Forex (FX) is a compound of the words “foreign” and “exchange.” Forex is the global market where international currencies are exchanged. Traders compete in the forex market through spot prices, futures or options.
Forex is different from the stock market in that there is no financial institution large enough to corner all of foreign exchange. It is the largest financial market in the world. While traders in the stock futures market will see a daily volume of approximately $5 billion, a staggering $6.6 trillion is traded on the forex market every day! Ample research and forex training tips are advised before trying your hand.
Best Tips For Forex Traders
The first thing to understand about forex is that currencies are exchanged in pairs. You cannot buy or sell one currency without the other. The forex market offers low transaction costs with high liquidity, making it an attractive opportunity for all types of traders and investors, from beginner traders through institutions. When it comes to forex however, banks are the major players.
Beginner traders may scour the internet for forex trading tips and tricks. The most important thing to remember is that there is no “magic formula” or winning strategy. The most successful traders may have twenty years of experience behind them alongside that gambling gold thumb.
Beginner Forex Traders – Where To Start?
Some swear by finding a simple strategy that works, such as technical patterns or news following. Others advise that you play the long game and learn the markets so you can start to read the trends and predict the price movements. Before we get into the forex trading tips for beginners, you should ask yourself these questions:
What is my goal as a trader? – Do you have a realistic target in mind?
How much time do I have to trade? – Are you turning to forex trading as a new full-time job and means to support yourself, or are you simply dipping a toe in the market waters?
How much can you afford to invest? – And more importantly, how much are you willing to lose?
Do your research first, and make sure you understand some of the basic concepts in forex trading. There are plenty of sites offering free or low-cost courses for an introduction to the foreign exchange market. Go old school and head to your local library and pick up Edwin Lefèvre’s “Reminiscences of a Stock Operator” or similar. Not all the books you need will be in the finance section either. Psychology is a huge part of playing the markets.
In forex trading, nothing beats education and experience
When it comes to forex trading, there is a whole new language to learn. Candlesticks are no longer something to look for in a power-cut. (In forex trading, a candlestick pattern is a type of financial chart. One candlestick typically represents a single day’s worth of price data, and over time ‘candlestick patterns’ emerge that investors can use when deciding whether to buy or sell.) Learn bank concepts such as order blocks and supply and demand.
These new terms will be confusing at first, but educating yourself will pay off in the long term. Remember to keep track of your trades so you can look back on where you went right and wrong. Above all, keep a clear head and make clear and rational choices. Emotional decisions are never a good idea, especially when it comes to forex trading!