Beginner's guide to Forex Trading
Beginner's Guide to Forex Trading
If you’re new to the world of forex trading, then you’ll love this guide.
Here are the topics we’ll cover in this guide to forex trading:
What Is Forex Trading
Forex trading is one in which a nation’s currency is traded for that of another at a mutually agreed rate.
Acting as middlemen, brokers facilitate trades by providing traders access to the 24-hour trading platform.
An online forex broker like Cyber Futures offers a number of different accounts, each providing services and features tailored to your individual trading objectives.
Alternatively, you can learn about the markets by opening a demo trading account ($100,000 virtual balance).
Currency Pairs Basics
Currencies are traded in pairs (e.g. GBP/USD) and include a base currency and a quote/counter currency. The base currency is denoted on the left side of the pair.
You always buy or sell the base currency.
In this example (GBP/USD), the pound is the base currency, hence it’s the “basis” for the buy/sell. If you buy GBP/USD,
this simply means that you are buying GBP and selling USD.
You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote/counter currency.
You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote/counter currency.
Major Currency Pairs
As a beginner, you will most likely start trading with major currency pairs, as they are the most liquid (easily exchanged for cash).
These pairs all contain the USD on one side (e.g. EUR/USD, USD/JPY, GBP/USD) and are the most frequently traded.
Minor Currency Pairs
Currency pairs that don’t contain the USD are known as minor currency pairs.
These pairs (e.g. GBP/JPY, EUR/GBP, EUR/JPY) are less liquid and more volatile than major currency pairs.
Why Trade Forex
Minimal Time Commitment
Even as a beginner, you don’t need more than 3-6 hours a day to be really successful in the business of forex trading over time.
An online forex broker like Cyber Futures offers a minimum deposit of $100, which makes forex trading much more accessible to you if you don’t have a lot of start-up trading capital.
The main thing that kills businesses is recession where people are not spending money. In the business of forex trading, there’s no good or bad time, because you make money in the direction of the currency pair regardless of the economic situation.
24-Hour Market Gives Flexibility
Since forex is a 24-hour market, this is ideal if you want to trade on a part-time basis at any time of the day.
No Employees, Office or Inventory
You don’t have to worry about overhead costs like any other business. There are no employees, office rental or inventory costs.
Leverage enables you as the trader to make nice profits while keeping risk capital to a minimum. Cyber Futures offers a 500:1 leverage, which means that a $100 dollar margin deposit would enable you to buy or sell $50,000 worth of currencies.
How To Make Money Through Forex
The goal of forex trading is to exchange one currency for another in the expectation that that the currency you bought will increase in value compared to the one you sold.
Or vice versa: that the currency you sold will decrease in value compared to the one you bought.
Signals from market experts suggest the euros will increase against the U.S. dollar. You open one standard lot (100,000 units EUR/USD), buying with euros at 1% margin (a deposit required by the broker) and wait for the exchange rate to climb.
When you buy one lot (100,000 units) of EUR/USD at an exchange rate of 1.6000, you are buying $160,000 with 100,000 euros (100,000 units of EUR multiply 1.6000). If the margin requirement is 1%, then $1,600 would be set aside in your account to open up the trade ($160,000 multiply 1%). You now control 100,000 euros with just $1,600.
You blink for 1 second and the EUR/USD exchange rate rises to 1.6060 and you sell. You’ve earned a profit of $600 ($160,600 minus $160,000).
How To Start Trading
It is recommended to choose a licensed, regulated online forex broker that has more than 15 years of proven experience like Cyber Futures. However, it’s really important to remember that becoming a profitable trader isn’t an overnight process.
It takes time to become familiar with the markets.
Hence, Cyber Futures offers free webinars, articles and market analyses in a variety of languages. Not to mention tools such as forex calculator, pip calculator, margin calendar and economic calendar that are tailored to the needs of both new and seasoned traders. Above all, reputable brokers like Cyber Futures offer a demo account.
This is a great way to trade with virtual money and none of the risks attached, while being able to experiment with different trading strategies. The trading platform we use is MetaTrader 4 (MT4), as it remains the world’s most requested Forex retail trading platform. It is available on a Mac, PC, mobile and tablet. MT4 provides access to a range of markets and hundreds of different financial instruments, including CFDs on Forex, Shares, Indices, Metals & Energies.
It provides you with all the tools you need to both manage your trades and analyse the markets, whilst also being completely free to download. You can find out more about our trading platforms, or download MT4 from our trading platforms page.
So what are you waiting for?