Forex Traing Guide

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Forex Trading Basics


Forex Trading Basics

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Forex or Foreign Exchange trading is a very lucrative investment anyone could do. Trading currencies could be in a form of million dollar online transaction between banks and large scale corporations but it could also be in a form of a few dollars or euros in local currency exchange booths.

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Anyone who has access to cash could trade in the currency market and hope for an improvement in currency for a higher yield. This type of investment could be a simple OTC (over the counter) transaction or large scale transactions which involves thousands of dollars everyday.

As different countries get closer through constant travel and online communication, currency trading is also getting bigger. It was estimated that more than US$ 4 Trillion worth of currency transaction was made everyday in April of 2008 and that figure continues to increase.

If you are considering Forex trading here’s a tip: do it as soon as possible. Time is always a value in Forex trading as everyday, new opportunity arises which will help you increase your earnings. You could have started with OTC currency trading a few days ago and the difference is already considerable.

Starting in Forex Trading

A convenient and profitable way of starting in Forex trading is do it online. Through the internet, everyone will be able to monitor currency movements in real time and trade anytime 24 hours a day. You can sign up to any online currency broker and its firm will provide you with an application where you can trade in real time.

The software that you will use could be tested as they provide “demo accounts” where you can practice trading with demo money. By trying out their application, you will know you trading practices online and know how good you will fare in the industry.

You could be encountering a lot of new terms during trading; but here are some of them that could help you get started:

Spread – difference between two currencies in points. For example, there is a three point spread in USD (US Dollars) from EUR (euros). If the USD is losing then it will sell 1.8880 for a Euro but a Euro will cost 1.8883. In a typical day, spread could go up to 200 points.

Pip – represents the smallest unit of currency which is the bases for trading and determining spreads (US – 1 cent, Euro is in the 4th decimal place and JPY is 1/100th of 1 Yen).

You will always be trading in different currencies – buying and selling at the same time. As a start, you can trade in just two currencies. You could start by buying EUR and later sell EUR for USD if there is a swing in spread.

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As you gain experience in this type of trading, you can increase your trading capabilities not only to EUR and USD but to other currencies as well as you notice their currencies to be profitable because of the swing of spread.

Next Page: Time Consideration

Read Next: Forex Options




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