5 things you need to know before starting Forex trading

img5 - 5 things you need to know before starting Forex trading

Forex trading has fast become a popular trading platform

With about $5 trillion dollars traded a day in Forex trading, it is no wonder at all as to why so many people, traders included, are looking to Forex trading.  Forex, or also known as FX trading (foreign exchange) is one of the world most widely traded markets which allows traders to predict global currency markets price movements.

The 5 main things to know about Forex trading before you begin

With the many ways to trade with Forex these days, it is easy to want to just rush in and start trading.  We would all like to make some extra trading cash but take a moment, slow down and read the fine print first as there are a few things one should know before diving into the deep end.

#1 When you are trading with Forex you are not actually trading anything like stocks or bonds, it is more like placing a bet on which way the currencies trend will go.  In other words, if the currencies you are trading with the rise or fall against each other within a set time frame.

#2    As you trade currency pairs they can sometimes be both up and down at the same time.  depending on the pairs you are trading.  For instance, the USD could fall short of the EUR if you are trading the EUR/USD pair but at the same time, it could be going long against the YEN.  So the best way to trade with FX is to watch the trends and distribute your trades wisely amongst the pairs for better outcomes.

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#3    The first currency of the pair is always the one upon which your trading quote is based.  For instance, if you picked the pair EUR/USD and you think the Dollar will fall against the Euro then you will bet long on the Euro but if you think the dollar will rise against the Euro you will be short on the Euro.

#4    When trading in FX it is always better to trade with larger margins even though most FX traders on the markets, especially online, will allow you to start trading at much lower margins.  Remember it is a gamble and ultimately you are betting on a volatile market that fluctuates constantly.

#5    It is always best to use a virtual demo account first to practice with as most of them you get to practice with virtual currencies in the live environments allowing you to watch the trends and trade without losing your money.

Conclusion

Whilst FX trading is exciting and if done correctly can earn a person some much needed extra cash don’t get caught up in the illusion that it is a quick fix to any monetary solution you may need.  It is something, like anything, that to do correctly must be learned, tried and tested!

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