How to Start Trading on Forex
Forex trading implies buying or selling a currency pair to profit from its volatility. Forex or foreign exchange is a fast-paced international market, the largest of its kind.
The currency pairs’ volatility represents the speculators’ bread and butter. After all, every trader is on the market for the same thing: to speculate on its moves, to make a profit.
Online trading became a reality since the Internet took over our lives. It increased its role as smartphones allow on-the-go trading.
In other words, as we receive tons and tons of information every day, we’re better informed to make a trading decision. From this point to the actual buying or selling of a currency pair or financial product offered by a Forex broker, it is just a small step.
Opening a Forex Trading Account
To start trading the Forex market, a simple trading account will do the trick. Funding it in the 21st century is very simple: just use one of the multiple payment options offered by any Forex broker: credit card, wire transfer, or other electronic options.
Before depositing funds, the trader must decide on the type of the account. Depending on the broker and the trading conditions, the account has a different structure, conditions, and variables.
Things like minimum deposit, spreads, swaps, commissions, other fees, execution, slippage, and so on, are important in the economy of a trading account. They all feed into the funds deposited, so minimizing them is a priority for all traders.
During the series of articles we build here we are going to cover most aspects of trading the currency markets and what are the elements of a trading account. Moreover, how to interpret and utilize them.
Mastering the Trading Platform
The most popular trading platform for the retail trader is the MetaTrader. It comes in two versions: MT4 and MT5.
Developed by the MetaQuotes Software company, it is an excellent platform due to its various third-party integrations that make is competitive in the industry. Almost all Forex brokers offer the MT4 and MT5 platforms to their customers.
There are some differences between the two trading platforms, though. For instance, the MT5 was developed due to some regions in the world imposing restrictions on specific strategies. Hedging (buying and selling the same product on the same trading account), for instance, is forbidden in the United States, while in other parts of the world it isn’t.
For this reason, the MT5 appeared and solved the issue: hedging isn’t allowed on the MT5 platform.
Also, the FIFO (First In First Out) condition is mandatory on the MT5, but not on the MT4. Other than that, the two trading platforms are pretty similar, with a plus for the MT5 regarding risk-management offered.
Forex Glossary as Part of Forex Education
Forex terminology is essential when trading currencies. Going long or short a currency pair (buying or selling), selling cable or buying the NFP reaction, are just some examples.
Brokers strive to offer access to as much Forex education as possible as their interest is to have active traders. Therefore, just ask a Forex broker for a Forex for beginners kit they might have to share, and you’ll be surprised to see that almost all of them have one.
To start trading the currency market comes easy these days. But once started, it becomes a part of you as its tremendous opportunities always attract people.
The challenge afterward is to make sure the trading strategy is good enough to profit from the currency market potential.