Like any form of trading, Forex trading also requires some amount of education to reap huge profit. Apart from knowing the technicalities of this trading, it is also important to assess you as a person, and how it can affect the trading spree. Few traits like intelligence, foresightedness, determination, analytical skill, courage, discipline, ability to take risk and patience are required to become a successful trader. Experience and various efforts taken can help you to become a successful trader. Over the net, you can find different tutorials that impart knowledge to beginners regarding the basics of the trade.
Know Basic Terminologies
You can start with the knowledge of the currencies in this form of trading, the currencies, the currency pair, country that uses these exchanges and also different factors that affect their values. Few basic terminologies are
- The currency that you sell is called the base one, whereas the one that you buy is the base currency.
- Exchange rates denote the amount you can spend to the base currency.
- Long positions denote that you want to purchase the base currency and sell quote one.
- Short position is when you buy quote currency and trade base currency.
- Bid price is the one at which the broker buy the base currency in lieu of quote currency.
- Ask price also known as offer price, is the rate at which, the broker sells a base currency.
- Difference between bid price and ask price is called spread.
Parameters for Choosing a Broker
- Recommended Reading : Beginners Guide to Understanding the Different Leverages in Forex Trading
Next you need to choose a broker for trading. They provide a trading platform, and facilitates trading over the net. There are many online brokers to facilitate the process. You can take help of best binary options broker in this regard. Factors based on which you can choose a broker are
- Accounts offered by them.
- The amount to be deposited to fulfill the margin requirement.
- Ratio between the margin and the pair of currency that is traded.
- Software platform that they offer.
- The need to be regulated by government rules.
- Customer service and support provided by the brokerage, as it also affects the profit percentage.
Open an Account
Opening an account is also integral to the process. You can choose between a personal account or managed account. Brokers handle the trading activities, if you have a managed account. Take care of the documentation involved in opening an account. Make sure of the cost that is incurred to transfer cash to the brokerage account. Analysis of the market is equally important. You can do this through different methods. This includes technical analysis, fundamental analysis and sentiment analysis.
Market Analysis is Important
Charts, historical data, economic condition all need to be reviewed prior to trading. Brokers can be of great help in providing charts using different software platforms. These factors influence the decision of trading. The mood of the market that is whether it is bearish or bullish is also taken into account. The policy of the broker is of the utmost importance. Depending on the margin, they deposit an amount to your account. Based on your profit or loss, the amount gets added or deducted from the account.
You can place three different types of order while trading. Market orders, limit orders and stop orders. In the first type, you instruct the broker, to trade currency according to the market rate. The second type includes brokers trading at a specific rate. The last one involves when you buy a currency higher than the market price and sell the same lower than the current price. This helps in reducing the loss. Always keep in mind the volatile nature of the market so there will be innumerous fluctuation in the market. It is advisable not to be influenced by this but stick to research and your strategy.