To some it is a thrilling hobby, while for others it is a way of life. Considered a major alternative to traditional stock market investments, many consider the world of forex to be one that has unlimited profit potential. However, trading forex isn’t always as easy as it seems on paper, as it takes a lot of skill to master. The following takes an in-depth look at online FX trading and what it entails.
Before you invest your money into the forex market you need to understand the trading basics and the terminology used:
|Base Currency||This is the currency listed at the front of a currency pair and is the currency you are selling.|
|Exchange Rate||This tells you how much or how little you will receive for the currency you are selling, along with how much you must pay to acquire the new currency.|
|Long Position||A long position relates to buying the base currency and selling the quote currency.|
|Short Position||A short position relates to buying the quote currency and selling the base currency.|
|Bid Price||This is the price you are willing to pay for base currency in exchange for a quote currency.|
|Ask Price||Sometimes referred to as the offer price, the ask price is the price that your broker is willing to sell the quote currency at.|
|Spread||The spread is the difference between the bid price and the ask price.|
Part of the challenge when it comes to online FX trading is deciding what currencies to buy and sell. Firstly, you do this by making predictions about how you think a nation’s economy will fare. For example, if you think that the US economy is set to weaken and that US dollar will follow suit, then you might want to trade off your US dollars for a stronger currency. You should also take a long look at a country’s trading position. This is because if they have goods in demand then you can expect this strong position to be reflected in the nation’s currency. Lastly, even though it isn’t always of critical importance the political stability of a nation is still something worth considering. If a country is on the brink of a new election, or civil unrest is occurring, then you can expect a nation’s currency to suffer as a result.
As you can see from the above, online FX trading is something that isn’t rocket science. After learning about what you need to do to find success in the world of forex, all you need to do is arm yourself with the right broker. When it comes to a broker you want one that has plenty of experience when it comes online FX trading, is governed by an appropriate body, and delivers a product catalogue worth looking at. Find a broker that ticks all those boxes, take note of what is mentioned in this article, and you’ll find that together online FX trading is made much easier.
Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.