Forex daily volume is slightly over seven trillion, which is more than all the other markets combined. With this article, you are going to learn just how exactly can you make a small part of those seven trillion yours. Consider it an oversimplified, yet still effective tutorial on how to properly trade on the Forex market.
What is Forex and how does it work?
Forex is where the world governments, international banks and pretty much everyone else trade currencies. It’s a single exchange-free market created by the thousands of the trading networks. However, you don’t really need to know exactly how it works — just like you don’t need to know the internet transfer protocols or how your mobile phone receives the latest cat memes.
All you need to know is how you can enter this market. You are going to need just three things:
- A Forex broker. The company that is going to provide you with access to the market. For beginners, we recommend
- A Forex terminal. The software that will let you communicate your trades to your broker. If you are going with JustForex, consider MetaTrader 4;
- A trading strategy. A basic set of rules that you will follow when trading. We will explore this below.
Of course, you are also going to need a computer or a mobile phone with internet access.
What are the major currencies?
Your best bet when it comes to Forex trading is major currencies. They have very small spreads, offer great trading conditions and often the brokers themselves provide detailed market analytics for these pairs. Granted, you probably won’t make tons of money, but even small winnings are a great result for beginners.
The major currencies are:
- US Dollar (USD)
- Euro (EUR)
- British Pound (GBP)
- Canadian Dollar (CAD)
- Japanese Yen (JPY)
The currency pairs that combine USD with one of other four major currencies form major currency pairs. For example, EUR/USD or USD/CAD. Each currency pair has a constantly changing value that shows how much of one currency one unit of the other currency is worth. For example, if GBP/USD is being traded at 1.5400, you can buy 1 GBP with 1.54 USD.
There are other currency pairs that don’t involve USD at first glance — like GBP/JPY. However, you will find that they have higher spreads and volatility than major currencies.
How to pick a Forex trading strategy
A trading strategy is basically a set of rules you have to follow to succeed on the Forex market. Commonly, it can be defined as a set of market conditions and corresponding trades you have to do to make money off them.
The definitive Forex strategy for beginners is Price Action. Originally designed by James16, this collection of price chart patterns and recommendations is the definitive Forex trading guide. That said, the original thread is somewhat overwhelming these days.
There are other trading strategies that are no less viable — like scalping. However, proper scalping is a complicated task, and the risk of making a mistake is extremely high. Since mistakes on Forex will commonly lead to a loss, we do not recommend this strategy for beginners.
How to make money on Forex
Making money on Forex is easy, and you should be able to do it as long as you think with your head and do not go in blind. With a good Forex broker, a terminal you know, and a viable strategy, you can succeed easily.
That said, do make sure that your Forex broker is reliable and is not going to scam you out of your money. A good recommendation is JustForex — an international broker with decent trading conditions and spectacular support team that will always be able to help you out.
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