“Forex” is a hotly searched keyword and is of interest to many people in the financial world. If this is the first time you have heard of this keyword and want to learn more about it, this is the article for you. The following article of Learn Forex Trading will give you the most general overview of foreign exchange trading platforms and what is Forex. So let’s follow along to understand better the Forex market as well as know how to become a financial “billionaire”!
Things you may not know about Forex
Before learning more about how to become a talented trader, you first need to understand the basics of Forex. Here’s what you might not know about this volatile financial market.
What is Forex that can interest many people?
What is “ Forex ” that many people are interested in? Forex is the abbreviation of the phrase Foreign Exchange (also known as foreign currency exchange). Forex is an investment field that uses currency as a commodity. Then proceed with the exchange based on their exchange rate changes at certain times in the market. Besides the name Forex, it is also known by many other names such as Foreign Exchange, FX…
Characteristics of the foreign exchange trading market
Furthermore, the Forex market is decentralized. It is not like other markets, because we can see where buying, selling, and trading activities take place. Especially in the Forex foreign exchange market, there are no trading centers. Investors who want to participate in the exchange must go through an intermediary brokerage called Forex Broker. Here, exchanges will provide platforms and tools to connect the trader community. Through it, traders can conduct orders to buy, sell, and exchange products.
Types of goods in the Forex sector
In the Forex field, the main commodities are currency pairs. The currency pair will consist of 2 currencies expressed as a ratio. In particular, the currency in front is called the base currency and the currency behind is called the quote currency. Currency pairs will be divided into 3 groups: Major currency pairs, minor currency pairs, and foreign currency pairs. In addition, the Forex market also develops many other types of products such as gold, oil, and stocks…
For example, The EUR/USD pair has an exchange rate of 1.22, which means 1 EUR is equal to 1.22 USD.
Components participating in foreign exchange transactions
So which components can participate in trading on the Forex exchange? They can be individuals, organizations, Central Banks, Commercial Banks, foreign exchange brokers, businesses, investment organizations…
See more: Instructions for registering an Exness account
Distinguish Forex from other concepts in finance
After understanding the basic knowledge of the Forex exchange. Next, we need to distinguish Forex from other concepts in the financial market.
How is the foreign exchange market different from stocks?
The biggest difference between the forex and stock markets is the assets traded. While Forex focuses on foreign currency trading, stocks focus on selling assets such as stocks, commodities, bonds, and stock indices. This makes the characteristics, properties, and trading methods of these two types of investments different.
Compare Forex with commodity derivatives
For Forex, investment is mainly based on the difference in exchange rates of currency pairs. As for commodity derivatives, it is trading on futures contracts… Furthermore, in the UK, the Forex market is not protected by the State and pays annual dividends like commodity derivatives.
Should I choose foreign exchange trading or invest in other fields?
Through the above information, it can be seen that Forex, stocks, and commodity derivatives are all different forms of investment. Deciding which form to invest in depends on each investor’s goals, knowledge, and experience.
Forex is a more risky investment option because it is not protected by the state. At the same time, it requires perseverance and serious learning to overcome all difficulties. However, this is an investment field that can bring extremely good profits. If you are new to the financial field and have little capital, you can choose to invest in commodity derivatives. Because it has high liquidity, low risk, high margin, and is licensed from the State.
How to make money on Forex?
So how to start making money on Forex? Please continue to learn in the next information section of Learn Forex Trading to answer the above question.
Principles of foreign exchange trading
First, traders need to grasp the operating principles of the Forex market. Remember, the forex trading market is not a physical market. Instead, it is a decentralized global network that operates 24/5. In it, traders will start buying and selling different currencies. And they wait for the change in the value of those currency pairs to earn profits for themselves.
Factors to consider when trading Forex
To be able to invest and profit most effectively on the Forex exchange. Traders need to pay attention to some important factors as follows:
How to calculate profit and loss on Forex?
First, is calculating profit and loss on the Forex exchange. It will be calculated based on the price change of the currency pair. If you buy a currency pair and the exchange rate between them increases, you will make a profit. On the contrary, if you buy a currency pair and the price falls, you will incur a loss.
Looking for the best time to trade forex?
Second, it is the best time to trade forex. Although the Forex market operates 24/5, not everywhere is a good time to trade. Typically, times of high price volatility and high liquidity will be when trading sessions overlap. That is also the best time for traders to take the opportunity to participate in the foreign exchange market.
Highly liquid forex pairs
Third, there are highly liquid forex currency pairs. The more influential a currency pair is, the more likely it is to cause volatility and profitability. These are usually currency pairs of large countries with strong economies. Prominent examples include EUR/USD, USD/JPY, or GBP/USD currency pairs…
Pay attention to spreads, overnight fees, pips, and lots in Forex
Fourth, you should pay attention to overnight fees, Spread, pips, and lot differences in Forex. Because they and other important factors help traders understand and manage risk costs every time they conduct transactions in the Forex market.
How to properly use leverage in Forex?
Ultimately, it’s about knowing how to use leverage properly. Leverage is an important tool, allowing traders to trade with larger amounts of money than their actual capital. However, if you do not know how to use it properly, it can cause unwanted risks.
Which Forex exchange should traders choose?
So amid the mushrooming brokerage market, which Forex platform should traders choose to trade?
