The word Forex stands for Foreign Exchange. Forex trading is an unregulated market. Billions of dollars are exchanged daily in the forex market. Forex business revolves around buying and selling one currency in exchange for the other.
The working mechanism on the forex is very simple. The earnings from forex depend on speculation. You buy the currency at a lower level and sell it when the currency is at a higher level.
So, the basic concept is if you rightly speculate that the US Dollar is going to rise, you will be buying that currency. And then when the US dollar swings up, you sell those dollars at a higher price.
However, before you jump into the biggest financial market on the earth (The forex market is even bigger than US Stock Market!), you need to understand some basic facts about the forex business.
Forex Trading Business – Learn the Basics
Before you start actually trading in the forex market, it is wise to learn the basics of the trade. Let us briefly explain the basic rules and terms of the business.
1. Pairs
The working procedure of trading in foreign exchange is mostly similar in comparison with other financial market platforms. But, there is one important difference. In forex trading, you buy and sell currency at the same time.
Here currencies are quoted in pairs. For example, you have to buy pairs like USD/EURO or EURO/JPY. The existing exchange rate will determine the purchase price between the two currencies.
2. Fix Hours for Trading
Unlike other markets, forex trading operates for 24 hours throughout the day and night. However, Saturday and Sunday are closed.
3. Risk Factor
Forex is an extremely volatile market. There is a considerable amount of financial risk in this trade. Hence, if you don’t have money that you can afford to lose, think twice before you jump in.
4. Forex Brokers
You can’t trade currency of your own. It is mandatory to take help from a broker. You have to select a forex broker and open an account with them. The good news is that you need to invest a lot of money to open an account nowadays. You can open a forex trading account even with a minimum of $5.
Generally, all forex brokers will provide you with a trading platform wherein you can deposit or withdraw money for currency buying and selling. They will help you provide information on technical analysis.
5. Pips
Pip is the most widely used word in the forex trading business. It is the lowest unit of currency change. For example, if the pair value of USD/EUR swings from 1.52222 to 1.52221, the difference is termed as 1 Pip( 1.52222 – 1.52221 = .00001)
6. Spread
Spread is simply the difference between the buy quote and the sell quote. It is, you can call it the earnings of a broker.
There are many other terms like lots, charts, reading quotes, placing orders, etc which you will learn as you start trading.
If you’re just a beginner, and just about thinking about the idea of Forex trading, working with a broker is a good option.
Select a Forex Trading Platform
There are many forex broker trading platforms you can consider. However, before finalizing check various forex forums and take reviews of existing users.
Related: Top Online Forex Broking Platforms
When you finalize the forex broker, start by opening a demo account or practicing account. Get used to the procedure and then start investing. Reputed forex brokers like, XM, FXTM, etc will provide you with a demo account.
Finally, our advice before entering into the forex market is to check your financial resources. Forex is not a scam. However, the forex business is volatile and risky in nature. Never invest money here if you don’t have extra money to afford high-risk-oriented profits.
Editorial Team at 99BusinessIdeas is a team of experts led by Rupak Chakrabarty with over 25 years of experience in starting and running small businesses. Started in 2010, 99BusinessIdeas is now one of the largest free small business resources in the industry.
