Beginners Guide to Online Forex Trading
When you are a beginner to forex trading, it can be quite challenging trying to get hold of all the essential details and making the most out of this market. As a newcomer, you have all these unrealistic but common expectations of how you expect things to turn out. You might, at some point, question yourself how you will learn forex from scratch. You don’t know where to start, yet you badly want to explore this market that everyone seems to talk about. Don’t worry; the following is a definitive guide to forex trading and forex broker fees for beginners.
Trading terminologies
If you are going to be active in the forex market, you should understand the languages used in this platform. The following are some of the main ones that you must know before your first trade;
- Spot forex
When you hear of spot forex, the first thing that should come to mind is the buying and selling of the real currency.
- CFDs
CFD means ‘contract for difference’ and is used to represent movements of financial instruments prices.
- Pip
When on forex trading, chances are you’ll hear the term pip. It represents a base unit in the price of the currency pair. It is also 0.0001 of the quoted price except for JPY currency pairs
- Spread
This is the difference between the purchase price and the sale price of a particular currency pair.
- Leverage
Leverage is a common term used in forex trading and is the capital provided by an online trading broker to enable his customers to make more trades.
- Margin
The money retained in a trading account when you open a trade is referred to as a margin.
Things every beginner needs to understand
Price and quote
When on forex trading, you must come across ask and bid prices because that’s mostly what this market is all about. The asking price represents the price at which you can buy the currency while the bid price indicates how much you can sell it.
Long trade
As an investor, every move you make should help you gain. A long trade involves buying a currency, hoping that its value will rise then sell it later on to make a profit.
Short trade
The short trade is the complete opposite. You sell a currency hoping that its value will decrease, then you can repurchase it at a lower price hence saving your money.
Chart types
Forex has live charts for viewing the exchange rates and come in three different options using the MetaTrader platform. They include line charts, bar charts and candlestick charts. Understanding the charts is the first step to making the right trades. A demo trading account is a good option for getting a better feel for the market and knowing what works before using real money.
Forex trading is quite popular and is a massive market. Beginners need to do adequate research to get all the necessary information as well as choose an online trading broker to help make things understandable. It’s also crucial to choose a trading platform that will meet your needs. It should be credible and allows you to use it with ease.
As a new forex trader, you should know there are different risks involved, such as leverage risk, interest rate risk, and transaction risk. You make decisions based on the risk. If it’s one you can’t accept, then participating in that particular trade wouldn’t be wise.
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