The Foreign Exchange market, more commonly called the Forex, is a market open to all where it can be highly profitable for individuals to invest, even ‘Forex Dummies’ who lack experience or knowledge as seasoned traders in this sector. So how does the Forex actually work? This is what we shall look at closely here in this article with some basic explanations on Forex Trading and some advice for obtaining the assistance you need, and the necessary tools.Start Trading Now
When we trade on the Forex, we speculate on the movements in the exchange rate of a currency pair. For example, when we speculate on the EUR/USD this means we speculate on the rise or fall of the value of the Euro compared to the value of the U.S. Dollar.
Using the online trading platforms offered by the Forex brokers, to make money on the price movements you simply need to buy a certain quantity of one currency pair at a given rate and wait until the price rises or falls to resell your position and cash in the difference between the rate when you subscribed and the final rate.
Of course, this operation has a cost, called a ‘spread’, which corresponds to a slight difference between the purchase and sale price of your currency pairs and their real prices.
If you are not particularly gifted when it comes to market logic and know that chart analysis is not for you then do not worry. With the development of online trading platforms, the opportunity to speculate on the Forex is now available even to total beginners and the online brokers do all they can to offer simple but effective solutions and thereby enable individual investors to make profits without any prior knowledge whatsoever.
There are, for example, managed accounts whereby professional traders trade in your place, also there exists automatic trading software which takes positions for you without you having to lift a finger, and there is also social trading that enables you to simply copy the strategies of expert investors on the trading platform that you have chosen from among the best.
As you may have noticed Forex solutions for Dummies are numerous and varied. All you have to do now is simply choose which broker you will use for your investments and make your initial deposit.
Here is some useful practical advice and tips for beginners to the Forex:
As we explained previously, the Forex market is not just for experienced investors, it is also eminently suitable for beginners that are curious and wish to learn easily. Therefore even if you are a financial dummy you can still easily learn about the Forex through the trading platforms and their specially created tools and support. Here are the different solutions available to you:
Over recent years the stock market world has become far more democratic and accessible to all, whatever your level of knowledge and experience concerning finance and the stock markets. In fact, the simpler tools such as CFDs (Contracts on the Difference) were specifically created for beginner traders to invest in stock market assets and be able to make profits while doing so.
Another thing, the brokers that provide online trading platforms for their clients equally provide them with various tools and features that enable totally novice traders with absolutely no stock market experience and knowledge to start trading confidently. Among the most popular of these tools and features are the following:
Apart from the tools we have already described that enable you to make profits on the stock markets without any prior knowledge, it is important that you know you can easily acquire the knowledge necessary for your independence. Here are the various solutions available to you:
Of course, even before starting to speculate on the stock markets through the internet you will need to choose your online broker from the many available online. To do so you should bear in mind certain major criteria.
The first point to take into consideration is related to broker fees. Whereas certain brokers invoice fees in the form of a percentage of the order amount (from 0.10 to 0.70%) others apply a forfeit that varies from 1 to 12 Euros per order. Your choice therefore depends on the average amount you intend to invest in each order.
But the price of your transactions should not be the sole element to compare when making your choice. Do not forget to check all the services and tools that are offered by the different platforms such as, for example, the possibility of obtaining signals in real time or making short sales, and of course the leverage effect that enables you to achieve higher profits.
A last element to take into account concerning the trading platform itself relates to the actual dashboard you use to pass your orders. This should be simple and ergonomic to use ensuring easy investment transactions and maximum reactivity.
In the cruel world of speculation, the lessons you need to learn from your mistakes are many and frequent. This is certainly the case with the currency markets, or Foreign Exchange markets. The mistakes made by certain traders can be interesting to analyse in order to avoid making them yourself. Let us now look at the most common errors that can have terrible consequences on investments.
The most frequent error made is in fact the easiest. This consists of anticipating the rate of a currency without paying attention to the trend and the different indicators. In fact, one of the rules that should be respected when trading in currencies is the overall tendency to follow the general trend. Many traders will say that following a trend ensures that you can considerably limit the risks and multiply your chances of successful operations. Only extremely experienced and highly successful traders are actually capable of successfully anticipating the direction that a particular trend will take and even then only after substantial research and market analyses. You should therefore keep in mind that you are not safe from an unexpected event or outcome. Take care to closely monitor your trades and be ready to act fast if a sudden trend reversal occurs.
Another major error committed by a number of traders is related to the leverage effect. In fact many investors, disappointed with previous financial operations that have led to them losing a large sum of money, tend to become a little overcautious and use high leverage effects to limit their initial monetary investment. This is actually the wrong way to proceed as, although the leverage effect enables the possibility of high profits, it can also incur high losses if the trade you have conducted results in a loss for you.
Whether or not you use a leverage effect you should ensure that you have sufficient available funds to cover any eventual loss. The higher your available capital the more chance you have of making profitable investments. It is actually recommended that you invest around 1,000 Euros minimum to obtain sufficient profitability.
Not covering risks is the last major frequent error when trading. The trading platforms do systematically offer a stop loss tool that enables you to considerably limit your possible losses without having to constantly follow the markets. These stop loss orders are actually limits that you set which lead to an automatic action to cut short any losses incurred due to a trend that occurs contrary to your prediction.
For truly effective trading, these stop orders should be fixed as soon as you take position and in accordance with your objectives. For this you need to understand the risks involved and be aware of any possible losses that you could incur.
You will surely have understood that passing stock market orders through the Internet is very simple and accessible to all, on the condition of course that you have subscribed to a reputable trading platform. Online banks and brokers offer you the opportunity to pass stock market orders through the internet by the simple completion of online, or digital, forms giving the details of the order that you wish to make. In exchange you will receive an execution notice.
However, certain trading systems such as CFDs are even simpler to undertake as everything is completed online and in real time using the specific platforms that enable you to trade on the rise or on the fall of the asset prices you have chosen and thereby make a profit in only a few minutes.
With the eToro trading platform, its unique system enables you to allow the best traders to take position for you so you can launch without risk into the Forex adventure!