Forex, also known as The Foreign Exchange Market, is the worldwide marketplace for trading currencies. It is often called the ‘Currency Market’ or ‘Foreign Exchange Currency Market’ and it is the market where the world’s most important investors, businessmen as well as large banks exchange currencies. To make things simple, Forex trading means speculating on the price of currencies against each other. The good thing about Forex is that you can make a relatively good profit without much time and effort involved, but it also involves a great deal of risk because the currencies fluctuate and the market can be unpredictable.
Therefore, it is very important you get acquainted with the basics of Forex trading before you decide to try it out yourself. Take some time to read the top three most important things you need to know about trading currencies.
You Are Selling and Buying Currencies
The first thing you should know about Forex trading is that you will be buying foreign currency and selling another. The ratio between the two currencies represents the key factor which will decide whether you will have gains or losses when you close the trade.
Let’s imagine you start by predicting that the Euro (EUR) is going to strengthen against the U.S. dollar (USD), and your next step is to buy the euro against the U.S. dollar.
If the Euro strengthens as you have predicted, you will record profit, but in case of the opposite outcome, you will suffer losses.
You Can Lose More Than You Invest
As with any other trade, there is a risk involved and it is important you realize that you can lose your investment that is essential to building your reputation as a Forex trader. When you decide to start trading, you should be aware that you may lose more than your initial deposit and this is why it’s best you don’t start risking too much.
For example, it is recommended that beginners should not risk more than 1 or 2 percent of their capital per one trade.
Tip: As a beginner, we recommend you try out the Forex demo trading account to learn the basics of Forex market trading. There is no risk of losing real money and it is a good way to familiarize yourself with how Forex trading works.
More advanced traders can try out the Qprofit System, a Forex trading investment robot whose algorithm enables to search the market and analyze data.
Don’t Invest Too Much Too Soon
One of the mistakes that many beginners to Forex trading make is that more expensive of accounts and greater deposits automatically mean larger profit. This is not only incorrect, it also puts new users at a risk of losing money due to the general unpredictability of the market.
Assuming that you don’t have extensive knowledge of leverage, trading, and currency exchange rate fluctuations, it is best you start by depositing more modest sums and limit the risks. Once you demonstrate that you are able to achieve consistent success and generate profit, you can easily switch to more advanced and larger accounts.