How to Trade Forex:
- Step 1: Understand the Lingo
- Step 2: Choose the Right Broker
- Step 3: Analyze the World Economy
- Step 4: Make Your First Trade
Step 1: understand Lingo
Properly grasping the most commonly used foreign exchange ringgo makes entering the market much simpler. Here are the words and phrases you can hear over and over.
Base Currency: This is the currency you have. If you are from the United States, it is likely that your base currency is the US dollar.
Currency quote: The currency you want to purchase.
Bid price: The price to “bid” or “buy” the base currency held by the broker.
Price Inquiry: The price your broker asks of you instead of buying the selected quote currency. The requested price is always higher than the bid price.
Spread: The difference between the bid price and the requested price. This is just a broker's fee.
Pip: The smallest measurable currency movement value. The word "pip" stands for "percentage in point" and a single pip is 1/100 of 1% of the currency. For example, if the value of USD rises by a single pip, it means that the value increased by $ 0.0001.
Step 2: choose the right broker
Before you start trading forex, you need to choose a brokerage firm. Brokerage firms help with transactions and many brokers also offer additional financial services.
Working with a reputable broker can mean the difference between trading profits and losing money between the bid price and the requested price. Don't be afraid to scrutinize and read reviews from various brokerage firms.
Not all brokerage firms offer forex trading, so make sure you can trade before opening an account. Cooperating with brokers who offer multiple outlets for customer service is a good starting point for traders. If you don't know what a forex broker should use, don't worry. Benzinga has compiled a list of some of the top forex brokers in the United States to narrow your selection. If you don't have time to read the full review, take a look at our quick selection below.
Step 3: analyze the world economy
Making money trading currencies is precisely predicting the movement of the global economy.
To be a profitable trader, you need to convert your base currency to a quoted currency set to a rise in value, then convert your quoted currency back to your base currency when the value reaches its best.
Examining the trading position, GDP and political climate of countries that are interested in buying currency, you will get a good “lead” for a country that is expected to grow and a quote currency that is worth the investment. This customizable widget from TradingView is a great starting point. Forex Heat Map by TradingView
Step 4: first deal
After deciding on the quote currency to purchase, it is time to order the first transaction. The brokerage firm will provide online trading software to buy or sell currency.
Use the trading platform to place market orders to brokers. Platform details may vary. See standard market order execution: After you finish placing your order, let the broker handle the rest.