Forex trading can be one of the most profitable ventures. It can also turn into an electrifying hobby and also become a source of investment income. For you to understand the level of opportunities that lie in the currency market, you first have to know that the securities market trades about $22.4 billion every single day. Out of this amount, $5 billion comes from forex trading. Some of the benefits you will receive from this kind of trade include market accessibility and availability, zero commissions, leverage and managed risks. All it takes for you to make money is to predict how the market is going to play out and bid on the winning economy. Since we have established that there are quite a number of gains and opportunities that can be found in this form of trade, the question now is how does one get into the world of trading currencies?
Step 1: Familiarize yourself with the Forex Trading Basics
It is prudent that you acquaint yourself with the world of forex trading even before you begin to sell and buy currencies. This means that you familiarize yourself with the language used and understand some of the basic forex terminologies such as:
- Bid price
- Ask price
- Short position
- Long position
- Exchange rate
- Quote currency
- Base currency
Understanding the language used in the forex trading business minimizes your risk of loss. It also enables you to read the forex quotes and hence gives you a better understanding of what goes on in the foreign exchange market. When you understand what happens in this market and the language used in this business, you are able to apply your own deductive reasoning on which currencies are safe to buy and the currencies that should be disposed of. Another advantage of familiarizing yourself with the basics involved in forex trading is that you learn how to calculate profits. To understand how to calculate your profits you have to know what a pip measure is and how it is used. All these things are important if you want to master the art of trading currencies and be a pro at it.
Step 2: Getting a Broker
This is the most crucial step in your journey to becoming a foreign exchange trader. The primary role of a broker is to ensure that the currency traders get the necessary assistance required to buy and sell currencies with ease. A broker can be an individual or it can be brokerage firm. Brokerage firms are preferred to the former because it is easier to regulate them hence preventing you, as a trader, from losing your hard earned money from scrupulous deals. When looking for a brokerage firm always make sure that you give priority to those that have been operational for more than a decade. You should also ensure that they are being regulated by an independent oversight body such as the United Kingdom’s Financial Conduct Authority (FCA) and Australia’s Australian Securities and Investment Commission (ASIC). One of the most trusted brokerage firms that exist in the in the foreign exchange trade today is AlfaTrade. The company has a peerless reputation and has recorded the fastest growing capital in the foreign exchange market. After you have selected your brokerage firm, you will request to open an account with them. You will subsequently fill in the necessary paperwork and activate your account.
Step 3: Start Trading
You should be able to analyze the market by the time you are getting to this point. This means that you are conversant with the three basic market analysis methods; technical analysis, fundamental analysis and sentiment analysis. You should also be able to determine your margin depending on the kind of policies set up by your broker. The last thing you will need is to familiarize yourself with the three types of orders so that you can place your order. The three include market orders, stop orders and limit orders.