FOREX TRADING
Forex trading is one of the most exciting topics when it comes to international finance but it doesn’t mean you have to be an economist or a graduate in finance accounting or any other business-related course to start Forex trading but hey who am I to tell you so am an accounting major at a business school so this type of stuff comes easy to me, don’t sweat it (worry) am going to simplify so as you could start investing is Forex(fx) who knows you may be the next warren buffet or my personal favourite John Periot Morgan or some of you are familiar with the name JP MORGAN CHASE Americas biggest bank so that guy started it. Anyway, let me interest you in the field of Forex trading.
WHAT IS FOREX TRADING (FX)
Forex trading is basically the buying and selling of currencies/currency pairs like USD/CAD and others with a motive of making a profit. Forex trading is the largest capital market in the world by capitalization, making it the most liquid capital market.
Capital is a market where financial securities are bought and sold and these securities include stocks, Forex, bonds, derivatives, commodities (gold, copper, oil) and others. I will be going throw them article by article but this one is dedicated to Forex trade.
HOW TO TRADE FOREX
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As I said earlier Forex trading is simply like any other trade in the world, you buy something and sell it for a slightly higher price to make a profit so that means you have to start the trade by buying a currency pair
A currency pair is a pair of two currencies where the first currency is greater (strength) to the other for instance USD/CAD and GPD/USD. In the former United States of America dollar currency with greater strength than the Canadian dollar and in the latter the British pound will be of greater strength than the dollar
BUYING / BULL
By buying a currency pair like USD/CAD you will going bullish on the USD meaning you will be saying that your confident that the USD will rise in value and then you be saying that the other currency is going to lose value.
SELLING/ BEAR
Selling a currency pair or any other capital asset is what we call shorting.
Shorting is the method of making a profit from Forex trading where originally you borrow a certain pool of Forex pair say 1000 used worth of USD/CAD just to wait for the pair to lose value then sell it at that ‘low price, then buy the same pool at that low price say 300 used to return it to the person you borrowed it from pocketing the difference as profit
The profit will be (borrowed price –low price) = (1000-300=700usd)
WHAT YOU NEED TO HAVE TO GET STARTED WITH FOREX TRADING
- The first thing you will need is to have a computer because all the software’s needed for this will of course need to run on a computer
- You will have to open up a breakage account. A broker is a company that executes all your trading orders and also provides charting software to help in your technical analysis. My personal favourite is META TRADER 4 (MT4). It’s a simple process as opening an account with say Google. You can be provided with a demo account to practice what you will be learning
RISK OF FOREX TRADING
As everything good on this lovely planet Forex trading has its parks (risks) and the statically one which is supposed to inform you about is that 90% OF ALL TRADING IN FOREX RESULT INTO A LOSS. This never scared me and when I see this all I hear my head saying is that I am part of the 10% who make profits.
But the risk is to be taken into consideration
BENEFITS OF FOREX TRADING
- GOOD INCOME. By trading Forex you’re standing a possibility of earning some good income by just sitting there on your laptop and clicking a few buttons. And if you compound your proceeds you could turn yourself into a rich person. Many traders have done it and so can you.
- LEVERAGE. Back then when Forex had just come into the financial market the smallest amount you could use to but pool a currency was $100000 which was way too much money making only the rich and elite invest. But as time has moved on there was something called leverage where broker would multiply your initial investment at a certain ratio so us you have enough to enter a trade. Leverage increases your profits but can also increase your loss so one has to be cautious of the leverage ratio you pick.E.g., 1:50, 1:100 the former means that your initial investment will be multiplied by 50 and the latter by 100.
IN MY SECOND ARTICLE ABOUT FOREX TRADING I WILL GO INTO LOT SIZES AND TOOLS OF FOREX ANALYSIS SO SUBSCRIBE FOR MORE FOREX.
