So You Want To Start Trading Forex?

So, you have heard all about the exciting world Forex trading and would like to find out more for yourself. Discover if it is something that you can get involved in and trust me, once you do start trading Forex there will be no going back, you will be hooked……………….in a good way of course!

Where to begin?

 

Forex is short for Foreign Exchange, the trading of world currencies against each other to establish the exchange rates between those currencies.

Why is it important?

Everything which we all buy is affected by these exchange rates from fuel to groceries and gifts for our loved ones. The most common example of this, which I am sure most of us have come across, is when we exchange currency for our overseas vacations. Indeed that is a very good example which we will discuss further later on.

Unlike the Stock Exchange we have all seen in the films, people on a trading floor answering phones and screaming at each other “Buy, Buy, Buy” or “Sell, Sell, Sell”, when you start trading Forex it will all be conducted on-line.

The basic reason for the existence of the Forex market is to set currency exchange rates which allow businesses and banks to trade easily without having to haggle over how much their national currency is worth against another at that particular point in time. As such it is probably the busiest, or most liquid of all the financial markets with billions of dollars being traded every day.

That is all very well I hear you say. How do we fit into all of this? How can we get involved and why?

A very good question.

From our point of view there are two  main differences between stocks and shares and Forex. Stocks and shares most often require a large financial outlay and a long term view whereas Forex requires a much smaller financial outlay and can be traded in periods from a few minutes, over the course of one day or for longer periods of days if you wish. The choice is yours.

Another aspect in our favour when we start trading Forex is the fact that it is a 24 hour market. The market opens at midnight on Sunday in Asia, UK takes over at around 8am and runs until the US market opens mid afternoon. This cycle continues until the US market closes late on Friday night.

This gives all of us wherever we are globally access to this exciting and potentially lucrative market.

I will finish this section by explaining the basics of how we actually get involved and place our trades.

We do this by holding an account with a spread betting platform. There are many of these out there, City Index, IG Index, ETX Capital and Spread EX to name but a few. These companies give traders the facility to trade at a reasonably low outlay on any number of currency pairs. The list is endless but most traders focus on just a couple. There are 7 major currency pairs and we will look at those at a later date.

To complete this part I will take you back to the currency exchange many of us do for our vacations which I mentioned earlier.

You will no doubt have noticed that we buy and sell our vacation money at different rates. It is this difference that the spread betting platforms use to make their profit. This allow us as Forex traders to have access to the markets at a very low outlay as the platforms make a small amount of money whether we win or lose our trade.

I will cover these points in more depth as we progress but there is no rush to learn all of this in one go.

I hope you found this information interesting, please feel free to ask questions or make a comment. I will reply as soon as possible.