Forex, which stands for Foreign Exchange, is a global marketplace for exchanging national currencies against one another. If you are a company based in Australia looking to buy goods from the United Kingdom, then at some point you or your supplier will have to trade dollars for pounds, or vice versa. Tech Radar estimates that Forex trading generates $5.3tn (A$8.6tn) daily, making it a lucrative business to understand.
Wherever there is trade, there is scope to make money and we’re going to guide you through the early stages of getting into Forex trading yourself. It isn’t a get rich quick scheme and there is an element of risk, but you can give yourself a good head start by adhering to our handy hints. This post will help you make money through trading currency pairs. If you are a beginner, you must be aware that it involves some amount of risk, but you can learn to do it through following a few basic tips.
Research The key to being a success in any new venture is knowledge and so the first step you need to take is to research Forex thoroughly. This guide will give you a good place to start, but don’t let it be your only research. Try to find some webinars or seminars on the subject and look for wider reading such as books on economics and finance. You don’t need to meet any formal requirements to start Forex trading, but to minimise the risk it is best you make sure you’re well-informed.
Open an Account Forex trading will require an outlay and you’ll need to have some capital available to get you started and open an account. The Balance suggests some brokers will allow you to open one with an investment as low as $50 (A$81), although with trades ideally set at around 1% of your capital, you may want to start with a little more. You then need to find a brokerage firm and not all firms offer Forex, but if you’ve conducted your research correctly, you’ll have identified a suitable candidate. Despite many options like indices, commodities, and cryptocurrency on top of Forex transactions, FXCM explains how opening an account is easy, as it only takes a few steps before you can start trading. Choosing a brokerage firm that offers multiple outlets for both customer service and other options is highly recommended for beginning traders, as they will be able to explore other possible avenues of revenue further down the line.
Watch the World Economy Your success will be based on how well you understand the world economy. Forex trading will see you take your base currency and convert it to the currency you expect to see rise and then convert it back when it hits a peak. Understanding where these peaks will occur is key to becoming a successful trader. Make sure you’re up to date on world affairs, watch for political situations, and make your calls from there.
Practice Many brokers will offer a practice account to get you started and it’s worth having a go risk-free before venturing too deeply into real trades. Get a feel for the market and how it works, and then make a few dummy trades and see how you do. If you’re sustaining lots of losses, repeat steps one and three to try to improve.
Go from There Once you understand the process of how to trade and have the capital in place, you should start trading for real. Remember, always look to trade around 1% of your capital at a time to avoid big losses. Find out what works for you and what does not and most of all, enjoy it. If you’re currently working from home due to the pandemic, you might find our article Expert Warns Working From Home Can Create New Issues interesting.