Fintech

An Introduction To Forex Trading

Forex Trading

June 2nd, 2021   |   Updated on February 28th, 2022

Forex trading, or foreign exchange trading, has gained popularity thanks to its high liquidity, barely any minimum requirements, and the affordable transaction system compared to other investments. However, entering a new trade without learning the basics is dangerous. So keep reading and prepare yourself for your first trade!

Forex For Beginners

Remember how you exchanged currency last time you traveled to a foreign country? That is what forex is about.

You turn one currency into another through a broker so that you can profit from the difference in currency values throughout the process. In general, you want to buy when the currency value is low and sell when that value increases.

Finding the Right Broker

This leads us to the next important thing in the forex world — your broker. There are many brokers out there, but only a handful of them are trustworthy. Working with a fraudulent broker will cost you money, time and even create legal concerns.

To find a trustworthy broker, pay attention to the following points:

  • Do they have all the necessary licenses?
  • Are they endorsed by the regulating agency of your country’s forex market?
  • Can they provide a track of record?
  • How are the reviews on independent websites from other traders?
  • Do they provide you the support you need, or do they only serve as a trading platform?
  • Are they making any unrealistic promises?

Ask these questions before you decide to go with any broker.

Understanding Currency Pairs

Forex operates around currency pairs. Therefore, knowing when and what to invest in is key to success.

Use a currency strength meter (CSM) to identify the strong and weak pairs. However, the currency strength alone is insufficient for anyone to make a trade decision.

You must combine that information with your currency research, such as a single currency’s performance over time, news and trends in the currency’s country, etc., before deciding to trade on it.

Making a Trade Plan

If you’re new to forex trading, make sure you have a strategy in place. Not having a trading plan is often why most new traders fail and suffer loss, which discourages them from making any future progress. “Forex is not for me,” they might say when they simply started on the wrong foot.

There are a few core pieces in your trade plan

  • Your short and long term goals
  • Your stop-loss and exit strategy
  • Your entry-point or buy signals
  • An analytical system so you can keep improving and become a more efficient trader.

A winning strategy combined with comprehensive research will lead you to success in the foreign exchange world.

Start Your Journey as a Forex Trader

Are you ready? Starting forex for beginners can be intimidating, but you’ll do just fine if you start reading, learning, and researching.

The main risk is the misinterpretation of trends, which again brings you back to having a dominating strategy, a well-rounded research system, and staying calm and rational.

If you’ve never traded before, we recommend you begin with a demo account with a credible broker and refrain from investing with real money until you’ve learned the basic ways around. Good luck!