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5 simple steps to Start Forex Trading

5 simple steps to Start Forex Trading

The most common mistake people make when starting forex trading is setting unrealistic expectations. And when the scenario doesn’t work as per their choices, they give up! People need to understand that it is not an overnight ‘rich’ making tool. One needs to have proper knowledge and skills to be in the game for the long run. Starting forex trading is not as simple as it sounds; it is not just opening your account with a broker and start trading. In this post, we’re going to get you an ultimate step-by-step guide on how to start currency trading. These steps are written might sound simple, but are so essential and effective that at the’ end of the day’ you might be recommending this post to your friends too.

Let’s first start by understanding some basics.

Now that you have got an insight into the most common terms in forex, it’s time to move to the step-by-step guide on how to start forex trading.

All these things will make you familiar with commonly used forex terms and make your starting journey simpler. Here are some basic terms and phrases related to forex trading.

  • Base Currency: The current holding currency. For example, if you live in Japan, then your base currency would be Japanese Yen.
  • Quote Currency: It is the currency that you want to buy.
  • Ask price: In simple terms, it is the price that a broker would demand in exchange for the quote currency, you want to buy.
  • Bid price: It is the price that a seller would demand in exchange for his base currency.
  • Spread: The difference between the ask price and bid price.
  • Pip: Stand for percentage in point. It is the fundamental measurable value of any movement in the currency. A single ‘pip’ is usually equal to 1/100th of 1% of a currency.

Some brokers don’t even charge that. And after creating the account, you can move forward with whatever amount of capital you want to trade with.

With a broker being so much important for trading, it is crucial to choose an authentic, trustworthy, and reliable one. There are several factors upon which you can judge a broker’s reliability, such as client reviews, terms and conditions, other trading options, and margins. Make sure to choose a registered broker only with an easy user-interface platform. Because at the end of the day, it is going to make the difference between losing money and profiting.

Profiting from forex trading is converting your base currency to the quote currency of the country, you think will grow. Then, when the quote currency takes a boost, convert that back to your base currency of your country. Be aware of the world events, their influence, GDP’s, and political climates of countries (in which you are interested in purchasing currency from). There are different methods to analyse the environment.

  • Technical Analysis: It includes evaluating charts, graphs, and other technical data to forecast how the currency of a particular country will move, based upon the past data and events. This data and charts are usually available with your broker, or you can also use other online platforms like Metatrader.
  • Fundamental Analysis: It involves analysing a particular country’s fundamental economic situation and using this data upon your trading commitments.
  • Sentiment Analysis: as the name suggests, this analysis is based upon an individual’s sentiments about a country. Through this subjective analysis, you try to figure out the market situation, whether it’s ‘bearish’ or ‘bullish.’

After playing your trading game for a few weeks in a demo, it’s time to open a real trading account. Make sure you have gained a significant amount of confidence with the demo account. Some brokers might also convert your demo account to a real account only. You need to deposit a minimum amount to start trading.

Fun Fact: The forex market trades about $5 trillion a day.

Amazed? Then what are you waiting for now? Go and make your first trade!!!

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