Trading Via the Forex Market

NFA – National Futures Association in the U.S.
CFTC – Commodity Futures Trading Commission in the U.S.
FCA – Financial Conduct Authority in the UK
ASIC – Australian Securities and Investment Commission
SFBC – Swiss Federal Banking CommissionForex Trading For Beginners

Trading foreign exchange on the currency market (Forex market) is a great way to gain income via investments. Over $20 billion is traded per day and the Forex market alone trades hear $5 trillion a day. It’s simple to make a ton of money and not invest much to begin with. All it takes is the ability to predict the market direction, and many find it quite thrilling. There are many ways to trade via the Forex market online.

Common Terms

A great place to start with Forex market trading is to get to know the common terminology used in regards to it. Here are some of the most important terms:

Exchange Rate – Tells the amount needed to spend to buy base currency.
Base Currency – The type of currency being spent.
Quote Currency – Currency being purchased.
Short Position – Selling base currency for quote currency
Long Position – Buy base currency and sell quote currency
Ask Price – The amount the broker will sell base currency for in exchange for the quote currency. It’s the highest price one is willing to buy for.
Bid Price – The amount the broker will buy base currency for quote currency.
Spread – The difference between bid and ask prices.

Once one has explored common terminology they should read a Forex market quote. The two numbers upon it are the ask price on the right and the bid price on the left.

Decide the Currency to be Bought and Sold

By making predictions on the economy, one will have a good head start on what currency to buy and sell. If it’s believed a certain economy will weaken then it’d be bad to purchase that currency, but rather sell them in trade for currency that is from a country with a strong economy.

One way to do this is view the trading position of a country. If they have in-demand goods, then they export to make money in most cases. This is considered a trade advantage and it will boost the economy along with currency value.

Politics also plays a big role. If there are elections and the winner has a great agenda that is fiscally responsible, then the currency will be worth more. Loosened regulations can do the same. These facts play a great role in trading via the Forex market.

Finally, view economic reports to include the country in question’s GDP and reports about other economic factors like inflation and employment which have an effect on the currency value.

Calculating Profits

The change in value between two currencies is called a pip.

Pip = 0.0001 of a change in value

The trade on the Forex market is a difference of 0.001, the currency has increased by ten pips! Then multiply the amount of pips any account has exchanged via current rates. The value will tell one how much their account has gone up or down in value.

Consider different brokerages

There are many important factors to think on when choosing a brokerage to work with. It’s important to get a complete understanding of their history within the industry, and preferably they have ten or more years’ experience. This means they know how to please clients. Also, check to make sure the brokerage is under regulation of a major government oversight body. Keep in mind that if they volunteer this information that means they are honest.

Oversight bodies:

Inquire as to the various products offered by the broker and see if they trade commodities and securities. Also read reviews, but keep in mind the competition can go in and write bad reviews. Visit the website and make sure it looks professional and has active links. Steer clear if getting a bad feeling. Finally, check transaction costs for each Forex market trade, and how much a personal bank will charge to wire funds to Forex market accounts. Good customer service and transparency is vital.