What is Forex Trading?

What is Forex Trading?

Forex Trading. We see these words quite often in the internet these days. It’s been growing at a fast pace. Each day many beginners join the markets, mostly lured by the possibility of quick riches and easy success. However, contrary to what Forex experts make you believe, it is a fact that Forex Trading is not easy to learn and master. It’s actually one of the most challenging skills you can ever set out to learn, which is daunting if you’re a beginner. This article will help you understand forex trading and what you can do to make money in forex trading as a beginner.

what is forex trading

How the Forex Market Works?

The forex market is the place where currencies are traded. It is the world’s largest international currency trading market which operates non-stop. Why? Currencies are important to most people in the world because currencies needs to be exchanged in order to conduct foreign trade and business. For example in travelling, A French tourist in the U.S can’t pay euros (EUR) to see a specific tourist destination because that currency is not accepted locally. As such, the tourist needs to exchange the euros for the local currency which is dollar.

As forex is all about foreign exchange, all transactions are put up from a currency pair. For instance, the Euro and the US Dollar. The basic tool for trading forex is the exchange rate which is expressed in ratio between the values of the two currencies such as EUR/USD = 1.4086. This value, is interpreted as the ‘forex rate’ which means that, at the particular time one Euro would be equal to 1.4086 US Dollars. It’s always expressed to 4 decimal places. The rightmost digit of the the ratio is referred to as a ‘pip’. So for instance, a change from EUR/US = 1.4068 to EUR/USD = 1.4088 would be interpreted to as a change of 2 pips. One pip, therefore is the smallest unit of trade. Click here to learn more about Forex Trading Basics

Is Forex Trading Risky?

Being in a trade on forex as in any form of currency training, you are in the business of currency speculation. Meaning that there is of course some risk involved in Forex trading. But you can and you should take some steps to minimize this. You can always set a limit to the downside of any trade, meaning you should define the maximum loss that you are prepared to accept if the market goes against you – which will happen on some occasions.

Your best insurance against losing on the forex market is to understand what you are doing. The internet offers good forex trading tutorials- study it in detail. If there are parts that you can’t understand, look for good forex forums and ask lots and lots of questions. Many of the people who normally answer your queries on this will have a good forex trading blog and they will not only answer your questions but also give you helpful links. However, be vigilant against forex trading scams.

Can a Beginner Make Money in Forex Trading?

If you read around forums, magazines or even look around at seminars, it seems like Forex Trading is making people millions of dollars. However, the thing is that Forex traders love talking about their winning trades and make themselves look out to be as wildly profitable traders. But in reality, only 5% of Forex traders are consistently making money. Even beginners can make money in Forex trading, but there’s a huge difference between making money from making a full time income, achieving financial freedom and building wealth through Forex.

How and where do you start?

The aim of Forex Trading is simple. You want to buy a currency at one price and then sell it at a higher price to make some profit. Forex trading is mostly done by professionals such as bankers – but almost anyone nowadays can enter trading currencies. Through proper training and practice, amateurs can trade like veterans. If you are a beginner in the Forex trade, you must study and understand the nature of Forex just as you would with other businesses. Given that Forex trading is not easy for a fact. Forex for beginners can be easier with the help of a Forex broker.

It’s been observed that Forex clients that are lured by Forex brokers end up gaining a lot of confidence in trading and are left feeling encouraged. Through a forex broker’s offer of a free demo account, forex clients are given a better understanding of the business. This also gives the clients an opportunity to invest virtual money instead of real and play it safe.

If you don’t want the help of a Forex broker you can also start on the internet. Like mentioned, there are plenty of online forex trading tutorials on the internet. There are plenty of companies out there in business to help you online or offline. Spend time to get some good forex training, which is provided online and set up your dummy account to trade before you attempt to go live. If you take your time to learn and understand this, then there’s no reason why you can’t be successful in forex trading, just be patient. But did you know that even as a beginner you can start making money in Forex Trading right now?

According to an article I read, the best shortcut is to buy a proven Forex trading system to do your trading for you. However, picking out a system doesn’t automatically make you millions. Profitable trading systems are rare, you have to choose one very carefully. And if you can find a system that works, then you’ll be able to gain valuable Forex Market experience, preserve your personal relationships and most importantly make money in Forex Trading while learning.


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