Ephy
Active member
What is forex trading?
Forex trading in simple words we can define it as the practice or the act of buying and selling currencies with the aim of making a profit. In short we can say it same as foreign exchange, cause it involves changing different currencies from different countries. For example, let say you live in United States and you want to buy a product from Kenya. So you need to pay KES (Kenyan shillings) in order to get or purchase the product. However you only have the US dollars so you need to change your dollars for KES in order to make the purchase.
The exchange rates normally fluctuate based on different factors such as economic and political events. Therefore forex traders tend to predict these fluctuations and make profits or money by buying currencies when they are low and selling hem when they are high. This is how forex trader make profits from buying and selling the currencies.
Forex trading is done through a broker, who provides you all the access to the currency marker and charges a fee or commission for their services. Traders use various strategies and techniques to analyse the market and make trades. Different techniques are used such as technical analysis, fundamental analysis or automated algorithms. This helps the trader to trade easily and also develop a working strategy that his or she is familiar with.
It is also important to know that forex trading can be risky and you can lose all your money moreso when you are a beginner. It's important to do research and seel professional advice before getting started. You have to do enough research plus have all the knowledge needed. Here are some basics of forex trading;
1. Leverage -this means traders can control large amount of currency with a small investment but also it depends with the broker that you are using. This is one of the aspects that you should know.
2. Market hours - you should know how the market operates. The forex market is opened 24 hours a day but five days in a week. That us the market is opened from Monday to Friday and it closes on weekends.
3. Liquidity -this means that there is a high volume of trading activities and it is easy to buy and sell currencies quickly. Note that forex is one of the most liquid market in the world.
4. Volatility - This the act of currencies often experiencing significant price movements in short periods of time. Meaning forex market is highly volatile. This can provide trading opportunities to the traders but also cam be a risk for traders.
5. Regulation - forex trading should be regulated to reduce scums in the market. Therefore when choosing a broker make sure you take a reputable broker.
6. Risk management - This is the process of identifying, assessing and mitigating potential risks that could impact in the forex trading. This is very important step to understand before taking any trade. Here are some strategies that you can use to minimise risk or manage your risks;
a. Use stop loss orders - This is an order that closes the trade automatically if the price reaches a certain level limiting the amount of losses. This helps a trader not to lose all the investment he or she has in the account.
b. Use proper position sizing - This refers to the amount of currency the trader is trading with. Proper sizing help the trader to minimise losses.
c. Keep upto date with market news and events, this can help you reduce the risk of being caught off guard by sudden market shifts.
7. Pips - This is the smallest unit of measurement for currency movements.
8. Bid ask spread, this is the difference between the price which currency pair can be bought and the price at which it can be sold.
9. Currency pairs, forex trading involves buying and selling of different currencies for example EUR/USD currency pair presents the exchange rate between the Euro and US dollar.
Trading has many concepts, I have just listed some of them to make it easier for anyone who wants to start trading. This information can atleast help you be aware of the forex trading.
If interested and you have the need to know more about forex trading don't hesitate to comment or contact me and I will be of help to you.
Forex trading in simple words we can define it as the practice or the act of buying and selling currencies with the aim of making a profit. In short we can say it same as foreign exchange, cause it involves changing different currencies from different countries. For example, let say you live in United States and you want to buy a product from Kenya. So you need to pay KES (Kenyan shillings) in order to get or purchase the product. However you only have the US dollars so you need to change your dollars for KES in order to make the purchase.
The exchange rates normally fluctuate based on different factors such as economic and political events. Therefore forex traders tend to predict these fluctuations and make profits or money by buying currencies when they are low and selling hem when they are high. This is how forex trader make profits from buying and selling the currencies.
Forex trading is done through a broker, who provides you all the access to the currency marker and charges a fee or commission for their services. Traders use various strategies and techniques to analyse the market and make trades. Different techniques are used such as technical analysis, fundamental analysis or automated algorithms. This helps the trader to trade easily and also develop a working strategy that his or she is familiar with.
It is also important to know that forex trading can be risky and you can lose all your money moreso when you are a beginner. It's important to do research and seel professional advice before getting started. You have to do enough research plus have all the knowledge needed. Here are some basics of forex trading;
1. Leverage -this means traders can control large amount of currency with a small investment but also it depends with the broker that you are using. This is one of the aspects that you should know.
2. Market hours - you should know how the market operates. The forex market is opened 24 hours a day but five days in a week. That us the market is opened from Monday to Friday and it closes on weekends.
3. Liquidity -this means that there is a high volume of trading activities and it is easy to buy and sell currencies quickly. Note that forex is one of the most liquid market in the world.
4. Volatility - This the act of currencies often experiencing significant price movements in short periods of time. Meaning forex market is highly volatile. This can provide trading opportunities to the traders but also cam be a risk for traders.
5. Regulation - forex trading should be regulated to reduce scums in the market. Therefore when choosing a broker make sure you take a reputable broker.
6. Risk management - This is the process of identifying, assessing and mitigating potential risks that could impact in the forex trading. This is very important step to understand before taking any trade. Here are some strategies that you can use to minimise risk or manage your risks;
a. Use stop loss orders - This is an order that closes the trade automatically if the price reaches a certain level limiting the amount of losses. This helps a trader not to lose all the investment he or she has in the account.
b. Use proper position sizing - This refers to the amount of currency the trader is trading with. Proper sizing help the trader to minimise losses.
c. Keep upto date with market news and events, this can help you reduce the risk of being caught off guard by sudden market shifts.
7. Pips - This is the smallest unit of measurement for currency movements.
8. Bid ask spread, this is the difference between the price which currency pair can be bought and the price at which it can be sold.
9. Currency pairs, forex trading involves buying and selling of different currencies for example EUR/USD currency pair presents the exchange rate between the Euro and US dollar.
Trading has many concepts, I have just listed some of them to make it easier for anyone who wants to start trading. This information can atleast help you be aware of the forex trading.
If interested and you have the need to know more about forex trading don't hesitate to comment or contact me and I will be of help to you.
