How to start Forex Trading
In this article we will give you an introduction to what Forex Trading is and how to get started. We will also guide you to the next steps in the process so that you can advance quickly.
What is Forex Trading
Let us choose a simple business – selling apples. You would:
- Buy apples
- Store apples
- Sell apples
The aim is to buy at a low price and then sell at a high price. You would store the apples and try to sell them when demand is high to get the best price. Your risk is that apple can go bad in storage.
Forex Trade is similar. The only difference is that instead of buying a product in a physical sense, you would buy money.
The concept of buying money
The concept of buying money may be strange for many people. Remember when you took that overseas trip? Chances are that you changed your currency. Well you bought money right then.
When you buy money in Forex Trading, in loose terms, it stays in your brokers account.
The whole deal is to buy a currency that has lost value for whatever reasons. You then hold on to money in this currency until it becomes worth more. Then you sell that currency to your base currency. This normally should result in a positive trade. And you would have earned from Forex Trading.
Base Currency
Base currency is a fancy word for your currency. In the US it is dollars and in the UK it is pounds. All of us hold the base currency in our normal accounts and measure our success in Forex Trade based on this currency. For advanced traders, this is a topic in itself. At this point it suffices to say that it is the local currency of your country.
Find a broker
Most likely you already have a broker. A lot of banks and other financial institutions offer Forex Trading. It makes sense to have a broker who is specialized in Forex Trading.
If you have no clue, go to www.myFXbook.com This is the best resource for you. It will accompany you thru your Forex venture. There is enough information on this site to find a broker. Selecting a broker is a very particular task. We would cover that in a different article. For now to get started, get a cheap account from a broker you trust.
Trading platform
Your trader will typically provide you with a trading platform. It will show you the value of the currencies you may be interested in buying. A trading platform will allow you the following minimum features:
- See the currency rates for buying or selling
- Allow you to buy or sell a currency
- Allow you to see you balance in the various different currencies you own
Play around with trading platform. It is the tool you will use daily and earn. You should be comfortable with it. Good platforms allow a host of extra features.
Start trading with small sums
When you trade, your purchase cost is:
- The commission of the broker
- Any other charges that might be involved
All charges are declared by the broker. Ensure you have the best deal.
The selling cost is:
- The brokerage fee
- Any other charges that might be involved
The formula for your reward is:
Difference in buying and selling currency – the purchase and selling cost
Ensure that you trade with small sums of money so that your losses are less.
Summary
Forex Trading is the buying and selling of currencies. You need a broker to execute your orders. We caution you to trade with small sums of money. For info refer to www.myFXbook.com as it is the best resource.
