Getting Started with Forex Trading – Help Me!

You may have heard of Forex trading or FX trading, but you may not have a good understanding of it. So, what exactly is it? Wikipedia (maybe not the most trusted source, but correct in this case) defines it as the world’s most traded over the counter marketplace. Basically, one currency is traded for another at an agreed upon exchange price in the market. Roughly $5 trillion in currency is traded every day in this OTC market.

forex trading software

Guide to understanding the Forex Market

The Forex Platform

A complicated system of currency exchange rates traded in a decentralized over-the-counter multinational market requires much in-depth understanding to master.  Learning the basics will be key to not losing your proverbial shirt in live forex regardless of the forextrading software or platform used,

Forex Trading Background

In BTI times (i.e…before the internet) hedge funds, central banks, and large financial institutions had a corner on the Forex market. Access to online stock trading firms has shifted the paradigm completely. Now, an average Joe can setup an online brokerage account and immediately begin trading currency with the largest corporations in the world with the same buying power.  Forex proponents believe the foreign exchange market is one of the lowest in volatility compared to others. Individual currency pairs have daily fluctuations of less than 1%.  Traders use leverage to make these tiny changes in the currency pair turn into a substantial gain (or loss).

We will get in depth in later articles.  The following example of leverage needed to really earn money in forex investing shows why:

If EUR/USD = 1.06 then the EURO to US Dollar (EUR/USD) currency pair means that buying 1 euro will cost you US$1.06. Likewise, if you sold $1 USD you would get 1.06 Euro.

The trivial amount gained by trading $1 USD for Euros requires thousands of dollars to make a substantial investment gain.  Extreme leverage is common in the forex platform.  This leverage makes for exponential risk from the minimal currency movements.  Our next article includes an easy to read forex rate chart and further info to get you more acquainted with the challenging world of foreign exchange.

Check out my favorite easy to read Forex Rates Tool that explains forex in a simple chart.

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