How does Forex Market Function?
How to Open a Forex Account?
Foreign exchange is the process of converting a particular currency into another. This exchange is
conducted for multiple reasons. Trading takes place within the forex market. Money/currencies
guarantees our ability to purchase goods and services. Now one might wonder why foreign currencies
would be of any use to us. But if we wish to conduct foreign trade/businesses it becomes a definite
requirement. A network of buyers and sellers exchanging currencies after determining a common price. This brings us to the question of what the Forex Market is. A decentralized global market facilitating currency exchange. This market has a set hierarchy and to better understand it.
I shall take you through the different organizations involved therein. At the helm of affairs are the central banks, followed by other major banks. Then come in the Electronic Brokering Services (EBS). Next in line are the average to small sized banks. And, finally trickling down to people like you and me i.e., Retail traders. Deemed as the biggest market in the world foreign exchange is also a global market that facilitates trading around the clock. As it trades in trillions of dollars each day, it becomes lucrative for both small and large size trading/traders.
For many, this is a business with extremely low investment and tremendous returns. The biggest question that constantly riddles all beginners is how to embark upon this daunting market of FX. There are several traders to learn from and numerous platforms to exchange upon. But if one doesn’t know where to make a start, they are likely to end up in losses. In order to prevent that from happening we shall give you a few pointers on how to initiate trade. Once a trader is assimilated to the market and how it functions, navigating your way further becomes relatively easier.
The goal should be to save your money and make as much margin profit with each trade/investment/exchange as possible. This doesn’t necessarily require a lifetime of learning just like in social trading. We can generate learning by looking at other traders for lessons and inspiration. This will help us come up with our own set of do’s and don’ts.
How to Start Trading in Forex correctly
- Learning forex is just like learning a new language of learning how to drive or swim. Sings of any valuable learning is how strongly the foundation is built. The foundation here being the BASICS. To start off we must be well versed with all the basics even the jargon. Learning the trading language is essential to our growth, ergo, our profits. For instance, what is a Lot size, indicator, how many types of traders exist and which category you fall into. There are various apps that provide its users with all the needed knowledge pertaining to the market.
- Open a Demo Account
As a rookie you are bound to make mistakes while you learn. But as you have real money at
stake your emotions get involved. You might at times get overwhelmed or flabbergasted looking
at the profits or losses. To curb this and also get the immersive hands-on experience of trading.
Opening a demo account is the best way to jump start and reduce the learning curve. You can
open a demo account with a broker, there are hundreds to choose from. Practice till you are
ready to stake real money. You can select the right broker if you look for the following. Whether
or not they are registered, how many customers do they have, what benefits do they offer, how
many years of experience they hold and lastly what sort of reviews do they have.
- There is not a quick way to success, we learn something new each day. Especially in such a volatile market, it is important to have these two in place. Proper Risk Management and find a winning trading strategy. This has been further simplified by Copy and Social Trading. You can replicate and/or revamp already successful trading strategies and cooperate them in your practice. We might adopt the strategies a successful trader has used and get the same amount of profits.
- Along with studying the current market, it is important to look at historical data and statistics.
Looking at the trade and charts of the previous year would give you an idea of what not to do.
You can easily identify the moves and their outcomes. This is called backtesting a strategy.
- Forward testing the strategy, starting with a demo account move to small amount of money.
This ensures you don’t exhaust your funds all at once.
How to open Forex Account?
You cannot open an account directly on the market. A Forex trading account is opened on a broker’s
platform. On this platform you can store your funds for further transactions. It would be completely
under the holder’s control.
Types of Forex Accounts
- Demo Account- This is a training account barring real money, work exactly like a regular real
account. The money on here is virtual. A demo account can be opened using just through a broker’s website but on any trading platform.
- Real Account- These are several kinds, Classic, Professional, ECN, Micro, etc. A real account facilitates trade-in the market using real money not virtual. They help the trader deposit funds, conduct trade and exchange, withdraw profits and connect different services for effective