How To Trade Forex For Beginners
What Is Forex?
Forex is short for ‘Foreign Exchange’. You might have heard it called ‘FX’ or the ‘Currency’ market. It is the most widely traded market and the largest form of exchange in the world. Forex trading is available from 20:00 Sunday to 22:00 on Friday from anywhere in the world.
How Does Forex Trading Work?
Forex trading involves trading currencies and buying and selling them against each other. Forex traders earn profit from the fluctuation and price movements in the Forex markets. A Forex trader forms a theory or predicts whether one currency’s value, like the Euro, will go up or down in relation to another currency such as the Great British Pound.
You might see EURGBP for example – Forex currency pairs are always in this format showing one currency against another. Forex traders earn profit from the price movements in the exchange rate between the Euro and Great British Pound. In this format, the first currency abbreviation shown is known as the Base currency. The Base currency is the one that you will predict will go up or down against the second currency (in this case, the GBP) and this is called the quote. Essentially, you are looking to buy and sell to earn a profit.
Why Trade Forex?
As the most traded market in the world, Forex, has great liquidity which means that prices can change rapidly creating great trading opportunities for Forex traders. This means there are numerous buyers and sellers. This along with the great volatility and low spread makes it a great market to place a trade as the price will be desirable.
Volatility is the price range at which variations in an instrument’s price occur. The larger the range, the higher the volatility.
Spread is the difference between the bid and the asking price.
The Forex market is open to both institutions and individual retail traders. Many of our students learn how to trade Forex because it allows them to trade flexibly around their current commitments.
What Other Markets Can You Trade?
Depending on your desires and your broker, you can trade on almost anything! The most popular markets are as mentioned above, Forex, Stocks and Shares, Indices, Commodities, Bonds, Options. When choosing a market to trade, choose one that has good volatility and low commissions.