Published on January 21st, 2020 | by Bibhuranjan0
The beginner’s guide to choose the right Forex trading
The foreign exchange market or more commonly called the currency trade market is indeed one of a kind. It is 12 times larger than the futures market and 27 times larger than the equities market, involving everyone from investment banks, hedge funds, traders, commercial banks, brokers and companies too.
The reason for this success of the Forex market is the highly decentralized system where it is a series of computers and brokers that make the market function. Moreover, with globalization, trade has opened up and when banks trade in currencies, it makes the currency conversion, say from dollars to euros easier and simpler. Now, even under the forex market, there are spot, forward and futures markets, all existing constantly and having avenues of immense revenue generation which is why financial institutions use it for hedging.
Forex is not just for banks!
Not just banks, the foreign exchange trading market has a separate over-the-counter set-up for individual traders who can directly speculate and buy, sell or exchange currencies as a part of this large market. With the daily average trading volume crossing 5 trillion dollars, there is always an opportunity to learn. Infact, due to the large volume, this market has a high amount of liquidity, making transactions extremely dynamic and easy. This reduces transaction costs and allows you to invest better in more opportunities.
Yes, if you are looking to venture into the foreign exchange market, searching for reliable forex brokers or need a guideline as a beginner, it is crucial that not only you understand how it functions and succeeds, but also be well-equipped to handle a market that runs 24 hours a day. For this, it is highly recommended to have a Forex trading platform, which can not only be a guide but also help you in tracking daily events.
However, choosing the right trading platform is a matter of concern and importance, where certain parameters have to be checked and confirmed. Especially as a newbie, a comprehensive platform that allows hands-on training should be looked for. Don’t worry, we’ve got a few guidelines for you to follow while choosing your trading platform:
Go for a proprietary
First and foremost, pick a proprietary platform at the beginning, which will work specifically for your own account. This means that the engagement of the forex market will be limited and centralized to your trades and would be primarily focused on the forex operations only. This way, you can streamline your efforts and avoid any distractions.
Look for compatibility
As a beginner, you’ll probably be trading from home or your work computer. With the available varieties in the market, make sure you choose a trading platform that has a software that is compatible with your computer and attached equipment. In a high-speed market with constant trades, you don’t want any lags or errors. So, for iOS or for Windows, different platforms have to be checked and accordingly used.
Know the rules
This is mandatory for anyone that works to learn something new. A trading platform for foreign exchange trading has to be tested and understood before going all-in. Practice and go through the platform to see if you are comfortable with it and can manage the software.
Be open to options
All tips are valid as long as you are willing to spend time to try out different platforms and find the most convenient one for your activities. This also means you should be open to getting rid of software that doesn’t sit well, be able to explore new options and then make a final call. A platform might give high functionality but not be compatible with your needs or a platform might be compatible with your preference but be time-taking in analysis, a choice has to be made about what fits and what doesn’t.
Understand the functionality
A trading platform should suffice and satisfy the functions you need it to do. There should be an economic analysis, stop loss and other additional features to give you an idea about the basic methods and information of trading in the forex market. It is the reality that you cannot master the trading platform but you need to be able to have enough to operate with and work on a long-term basis.
The most-traded currencies are the US dollar, Euro, Japanese Yen, and Pound sterling which makes a lot of sense since the main trading centers are in London and New York City itself. Considering how many economic factors like GDP, inflation and interest rates affect exchange rates, it becomes crucial for any beginner to understand the world economy and conduct trading plans accordingly.
Here are a few other basics you should be aware of:
In foreign exchange trading, you always buy one currency and sell another or have a direct exchange. Hence, there is a base currency and then a paired currency called quote currency. Mostly, these pairs are either of major currencies, minor currencies, exotic pairings, or regional pairings. It depends on your choices and knowledge to delve into whichever type.
Following global news that can impact currency prices and knowing what market sentiments are for a currency can be a major step in learning the tricks of forex trading. It can be a disparity, a piece of negative news or a strong future outlook, the currency of any country ties directly to the economy of that country and its trading partners.
The forex market can have multiple currency fluctuations by large margins because of the constant happenings around the world. This does open a path for huge profits but also acts as a warning for one to be careful about possible losses. Hence, on the trading platform, make sure you look for risk management tools as you dive deeper into forex trading.
Venturing into Forex and the nooks of trading take time, hardwork and understanding of the fluctuations. Infact, profits can not only be earned by changes in the exchange rate but also by interest rate changes between two currencies. Short on one currency and buy another, a simple yet complicated approach that can give huge yields.
The forex market has had a credible history of generating unbelievable profits for the investors, provided you employ the right techniques and take well-informed and well-researched decisions.