If you’re new to the world of investing and trading, you’ve probably seen the word “forex” appear quite a lot. It is the world’s largest and most liquid market, trading more than $5 trillion every day!
With such a large trading volume, this makes it one of the most exciting markets to trade in, and is also the best market to practice live-trading skills. It is not only easy to start small and scale up, but you also have the ability to control your initial risk on each trade.
If this sounds interesting to you, stay tuned to learn all the forex trading basics you need to know.
What is forex trading?
Forex trading, also sometimes known as “FX” trading, simply refers to the foreign exchange market. Essentially, this means buying or selling currencies you hope will move either up or down relative to another currency.
A thing to note is that currencies are always traded in pairs. For example, if you think the American Dollar (USD) is going to increase in value compared to the Australian Dollar (AUD), you could place a trade to buy the USD/AUD currency pair, and if the USD rises, you will make a profit. It is an investment strategy that provides an opportunity to speculate about price fluctuations based on global news events.
Unlike shares, forex markets are open 24 hours each day from Monday to Friday, which allows traders the flexibility of choosing when to trade. It is also very low-cost compared to other types of investment that reduces barriers to entry.
How do I trade forex?
There are no set rules when it comes to trading forex. It is accessible to everyone from new traders to seasoned traders, and everyone has their own preferences! Some place several trades a day, some hold trades for several days, while some place trades sparingly and hold them for months.
Currently, the majority of players in this space are big banks, including commercial banks and central banks, as well as investment managers, hedge fund managers, and corporations. As such, forex trades have the power to cause big ripples, affecting everything from interest rates to competition and exports.
Although individual investors only make up a small percent of all trades, it is becoming increasingly popular, as it is seen as a great way to diversify your investment portfolio. However, it can be a complicated marketplace, which means it is important to take time to learn the ropes. This is vital as trading does come with risk and you should always exercise caution!
How can I start trading forex?
The forex market is one of the most highly-regulated financial sector in the world. Due to its unique structure, the only thing to note is that trading most actively occurs when London opens, as that is when most of the major currency pairs are traded.
With that in mind, to start trading only requires you to follow these 5 simple steps:
The main reason brokers exist is to provide you with easy access to the forex market. Thus, the biggest advantage to choosing a local forex broker is that they will understand the market, and be in a great position to adapt and respond quickly to any changes.
However, do not just choose any broker. It is important to do your research, and choose a reputable broker with a license, good reviews, and a strong community to prove legitimacy as there are risks of scams.
Moreover, these brokers will provide you with the necessary education in the initial phases of your investment journey, which allows you to figure out what works for you and what does not. Besides education, they will also offer you access to a practice account to learn the ropes, without any risk, before placing your first real-world trades. This saves you a considerable amount of time, and as a result, you may start seeing profits sooner than expected!
Once your online brokerage account is ready, you can equip yourself with certain tools to help you with your trading.
What are the key forex trading tools?
The most important forex trading tools, when you’re first getting started, relate to research. You need to learn all the ins and outs of the market so you can develop your own unique trading style.
Here are some recommended tools you will need to look out for in the beginning:
When should I start looking at forex trading strategies?
Once you’ve got your head around the concept of forex trading, and you understand how the market works, it is time to talk forex trading strategies. Everyone takes a unique approach but their strategies often share some common threads. Here are some popular themes that you might like to consider:
The best strategy for you will depend on the time you have available, how often you have the opportunity to place trades, and your personal investment goals. Have a look at our newly launched ebook series as we discuss this further in the final one!
Ready to start your forex trading journey?
It may all seem very daunting at first but rest assured that Axi is here with you along every step of the way. We have an entire repository that will guide you on learning how to trade, which consists of a wide range of online courses, video tutorials, seminars, and eBooks. Moreover, if you still have certain doubts or any questions about getting started, please do not hesitate to contact our award-winning customer service team!
The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.
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