Gone are the days when foreign exchange trading was deemed as something that people did only when they needed of foreign currency to travel abroad.
Nowadays, foreign currency exchange (Forex, FX) is a decentralized global market in which a nation’s currency can be traded for that of another at a mutually agreed-upon rate. Forex opens its doors to retail clients to trade online via various platforms, and it runs electronically within a network, so there is no exact stock exchange. What’s more, there are no overheads - no employees, no rent, and no inventory costs to worry about. Some people trade just for fun whereas others seek to improve the underlying financial problems in their life.
If you’re wondering what Forex trading means and what role brokers play, then you’re lucky you wound up here, this article will show you common concepts and greatly simplify your entry into the market! Take a closer look at the inner workings of Forex to find the particularly mind-blowing benefits of the trading process.
Forex trading can be as simple or as complicated as you want it to be. For starters, it’s not difficult to enter the foreign exchange market, because many brokers don’t ask for a minimum deposit amount. Likewise, you don’t usually pay commissions for every trade. Sounds good, right? On the other hand, the cold hard truth of the matter is that a high percentage of Forex traders are suffering losses. To become a good trader, you need to get to know the markets through and through, develop the trading strategy, and start with small account sizes, since even experienced sellers can find themselves in a situation where their balance is in the red.
Rookie traders should be familiar with the most significant aspects of the retail market - leverage and the emotional side of trading.
People get interested in FX when they hear the word “leverage”, so does that mean you’ll be able to make more money? Kind of, but there is a “but”. The goal of leverage is not to make more money; it’s simply a tool that you can use to manage your risk effectively and still be able to trade and get some reward.
Even the best strategies which have worked flawlessly a thousand times before ultimately fail if any minor, yet unexpected changes occur. Everything about Forex is unpredictable - slippage happens, markets move, and we don't always get the price we want.
You’re also prone to emotional swings (the price goes up - happy, the price goes down - the sky is falling). Depositors are subjects to feelings which can be the basis of their failure. Hence, emotions have been playing a more central role in business these days, turning rational investors into irrational ones. Trading for the wrong reasons may make you vulnerable to emotionally fueled mistakes because you've got too much at stake. Control your greed, fear, and hope; know when to quit and when to push.
To begin with, an online broker (or a brokerage firm) organizes transactions between a buyer and a seller, and it gets a commission once the operation is executed. Every trader needs to have a broker; you simply cannot access the market without one.
Properly identifying what a reliable broker looks like is a very big deal, especially if you’re a newer trader just getting into the space. To ease the process, we’ve prepared some tips on how to protect yourself:
Separate the trustworthy broker from the fraudulent one. Regulatory compliance is probably the most important factor. Before handing over thousands of dollars, make sure you are dealing with a legitimate broker by reaching the appropriate authority to verify their credibility. In case he is not registered in any functional agency, keep in mind that it is a big scam.
Reach out to past clients. Browse the list of brokers' reviews for an in-depth view of the popular ones in the market to find which is best suited to your own trading style.
Join retail market websites and forums. They provide market forecasts, independent opinions of novice experts, and insightful information regarding trading and stock strategies to traders.
Determine if your broker is honest. Observe who the regulated and trusted brokers are who others are recommending.
Open a trial account. “Demo mode” replicates the real environment with real-life prices, all the available tools, and indicators that the real money account has, but that’s just it, it’s not real money. Try your hand at making transactions without risking anything real.
The exciting world of foreign exchange trading involves numerous nuanced maneuvers that require proper attention. It isn’t easy; far from it in fact. But now you've got a fundamental comprehension of Forex, so it’s up to you when to join the future of the market. It’s never too late to start! Wake up with determination, go to bed with satisfaction.
