Forex trading is a prevalent type of investment, and it’s been a favorite among investors and investment companies for many years. Many people have become very successful in forex trading, so it’s easy to see why you want to get involved in the industry.
However, as a beginner, you may be finding it quite challenging. Learning how to trade forex is just like learning any other skill like the piano or coding. It will take years of practice and commitment- so don’t assume that the journey will be easy!
You’ll have to take in a lot of information at the start of your journey. Making sure you start correctly and fully understand the process will help you avoid going through a few months of early struggles.
The world of trading is quite tricky, so you’ll need all the help you can get. To help you out here is some more information about the world of trading forex and how the whole process works.
What is Forex Trading?
Forex trading allows you to make money with the same approach you use in any other business- making or buying something at a lower price to sell at a higher price.
When forex trading, you estimate whether a currency will weaken or strengthen in respect to another currency instead of products. Whether it’s stocks or currencies, trading is based on price changes.
The term forex is merely a shorthand for foreign currency exchange, which converts one currency into another. If you’ve ever taken a vacation overseas, you’re undoubtedly already familiar with currency conversion.
If you regularly change between currencies, you’ll notice that the prices of different currencies change pretty regularly. This price fluctuation allows you to predict if a currency will rise or fall in price on forex markets.
One of the most common currency pairings, for example, is GBP/USD. This translates to ‘how many US dollars does one British pound cost?’
You are purchasing a particular quantity of pounds at 1.36 dollars per pound when you start a trade at the price level of 1.36. You are selling your pounds at a better price if the pound strengthens to 1.38 and you close your bets. This allows you to make a certain amount of money based on the increase in price and the size of your stake.
How to Start a Career in Forex Trading?
Since you make money by predicting changes in prices, to make a decent profit, you’re going to have to get pretty good at predicting those price changes!
If you’re a pure beginner, you’re going to have no idea how to predict a price rise or fall, so without any research, you’re basically just gambling.
This means, in your first few weeks, you should spend time reading books and watching forex trading videos. Before you even put a penny into your account, you should have a pretty good idea of how to trade and what strategies to use.
Make sure that you use demo accounts which are also known as ‘paper trading.’ Demo accounts are simulations of live markets that allow you to open and close positions without risking your own money.
After you feel confident enough with demo accounts, you should be ready to put in some real money.