How to Trade Forex? It's a Snap!
How to trade Forex? Trading Forex is a piece of cake. It is really not as hard as it seems to be. Forex trades involve entering the trade at the right time, as well as exiting also at the right time. All you have to do is select a currency pair, select the desired amount of the base currency that you wish to trade and choose whether you would like to sell or to buy. Next you will have to wait for a profitable time to exit your transaction, and there you are. In order to learn how to trade Forex and to start consistently choosing the winning transactions, you will have to practice on a demo account for several months.
Demo Account
Demo account trading is the safest way to learn how to trade Forex. Making mistakes is inevitable, especially in the beginning of your trading career. However, if you make mistakes, while trading on a demo account, you will not have to pay for your mistakes. Most common mistakes will be choosing the wrong time of entering and exiting the trades. Being unfamiliar with the system may also result in mistakes. That's what demo accounts are for - to teach you without incurring losses. 90% of the traders fail in the very beginning of their trading career. Demo account trading will safeguard you from becoming one of them.
Understanding Currency Pairs
How to trade Forex with the best currency pair? Which currency pair to go with? It is better to first go with the most traded currency pair - USD/EUR: Trade with this currency pair, until you know it like the back of your hand. Do not start trading with other currency pairs until this one becomes your "friend". All currency pairs are different; they are all tied to different countries and different reasons behind fluctuations, such as news, political situation and so on. Try to get a feel for one currency pair at a time, starting with the most traded one (USD/EUR).
Understanding Currency Quotes
Understanding currency quotes is extremely important in order to learn how to trade Forex. Understanding currency quotes is essential, because the trades are performed based on the quotes. Each quote has two sides. The bid price and the ask price. Bid price is the price at which you can sell the base currency at the same time buying the counter currency. Ask price, is the price at which you can buy the base currency at the same time selling the counter currency.
First currency in the quote is the base currency, and second currency is the counter currency (also called quote currency or terms currency). In the example of the USD/EUR currency pair, USD is the base currency and EUR is the counter currency. The value of the base currency is always 1. The value of the counter currency is calculated against the base currency, i.e., 1 USD = 0.7422 EUR. Prices in the terms of quotes are expressed through pips, which are usually the 4th decimal point. Once you understand the currency pairs, you will be well on your way in the process of learning how to trade Forex.
Margins and Leverage in Forex trades
Leverage is what your dealer is willing to give you based on the amount of your margin. Trading on margin often sounds very appealing for the novice Forex traders since in this case, leverage would allow you to make substantially larger profits. However, you should realize that your losses in the case of trading on a margin may also become colossal. Dealers often offer 100:1 ratio of leverage to margin. Such a large leverage would allow you to trade with a lot of lots at the same time raising your chances of both profits and losses 100 times. How to trade Forex and stay calm? Do not trade on a margin.
No matter what dealers may say, they often do not care much about the outcome of your trades. Dealers are similar to banks, which are willing to provide you with a loan, and they do not care much if you will lose your property for example. You will still have to pay back the loan, as well as the interest to the bank. You should try to never trade on a margin since the outcome may be frightening. You should consider trading on a margin only after you gain sufficient knowledge of how to trade Forex.
It's very easy to learn how to trade Forex. However, how to trade Forex with a profit? Allow enough time to train on a demo account before proceeding to real-life trading. - 23222
Demo Account
Demo account trading is the safest way to learn how to trade Forex. Making mistakes is inevitable, especially in the beginning of your trading career. However, if you make mistakes, while trading on a demo account, you will not have to pay for your mistakes. Most common mistakes will be choosing the wrong time of entering and exiting the trades. Being unfamiliar with the system may also result in mistakes. That's what demo accounts are for - to teach you without incurring losses. 90% of the traders fail in the very beginning of their trading career. Demo account trading will safeguard you from becoming one of them.
Understanding Currency Pairs
How to trade Forex with the best currency pair? Which currency pair to go with? It is better to first go with the most traded currency pair - USD/EUR: Trade with this currency pair, until you know it like the back of your hand. Do not start trading with other currency pairs until this one becomes your "friend". All currency pairs are different; they are all tied to different countries and different reasons behind fluctuations, such as news, political situation and so on. Try to get a feel for one currency pair at a time, starting with the most traded one (USD/EUR).
Understanding Currency Quotes
Understanding currency quotes is extremely important in order to learn how to trade Forex. Understanding currency quotes is essential, because the trades are performed based on the quotes. Each quote has two sides. The bid price and the ask price. Bid price is the price at which you can sell the base currency at the same time buying the counter currency. Ask price, is the price at which you can buy the base currency at the same time selling the counter currency.
First currency in the quote is the base currency, and second currency is the counter currency (also called quote currency or terms currency). In the example of the USD/EUR currency pair, USD is the base currency and EUR is the counter currency. The value of the base currency is always 1. The value of the counter currency is calculated against the base currency, i.e., 1 USD = 0.7422 EUR. Prices in the terms of quotes are expressed through pips, which are usually the 4th decimal point. Once you understand the currency pairs, you will be well on your way in the process of learning how to trade Forex.
Margins and Leverage in Forex trades
Leverage is what your dealer is willing to give you based on the amount of your margin. Trading on margin often sounds very appealing for the novice Forex traders since in this case, leverage would allow you to make substantially larger profits. However, you should realize that your losses in the case of trading on a margin may also become colossal. Dealers often offer 100:1 ratio of leverage to margin. Such a large leverage would allow you to trade with a lot of lots at the same time raising your chances of both profits and losses 100 times. How to trade Forex and stay calm? Do not trade on a margin.
No matter what dealers may say, they often do not care much about the outcome of your trades. Dealers are similar to banks, which are willing to provide you with a loan, and they do not care much if you will lose your property for example. You will still have to pay back the loan, as well as the interest to the bank. You should try to never trade on a margin since the outcome may be frightening. You should consider trading on a margin only after you gain sufficient knowledge of how to trade Forex.
It's very easy to learn how to trade Forex. However, how to trade Forex with a profit? Allow enough time to train on a demo account before proceeding to real-life trading. - 23222
About the Author:
About the author: Steve Maenshel can you help you navigate how to trade the forex markets. For more forex trading information, visit his forex resource center.
posted by X - Men @ 12:47 AM
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