How to trade currency online: basics to learn about the Forex Market

In this article, we will be providing information on how to trade currency online and some basics to learn about the Forex Market, after explaining What is Forex Trading all about, one of the most frequently asked questions we get addressed regarding FX Trader jobs.

Currency Trading can be quite an individual endeavour, especially since the strategy and reasons for trading may differ from one person to another; research and calculation for trading choices are done through online platforms and trading software.

When making a trade, most traders make a decision using a combination of fundamental and technical indicators. Fundamental indicators are generally used by larger traders such as institutions to make long-term decisions. Individual traders, on the other hand, tend to favour a more technical approach, trading markets in short swing.

How to trade currency online: core rules

Starting an account and learning to buy and sell isn’t all there is to Forex. Understanding some core rules about the market is necessary to trade properly.

The first of those rules would be to always keep in mind the high liquidity and low natural volatility of the market. Currencies do not change by rapid percentages the same way that stocks and options do. In fact, when trading currencies, you are always forced to trade with leverage.

So what is leverage? Basically, leverage is regular trading terms means money borrowed from the broker. This manifests in multiples, where adding $1 to your account may increase leverage, depending on the settings of your account. Let’s, for example, imagine that you are doing a 50:1 leverage. This means that for every £1 you put into your account, you can purchase up to £50 worth of currencies. This leveraging allows you to profit considerably from the tight movements in the FX market.

How to trade currency online

Now you need to understand the concept of margin. Your margin is the amount of money required in your account to open a certain trade, especially on margin. If you’re trading on leverage, which is a must in FX, then you’re borrowing broker’s money. This means that any form of error you do may cost the broker too. Another term you need to know is margin calls, which happens when your account runs below the limit required to trade effectively. This tends to occur a lot with high margin traders, especially those who low experience in the markets. Margin calls are best understood when we look at the flipside of leverage. In fact, leverage can be a double-edged sword. When you borrow money for a trade, you stand to make more money, basically for free. If you’re on a 50:1 margin, you invest $1, while your broker invests $49. You then get to profit off the $1, and he $49. If you lose money on that trade, while your gains multiply, so do your losses. Since brokers need to safeguard their borrowed money, you must understand that any losses the broker would sustain, are subtracted from your account. This means that if you lose money on the $49, the losses get subtracted from the $1. A simple and tiny mistake in such circumstances can put your account in the red. Thus, you should be extremely calculated when making an investment.

Understanding how to trade currency online and the implications of margin and leverage portions can be the difference between a successful FX career and a failed one.

Then, practice makes perfection. Open demo an account with one provide you choose to practice and free training courses, usually also a personal account manager and trading tools to help you in your decision-making. From here you’ll start learning by using their free training program for beginners.

Don’t forget the golden rule: no “safe” trading system has ever been devised, and no one can guarantee profits or freedom from loss. To fully enjoy your trading experience, invest only what you can afford to lose.

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