What is Forex Trading?
Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. All the world's combined stock markets don't even come close to this. But what does that mean to you? Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments.
FOREX TRANSACTION: IT'S ALL IN THE EXCHANGE
If you've ever traveled overseas, you've made a forex transaction. Take a trip to France and you convert your pounds into euros. When you do this, the forex exchange rate between the two currencies—based on supply and demand—determines how many euros you get for your pounds. And the exchange rate fluctuates continuously.
A single pound on Monday could get you 1.19 euros. On Tuesday, 1.20 euros. This tiny change may not seem like a big deal. But think of it on a bigger scale. A large international company may need to pay overseas employees. Imagine what that could do to the bottom line if, like in the example above, simply exchanging one currency for another cost you more depending on when you do it? These few pennies add up quickly. In both cases, you—as a traveler or a business owner—may want to hold your money until the forex exchange rate is more favorable.
OPPORTUNITIES IN FOREX: WHAT'S YOUR OPINION?
Just like stocks, you can trade currency based on what you think its value is (or where it's headed). But the big difference with forex is that you can trade up or down just as easily. If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it. With a market, this large, finding a buyer when you're selling and a seller when you're buying is much easier than in other markets. Maybe you hear on the news that China is devaluing its currency to draw more foreign business into its country. If you think that trend will continue, you could make a forex trade by selling the Chinese currency against another currency, say, the US dollar. The more the Chinese currency devalues against the US dollar, the higher your profits. If the Chinese currency increases in value while you have your sell position open, then your losses increase and you want to get out of the trade.
MAKING A TRADE: HOW TO BUY AND SELL CURRENCY
All forex trades involve two currencies because you're betting on the value of a currency against another. Think of EUR/USD, the most-traded currency pair in the world. EUR, the first currency in the pair, is the base, and USD, the second, is the counter. When you see a price quoted on your platform, that price is how much one euro is worth in US dollars. You always see two prices because one is the buy price and one is the sell. The difference between the two is the spread. When you click buy or sell, you are buying or selling the first currency in the pair.
Let's say you think the euro will increase in value against the US dollar. Your pair is EUR/USD. Since the euro is first, and you think it will go up, you buy EUR/USD. If you think the euro will drop in value against the US dollar, you sell EUR/USD.
If the EUR/USD buy price is 0.70644 and the selling price is 0.70640, then the spread is 0.4 pips. If the trade moves in your favor (or against you), then, once you cover the spread, you could make a profit (or loss) on your trade.
In an atmosphere as dynamic as the forex, proper training is important. Whether you are a seasoned market veteran or brand-new to currency trading, being prepared is critical to producing consistent profits.
Of course, this is much easier said than done. To ensure that you have your best chance at forex success, it is imperative that your on-the-job training never stops. Developing solid trading habits, attending expert webinars, and continuing your market education are a few ways to remain competitive in the fast-paced forex environment.
If your goal is to become a consistently profitable forex trader, then your education will never stop. As the old adage goes, practice makes perfect; while perfection is often elusive for active traders, being prepared for every session should be routine.
FOREX TRADING FOR BEGINNERS
The forex is the largest capital marketplace in the world. Featuring more than $5 trillion in daily turnover, the forex is a digital trading venue where speculators, investors and liquidity providers from around the world interact.
For those new to the global currency trade, it is important to build an educational foundation before jumping in with both feet. Understanding the basic points of the forex is a critical aspect of getting up-to-speed as quickly as possible. It's imperative that you're able to read a quote, quantify leverage and place orders upon the market.
If you are interested in boosting your forex IQ, completing a multi-faceted forex training course are one way to get the job done. To learn more, check out our currency market primer to get on the same page as the forex pros.
BEST PRACTICES OF SUCCESSFUL TRADERS
Unless you are playing the lottery, success isn't an accident. Mastering any discipline takes desire, dedication and aptitude. Becoming a winning forex trader is no different. Without the want, will, and know-how, your journey into the marketplace is very likely doomed before it begins.
Fortunately, some of the differences between successful traders and those who lose money are no longer a secret. Through conducting an intense study of client behaviour, the team at FXCM has identified three areas where winning traders excel. While there is no "holy grail" for profitable forex trading, establishing good habits in regards to risk vs reward, leverage and timing is a great way to enhance your performance.
To learn how successful traders approach the forex, it helps to study their best practices and personal traits. Trading doesn't have to be a mystery—much of the work has already been done for you.
FREE ONLINE FOREX TRADING COURSES
One of the advantages of being a modern forex trader is the availability of expert guidance. Internet connectivity and systems technology have brought an abundance of useful information to our fingertips.
A webinar is one of the best ways to learn information online. They offer an unparalleled personal learning experience in an exclusive one-on-one format. Attending a webinar is the next best thing to sharing a desk with a forex professional.
E-exch.net offers a variety of webinar types, each designed to cater to your trading needs. Daily entries cover the fundamental market drivers of the German, London, and New York sessions. Wednesdays bring The Crypto Minute, a weekly roundup of the pressing news facing cryptocurrencies. In addition, a library of past recordings and guest speakers are available to access at your leisure in FXCM's free, live online classroom.
WHY TRADE WITH EXNESE?
Because we're a leading forex provider around the world, when you trade with FXCM, you open access to benefits only a top broker can provide. You enjoy:
Award-Winning Customer Service: Get 24/5 service when you need it, wherever you are
Free Premier Education: With on-demand lessons, webinars and real-time instruction, you get the trading edge you need
Plus, you can trade on our proprietary Trading Station, one of the most innovative trading platforms in the market. Open a free forex demo account to start practicing forex trading today.