Hello guys, today we are going to be writing something different than usual.
Today, we are going to be talking about Forex.
Some of you may know what it is, and some of you may not.
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What is Forex
Let's talk about the basics, What is Forex anyway and what does it mean?
This was the question I asked myself when I first started Forex trading. "What is Forex anyway"
Before you hop on the train of trading currencies, you need to know the basics to avoid mistakes. There are some things I wish I knew before starting Forex, and if I knew them I wouldn't have blown some accounts.
Long story short, Forex is short for Foreign Exchange.
Now that we have gotten that out of the way, what is Foreign Exchange?
Foreign Exchange (FX) is the trading of one currency for another. For example, one can swap the U.S. dollar for the euro. Foreign exchange transactions can take place on the foreign exchange market, also known as the "Forex Market"
KEY TAKEAWAYS
Foreign Exchange (forex or FX) is a global market for exchanging national currencies with one another.
Foreign exchange venues comprise the largest securities market in the world by nominal value, with trillions of dollars changing hands each day.
Foreign exchange trading utilizes currency pairs, priced in terms of one versus the other.
Forwards and futures are another way to participate in the forex market.
Forex Market
The forex market is an ever-growing industry because money is distributed everywhere around the world, From country to country, country to company, company to company.
The forex market is by far the largest and most liquid financial market in the world, with an estimated average global daily turnover of more than US$6.5 trillion — which has risen from $5 trillion just a few years ago.
One critical feature of the forex market is that there is no central marketplace or exchange in a central location, as all trading is done electronically via computer networks. This is known as an over-the-counter (OTC) market.
What is Forex Trading?
Forex trading is the process of speculating on currency prices to potentially make a profit. Currencies are traded in pairs, so by exchanging one currency for another, a trader is speculating on whether one currency will rise or fall in value against the other.
The value of a currency pair is influenced by trade flows, economic, political, and geopolitical events which affect the supply and demand of forex. This creates daily volatility that may offer a forex trader new opportunities.
Online trading platforms provided by global brokers like FXTM mean you can buy and sell currencies from your phone, laptop, tablet, or PC.
Where can I trade forex?
I am often asked this question by people that are new to Forex, "Do you go to the bank every day to trade forex". I often laugh in my head or just answer the question then laugh afterward.
No, you must not go to the bank to trade Forex.
You can trade forex with an"online forex broker".
"An online forex broker acts as an intermediary, enabling retail traders to access online trading platforms to speculate on currencies and their price movements.
Most online brokers will offer leverage to individual traders, which allows them to control a large forex position with a small deposit. It is important to remember that profits and losses are magnified when trading with leverage".
For Online trading, I recommend "FXTM".
Link:https://www.forextime.com/
But this is just my recommendation, you can choose the broker that fits you well.
There are so many online brokers that give out good leverages and spreads.
Forex trading is just like a job but I can't really call it one.
This is because it can be done at anytime you set out to do it, the number one mistake that most traders make is they take Forex too seriously.
When I first started trading, I stared at my chart from 5 am to 6 pm and sometimes only got 3 or 4 winning trades.
Forex is not a 9-5 job, people!!.
If you treat trading like a game trust me you are better off not starting because you may lose a lot of money.
I finally got the hang of it by reading "Good trading books", Watching Forex Videos, Joining a trading group, and the most important...HAVING A GOOD TRADING STRATEGY!!!.
Beginners always think that Forex is Gambling and luck.
Based on my experiences, that kind of thinking only leads to several blown accounts that could have been successful if you had taken them seriously.
Forex is not a game, a wrong trade could decide your entire account.
Luckily, there are "Trading Strategies" that would help you become a better trader even if you are just a beginner.
What is a Forex Trading Strategy?
Some of you may be asking what a "Forex Trading Strategy" is.
Well, A forex trading strategy defines a system that a forex trader uses to determine when to buy or sell a currency pair. There are various forex strategies that traders can use including technical analysis or fundamental analysis.
A good forex trading strategy allows for a trader to analyze the market and confidently execute trades with sound risk management techniques.
FOREX TRADING STRATEGIES THAT WORK
Forex trading requires putting together multiple factors to formulate a trading strategy that works for you. There are countless strategies that can be followed, however, understanding and being comfortable with the strategy is essential. Every trader has unique goals and resources, which must be taken into consideration when selecting a suitable strategy.
