Want to start trading forex online, but aren’t too sure where to start? Well, you must have come to the right place, because we will show you everything you need to know to start a forex trading career on the right foot.
The industry itself usually notices trillions and pounds worth of currency on a daily basis, so you will join a bunch of retail and institutional investors. The comprehensive concept is the profit from price movements between two competing currencies – such as GBP and USD.
However, we suggest that you read our guide on Forex trading for beginners: How to trade Forex and find the best platform before you start. Not only will we provide you with details on how forex works, but we will also list our three most popular forex forex choices for year 3.
What is Forex trading?
Forex – also known as “exchange rate”, means foreign exchange. In its most basic form, Forex trading is the process of exchanging one currency for another. For example, if you were to exchange GBP for EUR, it would be foreign exchange trading. In this regard, forex trading is one of the most liquid financial markets in the world.
In fact, big banks trade trillions of pounds of currency on a daily basis. This is one of the main reasons why the forex space has since reached the retail day trading sector. Crucially, it is now possible to buy, sell and trade dozens of currencies from the comfort of your own home, and even via a mobile device.
How to trade Forex?
Like any other asset class that is active in the online investment space, the comprehensive concept of forex trading is making money. As such, you need to choose the currency pair you want to trade and then decide which way you think the markets will go.
Before you start trading, you need to understand what a currency pair usually looks like. Pairs will always consist of two currencies, and the price of the pair is based on the real-time exchange rate.
Forex trading couples: major, minor and exotic
So now that you know how a typical buy and sell order works, we now need to think about the type of currencies we want to trade. In the world of foreign exchange trading, this is divided into three categories – major, minor and exotic.
The most traded currencies in the world are known as major currencies. These include GBP, EUR, USD, JPI and CHF. As for the pair itself, the main units will always consist of two main currencies. For example, GBP / USD or USD / JPI.
Trading to major companies is always the most sensible option when you are just starting out. This is because major companies benefit from the largest amounts of liquidity, which in turn results in stronger ones
. Don’t worry, we’ll cover the spread in more detail later.
Minors are somewhat less liquid than directions. One side of the smaller pair contains the main currency and the other side the weaker currency. For example, the USD / NZD would consist of the US dollar as the main currency, and the New Zealand dollar would be a less liquid currency.
If you have a greater appetite for risk, you may want to consider trading exotic couples. They consist of one major currency such as the GBP and an emerging currency such as the Turkish lira. Exotic couples have much lower demand than financial institutions, which means that the range will be much larger.