Foreign currency trading has grown very popular these days as the forex or FX market is the most traded market in the world. However, although it offers opportunities to earn high amounts, it is also very complicated. So, you must know how to conduct trades right before you start FX trading. You can always use one of the best forex EAs as well to enjoy the benefits of automated trading. Three steps to start FX trading are:
Analyze the market
In FX trading, there is no place for emotion. If you rely on your emotion instead of logic and reasoning, then there are high chances that you will end up losing the trade. The only foundation for trading should be research and analysis of the market. It's a lot easier to carry out that analysis with the help of a trading platform like MetaTrader 4 for Mac.
When you begin your research, you will find a broad range of FX resources online and it may seem a big overwhelming in the beginning. However, when you research a certain asset, you will find valuable resources that stand out from the rest. You should look at live and historical charts on a regular basis in order to observe the news for economic announcements.
It is also recommended to use indicators and conduct other analysis activities. The better you learn to read the market, the higher are your chances to be a successful trader.
Choose A Currency Pair and View Its Quote
FX trading simply means exchanging the value of a currency for another. In other words, a currency would always be purchased while selling another at the same time. Due to this, traders would always continue trading a pair of currencies.
Most newcomers begin with the most commonly offered major currency pairs. However, it is not necessary to do so. You can trade any currency pair if you have the required capital in the trading account. Once you choose a currency pair, read its quote. You will notice that two prices are displayed for all currency pairs. For example, this is how a quote for EURUSD may look like:
The first rate is 1.07173. It is the price at which the currency pair can be sold. The second rate is 1.07191. It is the price at which the pair can be purchased. The difference between these two rates is known as the spread. This is the amount charged by a dealer to conduct the trade.
Pick Your Position
If you have experience in trading bonds, stocks, or other financial assets, you know that you can generally speculate only on direction of the market and it is up. However, forex trading is a bit different from it. Since the trader purchases one currency while selling another at the same time, they can speculate on both up and down market movement.
-
Buy Position
With a buy position, traders speculate that the value of the base currency would rise than the quote currency. If the EUR/USD pair is bought, traders speculate that the price of the Euro would strengthen against the dollar. To put it simply, it is guessed that the Euro is bullish while the USD is bearish.
-
Sell Position
With a sell position, it is guessed by the trader that the price of the base currency would fall compared to the quote currency. If the trader sells the EUR/USD, they guess that the value of the Euro would weaken against the USD. In other words, the trader speculates the Euro to be bearish and the USD to be bullish.
-
Entering A Buy Position
Let’s assume that the current price for the EUR/USD pair is 1.33820/840. Now, the trader believes that the Euro is bullish, so, they decide to enter a buy position for one lot of the EUR/USD. Since the trader is buying, their trade is entered at the value of 1.33840.
-
Entering A Sell Position
Now, let us assume that the trader believes that the Euro is bearish while the current price of EUR/USD is 133820/840 and decides to enter a sell position for one lot of EUR/USD. Since they are selling, their trade is entered at the price of 1.33820.
Conclusion
Make sure to obtain enough knowledge about the FX market and trading strategies before you start trading and practice on a demo account first to avoid risks of losing money.