There are three criteria traders can use to compare different strategies on their suitability:
Time resource required
Frequency of trading opportunities
Typical distance to the target
Here are some strategies that are used by traders worldwide:
1. PRICE ACTION TRADING
Price action trading involves the study of historical prices to formulate technical trading strategies. Price action can be used as a stand-alone technique or in conjunction with an indicator. Fundamentals are seldom used; however, it is not unheard of to incorporate economic events as a substantiating factor.
Length of trade:
Price action trading can be utilized over varying time periods (long, medium, and short-term). The ability to use multiple time frames for analysis makes price action trading valued by many traders.
2. RANGE TRADING STRATEGY
Range Trading includes identifying support and resistance points whereby traders will place trades around these key levels. This strategy works well in the market without significant volatility and no discernible trend. Technical analysis is the primary tool used with this strategy.
Length of trade:
There is no set length per trade as range-bound strategies can work for any time frame. Managing Risk is an integral part of this method as breakouts can occur. Consequently, a range trader would like to close any current range-bound positions.
3. TREND TRADING STRATEGY:(Recommended)
Trend Trading is a simple forex strategy used by many traders of all experience levels. Trend trading attempts to yield positive returns by exploiting market directional momentum.
Length of trade:
Trend trading generally takes place over the medium to long-term time horizon as trends themselves fluctuate in length. As with price action, multiple time frame analyses can be adopted in trend trading.
5. DAY TRADING STRATEGY
Day Trading is a strategy designed to trade financial instruments within the same trading day. That is, all positions are closed before the market close. This can be a single trade or multiple trades throughout the day.
Length of trade:
Trade times range from very short-term (matter of minutes) or short-term (hours), as long as the trade is opened and closed within the trading day.
WHY TRADE FOREX?
When traders choose which market to trade, they are looking for optimal trading conditions and the best chance of making a profit. There are many reasons why millions of traders across the world think that the forex market fits these criteria, but we are going to focus on the top "Six" benefits of forex trading:
Ability to go long or go short.
While you can go short on other markets by using derivative methods, short selling is an inherent part of trading forex. This is because you are always selling one currency (the quote currency) to buy another (the base currency). The price of a forex pair is how much one unit of the base currency is worth in the quote currency.
24 Forex market hours
The foreign exchange (FX) market is open 24 hours a day, five days a week – from 5 pm EST Sunday to 4 pm EST Friday*.
These long hours are because forex transactions are completed between parties directly, over the counter(OTC), rather than through a central exchange. As forex is a truly global market, you can always take advantage of different active session’s forex trading hours.
There are four major trading sessions each day, matching the opening hours of banks in London, New York, Sydney, and Tokyo. There is a high volume of trades throughout each of these sessions, and especially when sessions overlap.
It is important to remember that the forex market’s opening hours will vary in March, April, October, and November, as countries shift to daylight savings on different days.
Volatility creates a trading opportunity
The high volume of currency trades each day translates to billions of dollars every minute, which makes the price movements of some currencies extremely volatile.
You can potentially reap large profits by speculating on price movements in either direction.
However, volatility is a double-edged sword – the market can quickly turn against you, so it’s important to limit your exposure with risk-management tools.
Trade a wide range of currency pairs
Forex trading gives you the opportunity to trade a wide variety of currency pairs, speculating on global events and the relative strength of major and minor economies. Below are some of the different currency pairs.
Major currency pairs, such as GBP/USD, EUR/USD, and USD/JPY
Minor pairs, such as USD/ZAR, SGB/JPY, CAD/CHF
Emerging currency pairs, such as USD/CNH, EUR/RUB, and AUD/CNH
Exotic pairs, such as EUR/CZK, TRY/JPY, USD/MXN
High liquidity in the forex market
The FX market is the most liquid market in the world, meaning there are a large number of buyers and sellers looking to make a trade at any given time.
Each day, over $5.1 trillion dollars of currency is converted by individuals, companies, and banks – and the vast majority of this activity is intended to generate a profit.
The high liquidity in forex means that transactions can be completed quickly and easily, so the transaction costs – or spreads – are often very low. This creates opportunities for traders to speculate on price movements of just a few pips.
Conclusion
The forex market is not a forgiving market, it can humble even the greatest men you may enter with a thousand and leave with nothing, absolutely nothing!!!.
I highly recommend starting a demo account before getting a real account because it allows more exploration of the forex market, and I think all beginners need to explore the forex market before they can get into the "Real Trading".
To all those who want to start Forex trading, I highly recommend that you start soon because "it's better to start than regret it later", but don't rush into the trading and blow your account, "start slow and watch it grow" this is my personal motto all my life and I hope you learn something from it.
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Till we meet again, BYE!!!
Wow, really educative content😎😎