Business and Technology

What is forex trading and how does it work?

Online trading has become a growing industry, and people are not wrong for being interested in it. 

Forex (abbreviated as foreign exchange) market – is one of the biggest financial markets in the world. Traders worldwide have the opportunity to carry out transactions with foreign currency on it. Due to it lots of people already have enough passive incomes and take care of their financial safety. What is Forex trading and how does it work? We are going to deal with it right now. 

What is Forex trading?

Forex trading – is the process of purchasing and selling the currency (or other assets sometimes). It is carried out by people and companies as well. The market is open 24 hours, 5 days a week, that means that anyone in the world can trade here.

How Forex trading work? 

The main difference between forex and other types of stocks or bonds, is being traded in pairs traders chose. When you buy the currency you simultaneously sell another one.

There are 3 main currencies taking their part almost in any transactions:

US dollar

The Euro

Japanese yen

You should implement some steps before opening your first position to trade. 

Here are the steps to go through:

  • Select a broker 

Choosing a broker is a key moment, especially for novice traders. As the market is full of scams, pay attention to license availability firstly. Than base on such factors as:

  • leverage size
  • customer care level
  • minimum deposit

Try to choose between non-dealing desk brokers. It is essential to avoid trading with offshore brokers due to high risks. Check forex brokers in Zambia for more details about trustworthy brokers. 

  • Open a brokerage account

Opening a Forex brokerage account is the next step to get into this highly lucrative market. By the way, many brokers offer demo accounts where you can practice various trades without any risk of loss. 

  • Select a strategy to trade with

With a strategy, you can make the deal you achieve step by step. It is a trading plan that can be useful both in stable and unstable times in the exchange market. Some of widespread strategies are:

day trading 

scalping trading 

trend trading

  • Select the currency pair

Choose the pair you want to start trading with. Notice that some brokers offer to trade with such instruments as stocks or cryptocurrency, so you can consider such options too.

  • Select the platform to trade on

The variety of forex trading platforms can be daunting, but it is important to study their characteristics and consider which one is best suited for your needs. 

  • Open your first position

After all, you have to open your first position and start trading with the instruments you chose. Stay true to your strategy and do not be afraid of taking risks. 

Conclusion

It may seem a little bit complicated to trade in the Forex market, especially if you are a freshman of the industry. Knowing the market and trading process at all will make your way much easier. 

Reading the steps we introduced in the article you have already got some basics about it. Combine it with practicing and do not be afraid of risks – this is how you will get to profitable deals. Choosing the right broker is important as well, for example see the South African forex brokers  where you can find FCA licensed brokers.

Author

George Rossi

George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.

George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.

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