Category Archives: Financials

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Trading Forex Basics

 

Forex trading works much like it does with stocks, you buy low and you sell high. The benefit of trading Forex is that you don’t have to choose from thousands of companies or sectors. Plus, you can make things even simpler than choosing which company to buy.

For example, most people, even those that are new to Forex, have an opinion on the US dollar and the US economy. They can easily take their opinions and translate them into a Forex trade. Buying or selling US Dollars as simple as they buying or selling a company’s stock.

Also, another advantage of the FX market is that it doesn’t begin at 9AM and end at 4PM. Trading takes place 24 hours a day, 5 days a week. For most people 24 hour trading means they can trade before or after work. Plus, you have the flexibility to make your trades online.

What_is_Forex_body_Picture_1.png, What is Forex?

Plus, you can buy and sell at any time, in up trends (also called bull markets) and in down trends (also called bear markets).

 

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The 8 rules of Forex Trading

Forex trading is a difficult sport. You have to be ready to follow rules and principles. So, before start trading, please, read the following basic rules.

 

1. Don’t trade when you are tired, sick, anxious or worried.
2. Make sure you paper-trade before you risk real money.
3. Don’t get greedy. As they say… “Hogs get fed, pigs get slaughtered.”
4. Always put a protective stop in place.
5. Losses are part of this game and you must be able to accept them. If you can’t stomach the idea of losing money, then don’t trade.
6. Decide on your exit strategy, before you enter the trade.

7. If the risk is too big on a trade then don’t take it.
8. The hardest time to take a trade is when you have just had a few losers in a row. This however is exactly the time you need to jump right back in there as odds are that the next one will be a winner

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The pros of Forex trading

There are several advantages of the Forex market over some other types of financial trading.

When talking about various investments that are accessible to almost everyone, there is one type that springs to mind. The Forex or foreign exchange market has many advantages over other types of trading. Since it is an OTC (over-the-counter) market, the Forex market is open 24 hours a day, unlike the regular stock or commodity markets. Most investments require a significant amount of money before you can take advantage of that investment opportunity. You only need a small amount of capital to trade Forex. Everyone can enter the market with as little as $1 to trade a “micro account”, which allows you to open positions of 1,000 units. One lot of 1,000 units of currency is equal to 1 contract in micro account. Each “pip” or “tick” (smallest currency rate movement up or down) is worth $0.10 profit or loss, depending on whether you are going with the market or against it. A Forex mini account gives you control over 10,000 units of currency, where one pip is worth $1.00. While a standard account gives you control over 100,000 units of currency, and a pip here is usually worth $10.00.

 

Forex is also one of the most liquid markets. When trading currencies on the spot Forex market you have full control of your capital, meaning that you can buy and sell your positions anytime during market open period. This is a definite advantage because, if you need to use your account money, it can be accessed immediately without additional commission or waiting periods. Many other types of investments require holding your money up for rather long periods of time.

 

Also, in Forex, with a small amount of money, you can control bigger market positions using the leverage or margin trading. Leverage of 1:100 is common in the Fore market. It allows you to control amounts 100 times bigger than your capital, while leverage of 1:500 and 1:1000 can be found with some offshore companies.

Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit, since short-selling is a subject to strict limits in stock exchanges. Forex traders can make a profit during both uptrends and downtrends. Forex trading is rightfully considered risky but with a good trading system to follow, good money management skills, and some level of self-discipline, the risks of Forex trading can be minimized considerably.

 

The Forex market can be traded anytime and anywhere. As long as you have access to a computer and internet, you have the ability to trade the Forex market. An important thing to remember before jumping into trading currencies is that it is worth practicing with “paper money”, or “fake money”, on the demo account. Most foreign exchange brokers have demo accounts where you can download their trading platform and practice in real-time with real market data but with “virtual money”. While profitable demo trading cannot guarantee your success with real money, practicing can give you a huge advantage to become better prepared when you start trading with your real, hard-earned money.