Trading Education

How to trade forex?

Investment in forex can become a great way to make some extra income, or even more than that. The forex market reaches around 5 trillion dollars a day, making it the largest trading market. Traders can earn some nice profits from it without the need to invest huge amounts of money. The forex market is always in movement, always changing and creating exciting opportunities for traders to predict its direction. Forex can be traded online, from your home, using different strategies. But first you need to learn how to trade.

Basic terminology

Learning Forex trading begins with knowing the fundamental terminology. The currency you discard is known as the base currency, and the one you purchase is called quote currency. For instance, in case of buying American Dollars utilizing the British Pound, we can see an exchange rate that resembles this: GBP/USD=1.589. This rate implies that you will pay 1.589 dollar for each British Pound. Furthermore, when we say that you are making a long-term deal, say you need to sell the quote currency and buy the base currency. This case speaks to the case of selling American Dollars to buy British Pound. However, when talking about long deal, means one will buy the quote currency and sell the base. Basically, we are talking about selling British Pound for buying the American Dollar.

Bid price refers to the amount of money your brokerage is willing to pay to buy the base currency in return of the quote currency. When you want to sell your quote currency, the Ask Price is the best price available at the moment. In order to perform those operations, one must learn how to trade currencies.

The Ask price refers to the price at which your brokerage buys the base currency in exchange to the quote currency. This is the best available values when you are prepared to buy from the market. The spread is the difference between the ask price and the bid price.

A price in the forex market Consists of 2 numbers next to the currency pair. The number in the left represents the bid price while the number in the right represents the ask price. Before taking any action, one must determine which currency is he selling, and which is he buying.

Learning Forex trading incorporates the need to examine a few forecasts with respect to the economy. Thus, if you envision that the American economy will continue getting weaker, and that is going to affect badly on the dollar, at that point perhaps you want to think about selling the dollars for a more solid economy’s currency. While considering the trade circumstance in a particular country, and, if there is a country with a great deal of requested product, consequently, this country will likely fare the product to gain money. This action, in turn, will strengthens the country’s economy and its currency, too.

The politics is another factor to consider: a new elected president may increase its country currency if he had a strong financial plan. Or, for example, is some regulation were loosening in order to rehabilitate the economy, this too will reflect on the currency value. Other economic reports such as gross domestic product of a country, employment and inflation can also act as a predictor.

The mark up spread is added to actual market spreads and in fact is the profit of the broker you’re dealing with.