Forex trading will provide you one of the most exciting experiences with a lot of rapidly changing factors that directly or indirectly influence you. In the most simple terms forex trading is buying and selling the currency pairs and making bets on the values of currencies. It is one of the most earning ways to gain profits because of high profit margins and high liquidity in the market. Surely this is interesting for all people who want to earn great amounts so in the following lines a simple guide is discussed with 3 main steps to become a successful trader of forex market.
The first step is to understand trading of various currencies. There are three terms that are necessary to understand the following three terms:
• The quote or exchange rate
For example, a quote of EUR/USD currency pair can be given as EUR/USD 1.3325 BUY / 1.3315 SELL. As seen, quote consists of two things. First there is pair which in this case is EUR/USD which shows the two currencies about which we are talking. Here is signifies that we are talking about Dollars for Euros. And secondly, quote shows rate. It tells us how much we can buy and sell in this pair. In this quote, 1.3325 buy means that for each euro you can buy 1.3325 dollars and 1.3315 sell means for each euro you can sell 1.33315 dollars.
The second important term is “pip”. It is very important to have understanding this term as it is the basic point of gaining profit in forex trading. For most of the currency pain including EUR/USD this value of 1/10,000th. An exception is yen which has pip value equal to 1/100th.
As buy and sell rate are not same, it is sometimes very important to use a term to describe the difference. “Spread” term is used to describe this difference. The traders will want to increase this slightly to earn more profits. In order to take advantage of this, you must be able to earn the spread.
When you have good understanding of these basic terminologies, the next step is to gain experience with a lot of practice as practice is the only thing that can make you perfect. Many brokers will provide an initial amount of up to $50,000 for you to use it for practice. When you have this account, try different things and learn from them. You can switch multiple free accounts to gain maximum experience. Gradually, you will learn that some of the method works best for you. Choose such method and keep using it. Get an expert in it and after that you can start learning any other method.
The third step is to keep in mind that as beginner you have more chances of losing money so start with minimum amount possible. Unless you have learned how to use some strategies it is not worth spending money because there are more chances of losing. Choosing a reputable and trustworthy broker is very important to ensure your money are safe. So, always start with a small amount and after you have learned enough then you can start trading big amounts.