The digital economy offers several ways to earn profits. One of the oldest and most popular is Forex. Currencies from different countries bring benefits to traders who exchange them wisely. Discover the basics of foreign currency trading in the UK today.
Here are the deets…
Until the 1990s, currency trading was only accessible to institutional players. Transactions by large organizations such as banks and hedge funds still account for the largest share in terms of volume. Overall, this world financial market has a daily turnover of up to 5 billion US dollars. Scale simply because it was large.
Who Can Trade
Today, any Internet user with basic knowledge can start trading currency through a broker. This intermediary is needed. Although the necessary software (trading platform) can be found online, it just opened brokerage accounts. A popular provider operating in the UK today is FXTM.
For people who have no previous financial experience, the idea may seem daunting. It should be noted that no investment is totally risk-free. However, leading companies provide their clients with few educational opportunities. From the tutorial and guidance to trade copies, this aspect will be discussed below.
Currency exchange is familiar to all travelers. When going abroad, you are often faced with the need to switch your money into the national currency of the country.
This number is always in flux, so it is possible to benefit from this shift – as shareholders do. If you buy low and sell high (for example, Euro purchase while they are cheaper and sell them to follow the spike), the difference is an advantage.
As a trader, you are going to use one of the latest platforms available today (for example, MetaTrader 4 or 5). The software is packed with a powerful forecasting tool that facilitates decision-making. Here are the very basics trader should know:
A pair-based natural one.
All currencies are traded in pairs only, and each containing a base currency and the quote currency separated by a slash. One of the most popular combinations – the main partner – is the EUR / USD. Its value (eg, 1.08) indicates how many US dollars one euro is worth.
In the example given, the Euro will cost 1 US dollar 8 cents. In addition, there is the so-called “cross” (excluding USD) and “exotic” (ie, including TRY) currency pair.
Ask or bid?
A trader has more than one price to consider. Each pair comes with the “Ask” and “Bid” price alone. The former is used when the base currency is purchased, and the latter is applied to sell. Currency is always a little more expensive for buyers of its sellers.
The difference between the ask and bid prices (for example, from 1.0962 to 1.0958) is called the “spread”. Basically, brokerage commissions and profit determines the seller. Each of 0.0001 is the “pip”, so the differences mentioned above 0.0004 read as “four-pip spread”.
Types of position
A good trader opens a “long” or “short” position. The first type refers to the scenario when the currency was bought and then resold at a higher price. The second way to sell the currency you intend to buy more of it after drops in value. Therefore, you go long if you expect the currency to gain value, and go short when you think it will depreciate.
How to get experience
It is recommended that you start with a risk-free mode account. This demo allows you to explore the function of the platform without the financial risk involved. You will not be making any profit, either, but the demo period is a must for any rookie reasonable. With a trusted broker, the demo registration procedure is fast and simple.
After the experience and confidence gained, it is time to open a live account. And if you’re still afraid of mistakes, try to trade copies. This way, decision making is delegated to professionals (manager strategy), which trades only replicated in your account.
Due to the popularity of Forex trading, the internet is packed with tutorials and other educational content. This. However, it is important to choose a reliable source. Your broker should be able to provide sufficient teaching materials and guidance.