The Forex market is highly traded, more than any other financial institution in the world. There are approximately trillions of dollars per day being bought or sold. As a global network, there is a constant buying and selling of currencies and it also operates 24 hours every day, even without a physical location. That is what the over-the-counter market means. Currency prices are fluctuating in their value every now and then which leads to a greater opportunity being offered in trading.
Steps To Follow When Starting On Forex Trade
Choosing A Currency Pair
First and foremost, you need to choose a currency pair that you will be trading in the market after you open a trading account and sign up at MetaTrader 5 as your trading platform. There are more than 80 currencies to choose from and they are grouped together accordingly. They are the Majors, Minors, and the Exotics.
Majors are the biggest currencies in the world which includes the US dollar. They make up around 85% of the volume of trades in the market. The major currencies are EUR/USD, GBP/USD, USD/CAD, USD/JPY, AUD/USD, and USD/CHF.
Minors are the second group of currencies next to majors. They are the combination of these currencies known as the biggest in the world; AUD/JPY and EUR/GBP. Sometimes, they are also called major cross pairs.
Exotics are the currencies that are seldom traded. These currencies are the Mexican peso (MXN) and Turkish Lira (TRY).
For newbies in trading, they will certainly choose a pair that belongs to the major group, which often includes EURO-DOLLAR (EUR/USD). These currencies are known as the most traded currency pairs and also known to have to tightest spreads.
How Do You Want To Trade Forex?
Forex can be traded in two different ways – Spot Forex Trading and Forex Derivatives.
Spot FX involves buying and selling currencies like when you buy US dollars and you sell euros. You can open a trade by choosing the amount of your base currency that you want to either buy or sell. Most of the time, spot FX is traded based on the unit of your chosen base currency Fixing Error Code.
Forex Derivatives are another form of Forex trading. In this type of trading, you are allowed to speculate on the movement of the price in every currency pair without the need to buy or sell the currency. Instead, you will be trading in a market that actively tracks the price of every currency pair.
Deciding When To Buy and Sell
Now that you’ve picked the currency that you want to trade, it is time to decide when to start buying and when to start selling .
In Forex, buy means you are believing that the base currency will steadily strengthen compared to the quote currency. While Sell means that you are expecting that the value of the currency pair will somehow decrease. You can choose to go long or go short in this step.
Managing Your Risks
Of course, Forex trading wouldn’t be complete without risks and losses. Even if you use a powerful trading platform like MetaTrader 5, you will still have to deal with the risk. But thanks to the latest technology that we have nowadays, managing risks in trading and minimizing the losses is bearable and easy to handle.