Whenever it comes to trading, we have a lot of markets to trade. For instance, you can trade in stocks, cryptocurrencies, commodities, futures, and options or Forex.
But there are a lot of users who prefer trading in Forex because of a wide range of reasons. First of all, the forex market is still open, so you can trade at any time of the day.
However, most newbies have no idea of what forex trading is and how it works. So in case, the same goes for you, then let me just go ahead and explain every bit of it to you. You can also check out How to start forex trading guide here.
What is forex trading all about?
Forex is known as foreign exchange, and in simple words, forex trading is all about trading currencies. Forex is basically a network of buyers and sellers who transfer currency between each other at an agreed price.
Also, it is pretty much like a currency exchange that you do while traveling abroad. A trader buys one currency and sells another. And the exchange constantly fluctuates based on the concept of supply and demand.
All the currencies are traded in the foreign exchange market, which is also a global marketplace that is open 24 hours a day from Monday to Friday.
Also, you should know that All forex trading is conducted over the counter (OTC). This means, there is no physical exchange like for the stocks.
How does Forex Trading works?
All the trades are conducted in an electronic format in the foreign exchange market or better known as forex. This means the currency pairs are bought and sold 24 hours a day, 5 days a week participants all over the world.
The market participants can join the forex market remotely using the internet and exchange software. Also, whenever you place a buy or sell order to the market, the forex brokers facilitate the transaction by extending the margin.
Also, as a trader, you will be able to open new positions far in excess of capital-on-hand with the goal of realizing profits from beneficial movements in price.
Moreover, in order to complete every forex trade, the market’s technological infrastructure matches contradictory orders from market makers, individual traders, and other liquidity providers.
What are the advantages of FOREX Trading?
Forex trading has a lot of advantages which is why it attracts a large number of participants. Some of the best advantages of forex trading are:
- High liquidity
- Low barrier to entry
- Better risk management
- Trade anytime you want
- Low transaction costs
How to start Trading Forex?
Step 1: Connect a device to the internet
In order to start trading in forex, you will need to have a reliable internet connection with minimal service interruptions. Along with that, you will also need to have a smartphone, tablet, or computer to run the trading platform or app.
However, if your internet connection is lost, the only risk in trading is that you might face a huge loss if the market goes against you. Hence, a lot of the users prefer using a trading VPS for Forex.
Step 2: Find a suitable online forex broker.
The next thing you need to do is open an account with an online forex broker. Forex broker is extremely important, and you will need it no matter where you live.
While choosing a broker, go with a broker that meets your requirements and accepts you as a client. Also, make sure that the broker has good reviews so you can prevent yourself from falling into scams.
Also, to open a forex trading account, you will need to pay an opening fee. You should also know that different brokers have different account opening charges.
Step 3: Open and fund a trading account
After you are done opening a trading account, you will have to deposit funds into your trading account. Most online brokers offer you several ways to deposit funds to your account. For instance, you can deposit via bank wire transfer, debit or credit card payments, or use payment processors like PayPal or Skill.
Step 4: Obtain a forex trading platform
You will also have to download or get access to an online forex trading platform supported by your broker. However, most of the brokers offer their proprietary trading platform. Or they do support the popular third party forex trading platforms like MetaTrader4 and 5. However, when you choose an online broker, do check what platforms they support.
Step 5: Start trading
The final step is to start trading. However, when you are starting up, it is recommended that you open a demo account funded with virtual money to test your broker’s trading platform. Or get an idea of how forex trading works before you actually start trading. Also, a demo account is extremely useful when it comes to testing trading strategies and practicing trading without risking any funds.
When can currencies be traded?
The forex market is unique among all the financial markets of the world. As it is 24 hours a day and 5 days a week open. So you can take a trade at any time of the day you want.
And below tables lists both the GMT and EST trading times for the forex markets:
Trading sessions are according to GMT (Greenwich Mean Time):
Trading sessions according to EST (Eastern Standard Time):
So that was a quick guide on what forex trading is and how it works. You can follow our blog page for updates and get started guides Before you leave this page, you should know that forex trading can be risky. And you should only do it once you have an idea about forex trading. Anyway, for any other questions, do comment below.