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Tuesday, September 10, 2013

How To Make Money With Forex Market for Beginners

In this Forex training article we are going to discuss a few basics of the FX market so that if you are new to trading you have a bit more knowledge about the industry you are getting involved in. We don’t have room to cover everything in this article but we will provide a few basic points that you should consider if you are new to trading.
What is Forex?
The ‘Forex’ market stands for ‘Foreign exchange’ and it describes a marketplace where currencies from different countries are bought and sold. Unlike trading the stock market which is traded on exchanges such as the Dow Jones, the Forex market has no central exchange. This is why you are unable to find out the exact worldwide volume of trades on your trading platforms.
Currency Pairs
Majority of Forex trading strategies involve buying/selling of currency pairs i.e. buying/selling of one against another. For example if the price for EUR/USD is 1.5678, it means that it currently costs $1.5676 to buy EUR1. The major currency pairs that are normally traded due to their liquidity are as follows:
1. AUD/USD
2. EUR/USD
3. GBP/USD
4. USD/CAD
5. USD/CHF
6. USD/JPY
BID and ASK
As we mentioned, in order to execute Forex trading strategies you will be able to either sell or buy currencies. The BID and the ASK (also called the offer) will each have a separate quote for you to do so. The selling price of a currency may be 1.5678 whilst the buying price may be 1.5676 - a 2 pips difference.
Where can you trade currencies?
There are a large number of brokers available online where you can trade currencies. Amongst others, there are two main points to consider when choosing a broker - commission and spread. Commission is simply a transaction fee that is instantly paid to the broker as soon as you place a buy or a sell. These costs vary depending on the broker. The spread is the difference between the bid and the ask i.e. the selling price and the buying price. So, if the spread is 2 pips, you will always start your trade in a 2 pip debt. If you are trading $2 per pip, your initial debt at the start of the trade is $4 (2 pips x $2) so, you will break even when the market moves 2 pips in your direction.
Risk
Trading currencies comes with a degree of risk. Remember, you are basing your trades on a speculative outlook you have learnt to develop during your Forex training. Sometimes, this outlook may be wrong and you will have a losing trade. The reasons for this may be due to incorrect execution or a political statement that is beyond your control. Whatever the reason is you must ensure that your money management skills are employed in every trade so that if you lose, you only lose an allowed daily amount.

2 comments:

  1. Hello Everyone,

    Below is a list of the most recommended forex brokers:
    1. Most Recommended Forex Broker
    2. eToro

    I hope you find this list helpful.

    ReplyDelete
  2. Making money with Forex market for Beginners is not so easy. So before start investment it is important to learn and understand Forex and stock market. Thanks for sharing.

    ReplyDelete