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 of one currency in exchange for the other.
The working mechanism on forex is very simple. The earning from forex depends on speculation. You buy the currency at a lower level and sell it when the currency is on a higher level.
Related: Top Online Forex Broking Platforms
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 under the earth ( Forex market is even bigger than US Stock Market!), you need to understand some basic facts about forex business.
Forex Trading Business – Learn the Basics
Before you start actually trading in forex market, it is wise to learn the basics of the trade. Let us briefly explain the basic rules and terms of the business.
The working procedure of forex trading 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. Forex Trading Hours
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 which you can afford to lose, think twice before you jump in.
4. Forex Brokers
You can’t trade currency of your own. You must have 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 much 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 providing information on technical analysis.
Pip is the most widely used word in 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)
Spread is simply the difference between the buy quote and the sell quote. It is, you can call it the earning of a broker.
There are many other terms like lots, chart, reading quotes, placing orders, etc which you will learn as you start trading.
If you’re just a beginner, and just about thinking the idea of Forex trading, working with a broker is a good option.
There are many forex broker trading platforms you can consider. However, before finalizing check various forex forums and take reviews of existing users.
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 a demo account.
Finally, our advice before entering into 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.
About the Author: 99businessideas.com led by Rupak Chakrabarty is committed to helping beginners, entrepreneurs, and small business owners in starting, managing, and growing their business. Our aim is to educate the entrepreneur on the various stages of entrepreneurship.