Tips for choosing a reputable Forex broker
Finding a reputable Forex trading exchange is extremely important. Because it will help you avoid unnecessary problems during use. At the same time, minimize the risks when investing on the Forex exchange. To be able to choose a reputable Forex broker is not too difficult when you base it on the following criteria:
- First: Exchanges have high liquidity, minimizing the impact of price slippage during the investment process.
- Second: The Forex exchange has transparency when depositing/withdrawing money to help traders save time and be safe when conducting transactions.
- Third: The foreign exchange exchange is capable of providing quick service support. Because during the process of trading and investing, many people will encounter difficulties that need the support department to resolve.
- Fourth: The foreign exchange market has low spreads. This is an extremely important factor that helps traders limit financial risks.
- Fifth: Forex exchanges are regulated by compensation agencies. Any reputable trading exchange is responsible for purchasing insurance for customers. In case the exchange goes bankrupt or becomes insolvent.
Top trusted Forex exchanges in the UK
To be faster, Learn Forex Trading has helped readers find the top 3 most trusted Forex exchanges in the UK, including:
- Exness: At the top is the name Exness, which is extremely familiar in the trading community. This is an extremely reputable forex exchange with no Swap fees, allows traders to suspend orders within 24 hours and is managed by the CySEC agency…
- ICMarkets: The second name that you need to pay attention to is the ICMarkets broker. Established in 2007, ICMarkets has now become one of the trading platforms trusted and used by a large community of UK traders.
- XTB: This is the last name to appear in the list of the top 3 trusted Forex brokers in the UK. Currently, XTB is a solid brand, growing strongly in many countries and highly appreciated by industry experts.
Instructions on how to trade on the Forex exchange
Next, let’s Learn Forex Trading to learn how to trade on Forex through the following information.
Common trading orders on the Forex
In Forex, trading orders are created for their purpose. Each order will have its characteristics and features suitable for each situation, making trading convenient for traders. Some of the most common basLearn Forex Trading orders on Forex include:
- Market Order: Use to buy or sell a currency pair immediately at the current market price.
- Pending Order: An order placed in advance and only executed when the price reaches a certain level.
- Stop Loss Order: Used to limit losses when the price moves in the opposite direction from the initial prediction.
- Take Profit Order: Used to close a position when the price reaches the set level.
- Trailing Stop Order: This is a type of automatic stop-loss order. It can adjust the stop loss according to price changes.
Where to observe charts and analyze forex indicators?
In addition, when trading on the Forex exchange, traders need to know how to observe charts and analyze indicators.
Some common Forex indicator analysis methods
Among them, some common indicator analysis methods in Forex include:
- Technical analysis: Based on price charts and technical indicators to predict price direction.
- Fundamental analysis: Focus on political, economic, and social factors… affecting currency prices.
- Elliott wave analysis: A method that uses wave models to predict trends and reversals of the Forex market.
- Analyzing candlestick patterns: Based on candlestick pattern models on the chart such as Pin Bar, Hammer… Through this, traders can capture signals of market reversal.
- Strength analysis: Use indicators to measure the strengths and weaknesses of currency pairs on the market.
The fastest sources for Forex charts
Nowadays, traders can more easily grasp trends and make accurate forecasts based on Forex chart sources. Below are popular sources that you can refer to: Tradingview, MetaTrader platform, Investing.com, ForexFactory…
How to limit Forex trading risks is revealed by professional traders
As mentioned, the Forex market is an investment field with many potential financial risks. Therefore, those who want to learn and participate in trading need to understand financial knowledge and management.
“Avoid” traps on smart foreign exchange exchanges
In particular, smart forex exchanges often create traps that make it difficult for traders. To avoid these types of traps, investors should apply the following measures:
- Research and choose a reputable Forex: This will be the place to protect traders from unnecessary risks.
- Avoiding the FOMO effect: A psychological symptom that many traders suffer from. To better understand what is FOMO, readers can read more through the link above.
- Invest in knowledge and skills: Two basic factors that help traders get closer to success.
- Read and understand the terms and policies: This helps them avoid getting stuck in unwanted fee “traps”. At the same time, it ensures transactions are carried out in a transparent and fair environment.
- Make the most of attached services: Professional traders often take full advantage of the services provided by the broker to make trading easier.
How to manage finances when trading Forex
Besides, traders need to apply financial management measures when trading Forex specifically:
- Determine investment capital: This helps protect your account from loss when a transaction fails.
- Set and stick to rules: Traders must determine the maximum losses they are willing to endure and then stick to them to manage risk.
- Diversify your portfolio: By opening positions on many different currency pairs.
- Use order management techniques: To adjust position size and optimize profits.
- Controlling trading psychology: This is one of the most important factors that can directly impact traders’ trading decisions. Therefore, traders need to be disciplined to not get carried away by emotions during the trading process.
summary
So in the above article, we have learned in detail about the keyword “Forex”. Hopefully, this is all the information you are looking for and it is really useful. In addition, to select more useful documents about Forex knowledge, don’t forget to follow Learn Forex Trading to see the next articles.
FAQs:
Is the foreign exchange market protected by UK Law?
Forex is a foreign exchange market and it is not protected by UK law when faced with problems.
What are the benefits and risks of the foreign exchange market?
Foreign exchange market trading has high liquidity, the ability to trade both ways, and great profit potential. However, risks also exist including price unpredictability, exchange risk, and system risk…
Who can invest in the foreign exchange market?
Almost everyone can participate in investing: individuals, organizations, businesses, banks…