere you want, you can simply just open your lap top or cell phone and login to your trading platform and start trading.
the primary reason most people want to know how to trade forex is money. I love money and im sure you do too, that’s why you are here, right? otherwise you wouldn’t be here on my side reading this post. It’s true, professional traders do make money, a lot of it.
Traders like Bill Lipschuts make millions of dollars in profit every year and I know you can too. However, like any other career, forex trading is not easy and most defiantly not a get rich quick scheme.
What is forex trading
Forex is an acronym for foreign exchange – The largest and most liquid financial market in the world with daily currency trading volume of more than $5 trillion, yes more than $5 000 000 000 000 is traded daily, at least $200 billion is traded per hour.
What is traded
When people say they trade forex or they want to learn how to trade forex, they simple mean they buy and sell different types of currencies through an online brokers or banks. Since currencies are traded in pairs this means you simultaneously buy and sell currency pairs.
Forex currency pair quotes
Currencies are always quoted in pairs, like EUR/USD, NZD/USD, CAD/JPY, etc…
The reason for this is because in any forex transaction you are simultaneously buying one currency and selling another. below is an example of a forex rate for Euro vs US dollar (EUR/USD)
The first listed currency on the left before the slash mark is called a base currency, while the second currency after the slash mark is called a quote/r currency In the example above.
If you were to buy the EUR/USD pair, this means you would be buying the base currency (euro) and simultaneously selling quoter currency (usd).
By buying this pair (EUR/USD) means you believe the Euro will strengthen against US dollar and if this is true, you would then make money.
The opposite is also true, if you were to buy this pair but then usd strengthen, you would then lose money.
You would buy this pair is you believe the base currency will go up relative to the quoter currency or sell this pair if you believe the the base currency will lose value relative to the quote currency.
When buying, the exchange rate tells you how much you need to to pay in units of the quote currency to buy 1 unit of the base currency.
In the example above, you have to pay 1.16685 to buy usd When selling, the exchange rate tells you how Many units of the quoter currency you get for selling 1 unit of the base currency .in the example above, you will receive 1.16685 usd if you sell 1 euro
The Base currency is the basic for the trade .
If you buy EUR/USD you are buying euro’s ( base currency) and simultaneously selling dollars (quote currency).
if you sell EUR/USD you are selling euro(base currency) and simultaneously buying dollar (quote currency) so basically this means whether you sell or buy a currency pair , it’s always based upon the first currency in the pair called the base currency.
This can be confusing in the beginning but once you start learning about forex you will see how simple it is.
Who participate in the forex market?
- Brokers and other related financial institutions
So, what about us? Individual traders like me and you are called retail traders ,and in orders for me and you to participate in the forex market we must first register through forex brokers or banks
how do forex traders decide when to buy or sell
There are two ways to go about buying and selling currencies The first one is called “fundamental analysis” The second one is called “technical analysis” .
Fundamental traders use economic reports, social and political forces that drive supply and demand. such as interest rate, inflation reports, employment growth, etc to make trading decisions Price move primarily based on supply and demand Whereas technical traders only use charts and indicators.
Both of these strategies are taught here on this side. You will find all the information you need to trade profitably.
which one is batter, fundamental or technical analysis?
Both fundamental and technical analysis are important. both options will make you money if you take your time to learn them. However, in my humble opinion, I find technical analysis to be the easiest, this way I don’t have to keep up with the rest of the world and read news all the time,it is just not my style.
I like to keep things simple. The only thing i am concerned with is reading the price on a chart. That’s me though. Like I said earlier, every trader is different.
There are many trading strategies out there, also on this website, just find the one that you prefer and like.