How to trade in Forex ?

Forex Market is a market where foreign currencies are traded in pairs. In simple words Forex Trading is the process of changing one currency into another in order to gain profit. The process of Forex Trading is very complex, it requires proper knowledge of the market and its rules, regulations. Even for the experienced trader it is difficult to predict market accurately. As per the information 90% of traders lose money in forex. It is very important for a beginner to learn how to trade in Forex in order to predict and trade effectively.

Example of a currency Exchange

Suppose a person lives in United States. He wanted to buy organic beauty product for his wife from France, then either the person or the company from which you buy these beauty product has to pay in euros (EUR) and for the same purpose a U.S. importer have to exchange the equivalent value of U.S. dollars (USD) for euros. This is how a currency exchange takes place.

Steps for trading in Forex

Proper research and Analysis of Forex market plays a very significant role in order to select a right forex broker and find out whether it is regulated in the United States or the United Kingdom or in any other country. It helps trader to find out about the account protections that are available in case of a market crisis. In order to reduce the chances of loses and learning trading in forex a trader has to follow these steps:

Identify a currency pair 

The first and foremost step for trading in forex is selecting a currency pair. As forex trading is the process of exchanging currency and therefore you need to select a currency pair for trading. You can trade in any currency pair as long as you have enough money in your account. Research and analyzing of forex market is very important before selecting the currency pair in order to have a proper knowledge about the pair. It helps you to predict more accurately.

Identify a way for forex trading

For a beginner, there are two major ways to start forex trading. First is forex CFDs and the second one is trading in forex via broker. A CFD is a contract in which you agree to exchange the difference in price of a currency pair from when you open to when you close the position or you can also go for Forex trading via a broker. Under this a trader is speculating on the price movements of currency pairs, without taking the ownership of the currencies.

Research and Analysis of Forex Market

Before trading in forex it is important to know how the forex market works, what are the best forex platforms and brokers, how currency is traded, rules and regulations of the market and many other things. A forex trader should regularly check forex signals and indicators, current and historical charts, economic news and fundamental analysis to evaluate the market.

Selection of Forex Platform

There are numbers of online forex brokers available for a forex trader to facilitate the trade. These trading platforms can provide you with a smart and faster way to trade forex. On the basis of your trading style and preferences select a best suited trading platform with interactive charts and risk management tools. There are some factors you need to consider before selecting your forex broker like Leverage and margin levels, regulatory compliance, Commission and spreads, customer service, Ease of transaction etc.

Read the quote

After selecting the best forex trading platform according to your needs you can start trading. You need to open a deal ticket for your chosen currency pair. You can have a look at both buy and sell price. You can now decide the size of your position and add any stops or limits that will close your trade once it hits a certain level. There are two prices in currency pairs. For example, a currency pair of EUR/USD. Here EUR is base currency and USD is quote currency.

Select your position

 In the given example EUR/USD, If a trader believe that the value of the base currency will rise in comparison with the quote currency. A trader will go with a Buy Position which means he will buy the currency pair. Meanwhile on the other hand if a trader believes that the value of the base currency will fall compared to the quote currency then he will go with the sell position which means he is selling the currency pair.  Hit buy to open a long position or sell to open a short position on the trading platform based on the prediction. A trader can monitor the profit or loss of the position on the platform. When the trader decided to close the position, he just needs to make the opposite trade to what he opened.