Foreign exchange (forex) is arguably the
most liquid market in the world with a daily turnover of $5 trillion.
All the transactions take place in a marketplace where traders exchange
and speculate on currencies. Here is a quick guide on how to start forex
trading business for beginners.
There’s a wealth of information out
there for those who want to venture in forex trading. You should
understand everything about the financial market – there’s no free
lunch. Take time to learn how forex works,
active trading times, risk management, and more. Perhaps, you should
start with the main concepts like pips, base currencies, and cross
currencies. Another area you should pay close attention to is
fundamental and technical analysis. Fundamental analysis involves
analyzing high-impact news like ECB, FOMC, interest rates, among others.
On the other hand, technical analysis is about predicting the market
trend and learning how to use the indicators. If you understand the
previous market patterns, you can predict future price trajectories.
- Choosing the best forex broker
Since there’s no central market place in
forex trading, traders should select a forex broker to help them
execute the trades. Unfortunately, sifting through the major brokers can
be an overwhelming task. Here are five considerations when choosing the
best forex brokers for beginners.
- Regulatory compliance
Since there’s no centralized body that
regulates the forex market, a broker should be tightly regulated. This
ensures he acts in the best interest and adheres to the standard
business norms. If you’re a novice trader, you should check whether the
broker has conformed to all the regulatory requirements. In the US, the
major regulatory bodies include SEC, NFA, and CFTC. Depending on the
region, you’ll find other regulatory bodies like FCA, CySec, FMA, FSA,
among others. A reputable broker should list the name of the regulator
somewhere on the website. Keep in mind that brokers must keep clients’
funds in separate accounts. You don’t want to hand over your money to
someone who’s not legit.
- Account details
The broker should provide different types of accounts
to suit your needs. Most of them offer micro-account, mini, and
standard accounts which come with a varying initial investment. Some
accept as little as $50. Generally, brokers charge a small fee (spread)
which is the difference between the bid and ask price. Avoid brokers who
claim that they don’t charge commissions because they tend to widen
their spreads during high impact news. Another area you should look at
is the ease of deposits and withdrawals. Many accept different payment
systems like credit cards, Skrill, Neteller, bank wire, etc. A small fee
may be charged during deposits and withdrawals.
Finally, you should look at leverage and
margin. High leverage allows a trader to open large positions on
borrowed funds. And depending on your account size, you can choose a
leverage of 50:1, 200:1, or 400:1. Some brokers offer unlimited leverage
to lure traders to open large positions. Use leverage with caution as
it can work for or against you.
- Currency pairs offered
Currencies are divided into majors and
cross currencies. The majors include EUR/USD, GBP/USD, USD/CHF, AUD/CAD,
NZD/USD, USD/CAD, and USD/JPY. These currency pairs have low spreads
and are more volatile. The cross currencies include EUR/GBP, EUR/CHF,
GBP/NZD, AUD/GBP, among others. When choosing the best broker, you
should look at the wide selection of pairs offered.http://www.meta4forexbroker.com/what-is-forex-trading-7.html
- Customer service
A forex broker should offer customer
service 24/5 or 24/7. There are many ways of getting in touch with the
customer service desk. The broker should provide different channels of
communication like emails, live chat, or phone number. Start by making a
simple call to evaluate how long they take to respond. More
specifically, pay attention to how the representatives answer questions
regarding the trading accounts, spreads, leverage, and general company
information.
- Understanding forex trading sessions
Now that you’re a bit close to starting your trading career, you should know the best time to trade.
While the market is open 24 hours a day, investors can trade during the
day or at night. The forex market has three main trading sessions, so
you can choose the one that suits you best. Let’s jump right in!
- Asian Session
Once the trading opens on Sunday, the
Asian market is the first to observe the action. It runs from 23:00 to
8:00 GMT and affects countries like Japan, Singapore, Sydney, and Hong
Kong. During this period, about 20% of all forex transactions are
carried out. Liquidity is thin if there was a huge move in the NY
session. Note: the economic news from Japan, Australia, and New Zealand
can affect pairs with AUD, JPY, and NZD.
- London session
It’s considered the capital of forex and
runs from 8:00 to 16:00 GMT. During this period, more than 30% of all
forex transactions are carried out. When you trade the London session,
you can take advantage of low spreads and high liquidity. Towards the
end of the session, the market tends to reverse as traders take their
profits.
- New York session
After the London session traders come
from lunch, the NY session starts (13:00 to 21:00 GMT). It’s estimated
that 20% of all forex transactions take place during this period.
There’s high liquidity on all currency pairs with US dollar. It’s worth
mentioning that this session overlaps with the London session.
So, which is the best time to trade?
The beauty of forex is that you can
trade according to your knowledge, personality, and risk tolerance. If
you want to get the most out of the market, you should trade when one
session overlaps the other. But if you have a low-risk appetite, you
should trade during the Asian session. Remember, the right time doesn’t
mean that you’ll be profitable. First, you must be in the right frame of
mind. If you get emotional, you can easily blow your hard-earned money
on a single trade. Secondly, make sure the time you choose aligns with
your trading strategy.
- Opening a trading account
Before you open a trading account, be
sure to evaluate your level of experience. As a beginner, you should
harness your skills without risking real funds. Most forex brokers provide a demo account
where you can practice with virtual money. And once you’re ready to
start, visit the broker’s website and evaluate the types of accounts
available. Follow the instructions and submit the documents as per the
regulatory requirements. When the account is ready, you can fund it with
real money. https://fxdailyreport.com/best-forex-brokers-offer-demo-account/
Final thoughts
Forex trading is not a get rich scheme.
If you’re a novice trader, you should practice good risk management to
increase your odds of success. Also, stick to your trading strategy and
choose your broker wisely. Be sure to follow the above guide before you
venture into the trading business.
http://www.meta4forexbroker.com/what-is-forex-trading-7.html
No comments :
Post a Comment