Basics Of Forex Trading


So you are interested in entering into forex trading? Forex or FX or Foreign exchange is an over-the-counter market for the trading of different curries throughout the world. Forex is the largest and most liquid asset market in the world. Learning and starting forex trading is a great way of making money.

People enter into the forex market by thinking they would start making huge bucks overnight. But, when you are getting started and you don’t have enough knowledge and experience in this field, it is not possible to make big amounts just in the beginning.

In fact, not having sufficient knowledge and experience may lead to huge losses. So if you are a newbie, you must be wanted to learn and gain experience in forex trading. Basically, learning in the forex market never stops. With the changing market sentiments, you keep learning new things.

Talking about basics, learning forex trading may take around 3-6 months, depending upon the time you spend learning and the source of learning. It is also about how much time you take on learning different terms and concepts of forex trading.

Forex trading is not like a get rich quick scheme. The more you spend your time and effort learning about forex, the better you will understand the market and better your forex trading strategy will be. So if you are planning to learn forex trading, keep in mind that you have to give sufficient time consistently.

Let us guide you with basics of forex trading

Basics of Forex Trading

FX market or foreign exchange market is all about buying & selling of one currency in the exchange of another. In a nutshell, whenever you exchange your currency with other country’s currency, you participate in foreign exchange. It could be converting US dollars into Euros for traveling.

Your objective as a forex trader would be to buy a currency at a lower price and sell it at a higher price. The margin you get will be your profit.

Forex Currency Pairs

A currency pair in forex is the price quote of the exchange rate of two traded currencies. When you participate in the forex transaction, you enter into the purchase of one currency and sell another.

When you buy a currency pair, you will be buying the base currency and selling the quoted currency. On the flip side, when you sell a currency, you will be selling quoted currency and buying the base currency.

Types of Currency Pairs

There are three different types of currency pairs. Those three currency pair types are – major currency pairs, minor currency pairs, and the exotic currency pairs.

1. Major currency pairs

Any currency pair that has U.S. dollar (USD) on any side, either base currency or the quote currency, is known as major currency pair. Because USD is the most traded currency, major currency pairs also provide low spread and such currency pairs are the most liquid currency pairs. Some examples of major currency pairs are – EUR/USD, GBP/USD, USD/JPY, and USD/CHF.

2. Minor currency pairs

Minor currency pairs are also known as cross-currency pairs. Any currency pair that does not contain USD on any side, is known as minor currency pair. Such currency pairs have wider spreads and they are not as liquid as major currency pairs. Some examples of minor currency pairs are – EUR/GBP, EUR/CAD, AUD/JPY, and NZD/CHF.

3. Exotic currency pairs

The exotic currency pairs consist of currency that is in the emerging market. Talking about spreads, exotic currency pairs also have much wider spreads. An exotic currency pair includes one major currency and one currency of an emerging economy like Singapore, Mexico, Hong Kong, etc. Some examples of exotic currency pairs are – USD/SGD, EUR/TRY, USD/HKD, and NZD/SGD.

So these are the three main types of currency pairs out there. It is essential to know about currency pair types because each of the currency pair types has different spreads and they have different liquidity.

Methods of Learning Forex Trading

There are so many ways by following which you can learn forex trading. If you are a complete beginner, you may be confused about where to start. Here we have mentioned some of the best ways to learn forex trading:

1. Demo account

This one is for complete newbies. If you are a complete newbie, you should create a demo forex trading account. This gives you an idea about how actually the forex market works. Though it is not as effective as a real trading account, still you can learn various stuff from the demo trading account. It is a good idea to get started with a demo account instead of directly opening a real trading account or a micro forex trading account.

2. Micro forex

One of the best ways of learning forex is using a micro forex account. If you are a newbie and can’t risk a huge amount, then starting with a micro or mini forex account is a good idea. The disadvantage of learning through a demo account is you don’t get real experience. Because the micro forex account has some money funded, it provides a real experience. This way, you won’t be spending a huge amount of learning forex trading.

3. Self-education

Learning forex through self-education is a bit time-consuming. Learning by educating yourself is a good way to master forex. There’s so much information out there on the web. Apart from this, you can also learn by reading articles, listening to podcasts, etc. To learn forex trading, all you have to do is select the right source.

4. Individual training

Individual forex training is also a great way to learn forex trading. In individual training, you are learning under the guidance of a particular forex trading professional. Though learning through individual training would cost you a bit more money, but you would learn faster this way. The only drawback of this method of learning forex trading is it can be really expensive. If you can afford to hire an expert forex trading professional who can provide training, then you should consider this option.

5. Video lessons

Learning through video lessons is becoming popular nowadays. There are many experienced professional forex traders who have their video training lessons. This is the best way to get quality learning for high experienced traders by paying low. You can enroll for the video lessons or course for any of the expert forex trading professionals.

So these are the different methods from which you can learn forex trading. With the right method, you would be able to learn forex trading faster.

Conclusion

The main reasons why most traders fail in the market is due to the lack of trading strategy and greediness. People don’t want to spend time learning, they want to get rich overnight. But, forex is not a get quick rich scheme. Hence, to start earning from forex, you have to spend sufficient time on learning and take forex as a business.

For a complete beginner, how to enter into the forex market and start trading becomes the main question. To learn the basics of forex trading it may require 3 to 6 months. The timeframe could vary depending upon the selected method for learning the forex, capabilities of the person, etc.

There is no end to learning in the forex. When you will get into this field, you will keep learning new things every day. If your goal is to become a forex trading expert, then it will require years of hard work and effort.

 

Tab Winner

Hello I am Tab Winner welcome to my Forex blog. I have been trading Forex for over 2 years now and a stay at home dad for about the same amount of time.

Recent Content