The word forex itself is an abbreviation of foreign currency and exchange. Like trading Euro for Pound. No matter where you live in the world and what time zone you follow, currency exchange is always happening 24/7/365, but as a trader market is open for you 24/5/260 excluding weekends mostly trading through big brokers and banks. This exchange of currency can for various reasons; the most common ones are commerce trading or tourism. Based on the world back report in 2019, the average daily forex volume was $5.1 trillion. So, this gives you an idea of what is a forex and how does it work?
Now let’s talk about what is forex trading?
Forex trading is the exchange of currency in the hope of making some profit. This opportunity is created because of the difference in supply and demand of respective currencies. Multiple factors affect supply and demand; the most important ones are interest rates, trade flows, tourism, economic strength, and geopolitical risk. This allows a trader to profit from the change in one currency’s value compared to another.
Let’s understand this through an example.
Suppose you have $100 and you would like to profit from opportunities created by currency’s supply and demand difference.
You sign up for a free trading platform, and currently, the EURUSD pair is trading at 0.8932. What’s 0.8932 value? We will discuss on later. You decide to buy this pair, and after 5 hours now, this pair is trading at 0.8940(Higher Value); congratulations, give yourself a tap. You just made some profit.
Now, you might be wondering, is forex trading profitable? If it’s that simple, then why isn’t everybody doing it? The answer to this question is not that simple. But I will say it is profitable if you have the right mindset and strategy. Don’t worry; we have covered everything in detail in our advanced articles. But as you are just starting out and getting yourself familiar with Forex, I would highly recommend you to first read all beginner material so that you have sufficient knowledge when you go out in the market to trade.
Many people ask a question, can you get rich by trading forex?
The simple answer to this question is yes if you equip yourself with a first-class knowledge of Forex and have the right strategy in hand. It’s very easy to lose money in Forex as well, with just a little swing of currency pairs. So you really shouldn’t be focusing on getting rich quickly. But educate yourself first and then do some practice on demo accounts.
Oh! Didn’t you know that there are demo accounts as well? Which lets you practice for free with real market data. Almost all major brokers give demo accounts when you sign up on their platform. By using that demo account, you can participate in real Forex with paper money given in your demo account.
You might be wondering, ok, where do I sign-up to get started, and where do I get all the strategies? Calm down; this article is just to give you an idea of Forex. All the forex education and strategies can be accessed in later articles in this series.
First of all, we should capture some big elephants in the room. We get all sorts of questions related to Forex. Here are some of them
Is Forex legit?
Heck ya! it is. Forex is above the $5.1 trillion per day market. If you know about the Options market and people make profits in that as well, even if we believe that the Options market is highly manipulated. There are many false websites too on the internet which are scamming beginners by selling them indicators and expert advisors. Beware from such websites. One thing more is that there are many false forex brokers too on the internet which are scamming in many ways. XM broker is a reliable and proven broker. Create a free account at XM.
The point is Forex market is as legit as a ray of sunshine on a sunny day.
How to trade Forex for beginners?
First of all, beginners are recommended to equip themselves with updated knowledge. Once you understand what Forex is and how it works then, you should proceed towards opening a demo account and trade in that demo account for few weeks, so you get real experience. After you have gained some confidence in demo account trading, start trading with small capital and start to grasp high knowledge of risk management and test some strategies. See which strategy works best with your personality. Now once you have the right strategy, start mastering it and test its limits according to your risk management. A long way to go, right? Well, that’s how it is. Shortcuts will only distract and lead you to big losses.
Don’t make friends with the trend, make friends with each candlestickVivek Nair
Note: All the viewpoints here are according to the rules of technical analysis. we are not responsible for any type of loss in forex trading.