The logic and fundamental principles of Forex trading – Wales247
The Internet offers a broad range of money-making opportunities. Forex trading, which has been around for decades, is popular in the UK and abroad. With specialized software and assistance of a broker, anyone can access the enormous currency market with daily turnover reaching 5 trillion USD.
Here are the basics of gaining profit from shifts in exchange rates.
ABC of Trading
Different countries have different currencies, and these may be bought and sold for profit. In this respect, the market is no different from that for stocks. Currency values are never static, and a carefully timed exchange may bring real money to the trader. Individuals act alongside large institutions like major banks. To join the ranks of retail traders, you need knowledge, software and assistance.
A broker, such as FXTM, provides access to the immense global marketplace by registering trader accounts. Aside from supplying clients with software tools and educational material, it ensures support and guidance from finance pros. MetaTrader 4 and 5 are one of the most popular trading platforms in the UK.
Factors at Play
Values of currencies are affected by factors of both micro- and macroeconomic scale. For instance, currencies of oil-exporting nations, such as Russia, usually collapse following a sharp fall in oil prices. They may also be affected by domestic monetary policies, geopolitical conflicts, wars, and other changes.
Trading platforms come with multiple graphic aids. These help you comprehend the trends and hone your skills. Here are the key aspects every newbie needs to understand.
1) Pairs of currencies
All trading is pair-based. One of the most popular combinations is EUR/USD. In this example, the Euro is the base currency, while the US dollar is the quote currency. The indicator shows how many US dollars a Euro is worth. For instance, 1.05 means one Euro can be purchased for 1 dollar 5 cents.
2) Ask vs. bid
These are two prices a trader look at. When a currency is being bought, its “ask” price is applied. In the opposite situation, the trader’s profit or loss is determined by the “bid” price. The former (e.g., 1.0966) is always higher, albeit slightly than the latter (e.g., 1.0958).
3) Spreads and pips
The difference between the “ask” and “bid” values is known as “spread”. Since each 0.0001 is termed “pip”, a spread of 0.0004 should be read as “four pips”.
4) Long and short positions
When a trader buys a certain currency and sells it once the value has increased, this is known as the “long position”. In the opposite scenario, the currency is first sold based on the expectation that the value will drop, and more of it can be bought back later.
How to Choose a Broker
Forex trading is impossible without an intermediary. The number of brokers advertising services online is impressive. As some of these companies are established for a scam, you must choose carefully.
Do some research. Make sure the provider is officially registered and licenced to conduct operations in your region. It is also important to look through genuine user feedback on trusted dedicated websites.
Tips for Newbies
Educational material on Forex trading is abundant. There are countless articles and tutorials explaining proven strategies. Your broker should also supply sufficient content to guide you through the trades.
One useful option is copy trading. If you have no time to analyse the trends or have fear of making a mistake, delegate the job to professionals. A certain portion of your funds will be linked with the account of an expert. Next, all the trades they conclude will be copied as if you were taking the same actions yourself.
Different brokers offer different terms for the scheme. For example, if you trust the manager with $1,000, and they gain $500 in profit, a lion’s share of it ($450) could go to you, while the rest constitutes the commission ($50).
It is important to note that currency trading entails certain risks. Users with little experience should first learn the ropes of trades in the demo mode. Unlike live accounts, demo trading is done for training purposes only. No real money, and therefore financial risks, are involved.
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