An introduction to Forex for beginners
For those who don’t know nor have a clear idea of what Forex is, the Forex market is where traders, investors, businesses, banks, and even governments got to exchange or speculate on currencies. There are multiple terms to refer to the Forex market, like the “Fx market”, ‘Currency market’, ‘Foreign exchange currency market’, and ‘Foreign currency market’. With an average daily turnover of USD 3.98 trillion, the Forex market places itself as the largest and most liquid market in the world.
The most important trading centres in the Forex market are located in New York, Tokyo, London, Zurich, Frankfurt, Singapore, Hong Kong, Paris and Sydney, with their Fx market available 24 hours a day and five days a week.
The Forex market has no central marketplace; instead, it is said to be conducted ‘over the counter’, Forex is a product quoted by all the major banks, each one having a different price. What the broker platform does is taking all these feeds from various banks; so, the quotes that users and traders see from their broker are an approximate average of them.
The broker is the one in charge of transacting the trade and taking the other side of it. In short terms, the brokers make the market for you; if you buy a currency pair, you’re not buying it from another trader, is the broker who’s selling it to you.
What is Forex Trading?
Now that you have a clear idea of what the Forex market is, you should now be interested in Forex Trading. Forex trading, as it relates to retail traders, is the speculation on the price of one currency against another.
For example, if you think the euro is going to rise against the U.S. dollar, you should get an advantage from it by buying the EURUSD (Euro/U.S. Dollar) currency pair low and hopefully, sell it at a higher price as soon as you see a good profit from it. But, if you buy the euro against the dollar (EURSUD), and the U.S. dollar strengthens, you’ll be in a losing position. So, be aware of the risk involved in Forex trading as much as you are aware of the rewards.
Is it a good idea to become a Forex trader?
Being a Forex trader offers the possibility to make a living as good as (and better than some) some of the more popular professions. Although it is challenging to get there, with enough discipline and determination, you’ll make it happen. Just keep in mind that it requires many skills in order to reach your goals in the Forex market; you will have to learn to take a loss without panicking, or build confidence to believe in yourself and your trading strategy, fear should not be welcomed in Forex Trading, but most importantly, build enough dedication to become the best Forex trader you can be.
Traders who learn and master effective Forex trading strategies can take advantage of the high leverage and volatility of the Forex market, but you’ll need discipline and self-control to build an effective Forex trading strategy, and then developing an efficient trading plan around that strategy.