If you are interested in entering the foreign currency exchange market, it is essential for you to learn the basics before you commence trading. This is an exciting market where you can make huge profits without investing a huge amount of your own funds.
The one factor you have to bear in mind is if you do not trade carefully and do not fully understand the complexities of the market, you can lose as much as you can make. Learning how to predict the direction of your currency is an exciting and fulfilling task, but you should train yourself not to become too excited about the market as this will make you emotional.
Choice of Foreign Currency Exchange Pair
Prior to commencing live trading, you need to make a decision as to the currency pairs you wish to trade. You should keep abreast of all economic movement in the countries related to your chosen currency pair.
In the event that a country has a high demand for its goods for export, this inflow of funds will boost its economy which, in turn, will increase its currency value. A country’s politics plays a massive role in the demand for its currency. Countries that have pending elections need to be monitored carefully. If the winner of the election has a solid and stable fiscal policy and the citizens are happy with their new leader, the economic climate of that country could improve, thereby increasing its currency value.
In countries where the government chooses to relax regulatory control that affects economic growth, the currency will normally increase in value. To keep up to date with this type of information, you must be aware of all the relevant economic reports that are available. Economic factors relating to the employment levels and inflation have a direct influence on the value of a currency. To ensure that your trades are profitable, you have to keep up to date with all the economic information related to your currency pair.
Before you are able to commence live trading, you need to register with a forex broker. This is an involved task as you have to ensure that you find a reliable, trustworthy, reputable broker. When you are searching for a broker, you have to bear the following in mind.
- Is the broker regulated?
- What is the extent of the products the broker can offer you?
- Check on some of the reviews for the brokerage
Once you have completed all the research and done comparisons of various brokers, you can open an account and start trading. It is recommended that you commence with a demo account for a while before you start trading with your actual cash. This will give you the opportunity to test your strategy and trading plan whilst you are trading with virtual currency.
Unless you have experience in this financial market, you cannot start trading as soon as you make the decision to enter the market. There are several stages you have to go through before you can start placing trading. Once you have opened a brokerage account, you have to learn different methods of analysis, chart reading and develop a suitable strategy. Once you have determined a suitable trading margin and feel comfortable about the entire process, you can commence trading.