- 8 Mar 2021
- Reading time
- 9 minutes
What Exactly Is “Forex”? "Forex’, this word is a shortened term meaning Foreign Exchange. Basically, it is the trading and exchanging of various currencies from different countries. Like exchanging the U.S. Dollar to Japanese Yen, or trading the Philippine Peso against the British Pound. The forex market is quite an unpredictable financial trade market, you can make or lose money in the blink of an eye.
To be a suitable player in the game of forex trading, you have to study currency trends, patterns, directions, and more. If you equip yourself with the proper skills and knowledge, it can be a very fun, easy, and rewarding endeavour.
Forex Trading For Beginners
You trade international currencies in the Forex Market’. Essentially, it is what “makes the world go ‘round” in terms of economic aspects. No matter who you are in the civilized world, either a
willing player or an unconscious participant, you take part in the forex market. You may ask
“how”? Well, let’s start simple, say you live in the U.S. and you’re at the shops buying groceries, you buy milk and cereal for the kids. More often than not, good milk is imported from countries like New Zealand or Australia where cows are said to be grown in a healthier environment. You are then indirectly participating in the forex market because you buy from a company that had to purchase that milk in New Zealand or Australian dollars to be imported into your country.
In another example, you might have planned a vacation to Asia, say the Philippines perhaps,
before heading to your destination, to prepare for your trip, you decide to exchange your U.S.
dollars for Philippine pesos at the airport, this is a very straightforward example of you directly
engaging in forex trading.
Those were just everyday examples of simple foreign exchange. If you want to dive deeper into the business of forex trading and start investing in it, you have to get ready to learn and do more research on the topic. Like in any and every other investment, there are risks involved. The more information you have, the lesser the chances of you losing.
And the more chances of rewards. In the next part, you will learn about the fundamental terms in forex. See the explanation of a broker, understand the difference between long and short positions, etc.
Having this knowledge will help you so won’t get lost in the jargon of the forex trading world. Let’s get started.
Learn Basic Forex Terminology;
●Base Currency - The currency you are trying to get rid of or spending.
●Quote Currency - The currency you are buying or trying to purchase.
●Exchange Rate - This pertains to the price of the base currency which you have to
spend in the quote currency.
●Broker - A mediator of finances and investments between client and market. The broker can represent the investor in the forex market and conduct trades on behalf of the client.
Basically, they do the dirty work for you.
●Long Position - You are the buyer of the base currency and seller of the quote currency.
●Short Position - This is the opposite of ‘long position’, in this case, you want to buy
quote currency and buy the base currency.
●Bid Price - The best price at which your broker is willing to purchase base currency to
swap or sell your quote currency.
●Ask or Offer Price - The price that your broker is willing to sell base currency for.
●Spread - The numerical contrast between the asking price and the bid price, in short, the
How Can I Safely Get Into Forex Trading?
If you want to get into forex trading but want to practice first, a suggested way of going about it is to use a demo account first. This way, you can test out a platform before diving in headfirst.
Think of it like test-driving a car before buying it, testing the waters if you will, and all those other cliches. Most importantly, in this case, it will teach you how to use the platform’s different features, master its ins and outs. Like a rehearsal before the big show. Using this technique, you can safely learn without investing real money yet, thus, eliminating risks that usually intimidate rookie investors.
Why Use A Demo Account First?
It’s not actual trading yet, but that’s what’s so beneficial about it. Different platforms have varying features, with demo accounts, you can try them all out without any risks of losing real money. Trying our a trade once will teach you nothing. Using a demo account, you will be able to continuously trade, or at least pretend to, while learning how to observe trends, patterns, and currency movement. It can also give you time to figure out whether you’re in this for the long run or not. You can then decide to either be a long-term or short-term forex trader. With this in mind,
you can filter out features, and cherry-pick the platforms that will work best for you and your needs. Try your hand at it by placing demo orders, professionals recommended at least 50 of these demo orders before trading live. With these, you will learn about limit orders, setting stop orders, and figuring out whether spreads are fixed or not.
Even while using a demo account though, still pretend as if you are risking real money, immerse yourself truly in the game. Whether or not it involves real money, treat it as if it does. This way you will be better groomed for the real thing.
Once you’ve practised enough using your demo account, you will develop a style of your own,
you will also have ample experience in the actual forex trade industry. This will build your confidence in yourself and your skillset. You will be able to provide answers to critical questions,
and most importantly, be better equipped to earn more for your investment.