What is Forex Trading and How to Start


Understand the terms – as with any type of investments or businesses, there are technical terms and jargons that you need to know. As there are hundreds of different terms used, you should at least start by learning the basic terminologies. Words like base currency, quote currency and exchange rates should be those that you must be well-versed in. other terms that you should know before starting are long and short positions, bid and ask prices and spreads.

Make an initial decision – This is to give you a starting point and a reference approach. You might not execute the decision in the end but it is a good start. Make some predictions about the economy and check if your predictions are correct. In doing so, you will have to understand the political and economic situations of the specific country.

Calculations – Learn about the basic structure of earning profits in forex trading. This is where you will need to read up about what a pip is and then use it to calculate how you can earn profits (and incur losses in the process as well).

Identify online brokerage firms – There are hundreds of online forex brokerage firms available today. Most of them offer similar packages. So the question is, which one should you choose? This is where you will need to spend some time to research and identify who you want to work with. When conducting your research, you should consider the following factors:

  1. Experience – It would be best to find a firm which has been in the forex industry for more than 10 years.
  2. Regulated – most brokerages will provide you with information of who they are regulated with. Find one which voluntarily submits to government oversight like the NFA of the United States, FSA of the United Kingdom, ASIC of Australia and AMF of France(with Embassy of France), among many others.
  3. Reviews – Always read the reviews of the brokerages but ensure that you do not fully believe what is written there.
  4. Cost – most online brokerages do not charge or charge minimum transaction fees. It would be best to find those that are cheapest but you must ensure that the charges from your local banks are not too high for international wire transfer as well.
  5. Customer support – When trading in forex, chance are you will come across situations where you will need some help or customer support. This could be a technical problem or perhaps some insights on certain currencies. This is where the customer support of the brokerage would come in handy. To know which customer support is good, ensure that they have your local language and is available throughout the market hours.

Trial and error – the best way to know if the broker is suitable for you is to try out their demo accounts. This is where you are given some ‘virtual’ funds and trade in the open market. If you are comfortable with this platform, then it might be suitable for you.

Portability – This is an additional feature which allows you to trade ‘on-the-go’. Some brokerages provide portability where you can use your smartphones running on Android, iOS, Blackberry and others to trade. Caution: Bank Negara Malaysia only allow trading forex with an authorised dealer

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