These days when it comes to investments the general public is given no shortage of options. Saying that, while there is certainly a wealth of riches at hands when it comes to trading options, there is one format in particular that commands more attention than any other. Forex trading has really emerged as the go-to market for casual and professional investors alike, with it now commanding headlines around the world thanks to its profitability. Starting all the way back in 1875, what makes forex trading so relevant is that as a form of investing it has been truly able to weather the test of time. With stock options and the like showing signs of unrelenting weakness over the years, forex has always managed to maintain both popularity and effectiveness.
Given all that is taking place within the world today, many have turned towards forex in an attempt to profit from the fluctuating currency values. Given the appeal of forex trading, it seems that even novice traders appear in rush to start snapping up currency. If this is you, hold your horses, as forex is by no means a “pick up and play” form of investing. You are going to need to treat the matter of forex trading with utmost seriousness, with the following guide helping your get a leg-up on such matter.
What is forex?
With the world of forex at your feet, you need to understand that education is key to any success that you may find, as it pays to answer the question “What is forex?” before you start trading. Warranting mass media attention as of late, you are going to need to understand what exactly is before you start throwing money around. Forex is the short term used to describe the term foreign currency exchange, with forex representing the biggest currency exchange platform in the world. Over $4 trillion in forex related transactions take place every single day, with it being a market that focused upon heavy liquidity.
In a similar fashion to stock based investments, when it comes to forex there is no one stop shop trading destination. Forex is spread across a multitude of different financial centres, with such conducted through various different forex brokers. The actual forex market is open 24/5, which means that currencies are trading hands in within key markets such as Frankfurt, Hong Kong, Zürich, Singapore Tokyo, Paris Sydney, London, and New York round the clock. What this means is that no matter the time, day or night, you can be sure that you will be able to move money around within the forex markets.
How does forex-trading work?
Trading forex is all about working in pairs, currency pairs to be specific. When you attempt to exchange one currency for another you are engaging in a pair, with the fluctuations in the two currencies being where money can be earned and lost. For example, the most common currency pair is GBP/USD, which represents pound vs. dollar. In this example, you are trading on the belief that the GBP will appreciate against the USD. This means that buy purchasing GBP you are selling USD under the belief that the exchange rate will favour GBP. From a stance of the basics, that is really how forex trading works, as you select a currency, chose a position, before going through the motions of completing the transaction. The goal of every trader is simple, to shift weakening currency in favour of that which has the potential to improve and grow beyond its current price.
How can I trade forex?
The forex market is quite frankly huge, with it expanding to all four corners of the globe. Because this is the case, it can at times present something of an intimidating beast. But don’t be fooled, the market is approachable, as long as you have know-how on your side. Here is a breakdown of the ways in which you can trade forex:
- Spread Betting – Spread betting has only really gained momentum in recent years, but has appeared almost unstoppable as of late. Allowing you to speculate rather than acquire within the market, traders can take advantage of low and tight spreads, with related profits being notably tax-free.
- CFD – CFD trading (also know as contract for difference trading) is a way of forex trading that removes the move expiry date element out of the equation. Much like with spread betting, when you engage in CFD trading you will not be liable for stamp duty. Saying that, with CFD trading you will be liable for capital gains tax in the UK.
- MT4 – When people think of forex trading, odds are they think of MT4, as it is something that pretty much all-upstanding forex brokers offer as a trading platform. Allowing for standard and tailored forex trades, any trader with eyes on the big prizes needs to learn the ins and outs of MT4.
How do forex signals work?
If you are novice forex trader, you are going to need to seek out all the support you can get. One way of doing this is to head down the route of forex signals, which can drastically improve your performance with controlled effort. Viewed as somewhat controversial in the eyes of some, what forex signals represent are a heads up on what to do and what’s going on the market, simply with the need for manual analysis and research being taken out of the equation. By subscribing to a forex signals service you are being advised by either a forex trade pro or team of forex trade pros on what to do and often when to do it.
How to find a forex broker?
After taking on all the above it will be time to start putting a forex trading strategy into practice, but to do this you are going to need a forex broker. There are countless forex brokers out there vying for you business, with not all forex brokers offering the same service. Do not take the act of selecting a forex broker lightly, as it could prove costly. Before signing on the dotted line anywhere, it is recommended that you research reputation, market offerings, trading platforms, commissions, fees, and more.
Remember, forex trading is an act that does come with a certain degree of financial risk, which means it pays to have the backing of a broker you can trust. If you aren’t happy with what a forex broker is making available, take on the initiative and look to trade elsewhere.
Moving forward with forex trading
Anyone with an eye on investing should take the time to give the forex market plenty of attention. The fact that it is such world renowned market tells the story of just how influential and profitable this form of investing can be. Powered by currency and made highly approachable by various technological innovations, there is now no denying that forex trading is an act that anyone can take up successfully should they have the times, the means, and money.