How To Get Started In Forex

The word ‘forex’ means ‘foreign exchange.’ As the name implies, it refers to the exchange of foreign currency e.g. US dollars to British pounds. Exchanging forex can be a good source of income. Banks and Forex bureaus are good examples of businesses which make piles of cash by trading in forex. You too can make a lot of money in this way if you put your mind and energy into it.

The entire business depends on speculation. You have to be able to speculate and forecast how one currency will decrease or increase relative to another. If you speculate correctly more times than not then you’re bound to make some money.

Getting Started

Firstly, you need to do a bit of research on the forex market. Find out which currencies tend to fluctuate more, finds out which currencies are in demand in your area, find out the current exchange rates, and look at historical data to see trends on how different currencies perform against one another.

Choose a currency

Once you’ve done your research, you can proceed to select the currency you wish to trade in. Make sure you have enough access to it and ensure that you have enough capital to get started. The forex business requires little inputs to sustain it so once you get started, there’s relatively little else you need to put into it to thrive.

Buy and sell

There are several ways you can operate your stock business. You can buy and sell the currency physically by yourself, of you can open an online forex brokerage account. Having a broker means you don’t have to worry about carrying out the trades yourself. However, you need to choose your broker very carefully as some may be unscrupulous and you may end up losing your money.

As a general rule of thumb, you buy your base currency at a lower rate and resell it at a higher rate. In so doing you make the difference between the selling and buying price. When you trade small amounts, the profit may seem minimal, but as you trade larger and larger amounts, your profit can quickly increase. The key is to watch the forex market and sell at just the right time. The core principle is not very different from stock trading.

There are three strategies to buying and selling. You can trade at the current market price if it is profitable, or you can choose to trade only when the exchange rate reaches a certain price, or you can buy forex at a high price in anticipation that it will increase in value and hence you can resell and make a profit.

Other tips

When choosing a currency, you should take politics into consideration. War, economic sanctions, or other political issues can weaken a country’s currency. In that case, you may want to sell the weak currency in exchange for something stronger as you may lose money due to continuous depreciation.

It’s not advisable to trade all your savings because if you lose you lose big. It’s also important to note that the forex market is speculative, and the vast majority of traders lose money.

 

Photo credit: Japanexperterna.se via Chairs Hunt / CC BY-SA

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