Trading in the foreign exchange market, also known as trading in Forex can be an exciting hobby and, in addition, the second source of income. Compare it with something, the stock market of shares revolves around 22 billion dollars a day, while the forex market moves 5 trillion dollars. You can make lots of money without the need of a too large initial investment, and predict the direction that will move the market can be very interesting intellectually. In addition, you can trade Forex from Internet easily.
Learn to read a forex exchange rate.
You will see two numbers in each currency exchange rate: offer price, left, and the price of demand, right.
Decide which currency pair like to buy and sell.
Learn how to make predictions of the economy of these two currencies.
If you think about the United States economy will weaken, that will be bad for the U.S. dollar, then you will want to sell dollars and buy them a currency that will be strengthened.
Learn to calculate the benefits.
The value between the two currencies is measured in “pips”. ” Normally, a pip is a change of 0.0001 in the value of certain currency with respect to another. For example, if the Euro on the dollar change to 1.5468 1.5467, the value of the currency EUR/USD increased 1 pair pip.
You can open a personal account or choose a managed account. With a personal account, you can make your own operations. With a managed account, your broker, or someone else, it will negotiate for you.
Fill in the corresponding documents. You can ask to send you the documents by postal mail, or you can download them and print them. Make sure you check the costs of transferring money from your bank to the broker in question. Sometimes, the commissions may be exaggerated.
It activates your account. Normally, your broker will ask some documentation to activate your account. Sometimes, they send you a link that you must follow to perform activation.
It analyzes the market. You can use different methods
Technical analysis: technical analysis is to predict the movement of the price by reviewing the previous behavior of the currency on a graph. Normally, the own broker will supply you, graphic officers, perhaps through standard platforms such as Metatrader 4.
Fundamental analysis: this type of analysis is to check conditions in the real economy of each country to see how will influence the value of their currencies.
Trend analysis: this is the type of analysis more subjective and imprecise. In essence, it’s analyzing what the majority of merchants are doing to find out if the market the “Toros dominate” (an expression that is used when the price goes up) or the “osos” (when the price falls).
Although you can not define clearly what the trend, could give you a good clue that will help you on your way to negotiate.
Know what your margin. Depending on the rules of your broker, you can invest a small portion of your money, but open large, even with all operations.
Create your orders. You can use different types of orders:
Market orders: with a market order, ask you your broker to execute the order to buy/sell at the current market price.
Limit order: this type of order request to your broker that perform an operation at a price that you specify. For example, you can buy some currency when the price drops to a certain level, or sell if the price drops to the price you specify.
Orders stop: a stop order instructs your broker that you want to buy some currency when this rise to the level you want, or you want to sell it if low too, in order to limit your losses.
It monitors your winnings and your losses. Above all, don’t let yourself be carried away by emotions. The Forex market is very volatile, so you’ll see many ascents and descents. The most important is that you keep investigating well and that you use a well-defined strategy. Finally, you will see earnings.