Forex often referred to as FX or foreign exchange, is a global decentralized market for the trading of various currencies.
The Forex market is the largest in the world, with trillions of dollars are traded every day. Once you choose a broker, whether it be on such FP Markets broker or brokerage different choice, the next step is to create and fund a trading account.
The following information will provide you with a clear expectation of what to expect (and what to do) in the minutes following the completion of these steps.
Currencies are always traded in pairs, and it will be up to you to predict whether a currency will rise or fall at odds with each other. The GBP / USD, for example, measure the value of the pound against the US dollar.
currency pairs, as well as other assets, can trade as a CFD. Contracts for Difference contracts represent the price movements of various financial assets, such as currency pairs, commodities, cryptocurrencies and more.
Will Go long or short?
One of the advantages of contracts for the difference is that you can choose to either go long or short. Where the standard, traditional investment centers on buying and holding assets (you buy an investment, continue to the investment until the value goes up, and then sell it off at a later time for a price exceeding the price paid), different CFD trading.
When trading CFDs with FP Markets, you can enter into trade ‘Buy’ or go long. This means that you have open positions with the expectation that the underlying asset value will climb and that you will be able to get out of position or sell at a higher price.
There is also the potential for trade with the expectation that the value of certain underlying asset will decline in value. In this scenario, you will go to ‘Sell’ or go short. Here, you will close the position, buying back the contract at a reduced price.
In doing this you will make a profit on the price difference. Regardless of whether you are trading with a long or short position, if your trade goes as planned and asset prices move in predictable directions, you will get the money.
If the opposite happens and the market moves against you, you will take a loss. The benefits of this type of trading is that you can earn money from price movements in both directions and will not be limited only to get if the price increases.
What About the leverage?
Another benefit to Forex or CFD trading are leveraged. In conventional investments, your income is limited by the amount of money you have to invest. It’s quite simple, actually. If you have $ 1,000 to invest, you can buy up to $ 1,000 in assets.
Nothing is free and no broker will give you more than you can afford. CFD or FX trading is leveraged trading, which means that you can trade using the amount of money that exceeds the total amount that you actually invested.
For example, when trading with FP Markets, clients can access leverage up to 1: 500. This means that it is possible to stretch a deposit of up to 500 times the baseline value when trading.
Sounds wonderful, doesn’t it?
Well, it can. However, it is important to remember that both profits and losses can be magnified when leverage is being used. The level of the potential reward increases when leverage is used, but so does the level of potential losses.
Avoid brokers who do not tell you that it is possible to lose more money when leverage is used. A reputable broker like FP Markets clear and upfront with clients when it comes to making the risks associated with trade is very clear.
Last but not least, do not become aware of the costs associated with the trade. Forex brokers profit from the spread so looks for a broker that offers low spreads. FP Markets is one example because they offer spreads starting from 0.1 pips and an average of 0.3 pips.
Swap and commission fees are also relatively standard in the industry, so keep this in mind as well. Best traders are the traders prepared well, so make sure that you are really ready for them to draw the first five minutes!
Good luck and Trade Safe.