Forex stands for foreign exchange and Forex
trading means trading currencies of different countries against each other. For
instance, in America the currency in circulation is called the US dollar (USD)
while the currency in Europe is called the Euro (EUR). An example of a Forex
trade transaction is to buy Euros and sell US dollars at the same time. The
Forex market is open 24 hours from Monday to Friday and you can earn money
either by going long or by going short. Going long means to buy a currency pair
and sell it at a later time while going short means selling a currency pair
first and buying it later.
Normally, Forex trading is done
through a broker. As a trader, you have the freedom to choose the currency pair
you expect to change and take your trading position accordingly. If you think
that a currency pair, say EUR/USD, will increase after some time, you can place
a long position and buy the pair. After a period of time, when you see a rise
in the pair, you can sell the pair and earn profit. It must be noted that the
currency pairs move upwards and downwards in terms of points known as pips. If
your predictions turn out to be true, you profit from the trade. However, there
are equal chances of loss in a Forex trade. Therefore, it is very important to
trade Forex in a disciplined manner.
First of all, choose a Forex broker who has
a very good reputation with years of experience in the field. Now choose the
currency pair you want to trade. In the beginning, it is better to choose
EUR/USD to trade Forex. Later on, you can also go for other highly volatile
pairs like USD/JPY.
Since the Forex market is unpredictable and
volatile, it is always advisable to start trading with a practice account for
at least one month before trading with real money. This will help you in
getting experience in the Forex market. The price movements and statistics in a
practice account are real time; hence, you will be able to get hands-on
knowledge and experience with the practice account. This will also boost your
confidence when trading with real money.
While trading with a practice account,
develop your own strategy with the help of current news, charts and patterns
available on the trading platform. Learn important indicators like moving
average price, moving average convergence divergence (MACD), candle stick
patterns and parabolic SAR. These are very important indicators and you must
develop your trading strategy based on these indicators. This will increase
your chances of earning decent money from the market. It is recommended to
trade during the busiest hours of the market between 13:00 GMT to 16:00 GMT
when the London session and the US session overlap to earn maximum profit. But
be careful as there are equal chances of loss as well.
After getting experience with your practice
account, start with a small investment. Start trading with the help of
indicators and current news events. Don't panic and stay focused even if you
lose initially. Analyze your strategy periodically and make necessary changes.
Over a period of time, you will be able to earn decent money through Forex
trading.
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