Forex, also referred to as foreign exchange or currency trading is the driving force in the economy. The world’s currencies are traded on the forex market. Hence, do not expect to find a central marketplace. The trades happen online across a wide network. If you want to trade in currencies, then you simply use Forex trading online.
The market can be classified into two groups: the interbank and the over-the-counter (OTC) market, and it’s continuously moving. It’s also worth noting, 80 percent of all trades in the market include the USD.
Why Trade Currencies?
Engaging in Forex trading online is one of the best ways to make a profit. There are traders who are able to quit their day job and become full-time traders. While the sky is the limit, trading currencies is also a kind of investment. And just like any other investment, there is also risk involved; that’s why you must first gain some knowledge before actually starting.
When you trade currencies, you trade major pairs in the market. The major pairs are:
EUR/USD
GBP/USD
USD/JPY
USD/CHF
USD/CAD
AUD/USD
In a pair, there is a base, which is the first noted, and a quote currency. for example, with the EUR/USD, the EUR is the base, also called the bid price, and the USD is the quote price. When trading currencies, there is a number after the pair.
Day Trading Versus Long-term Trading
An important part of making a successful trade is learning how long to hold on to your position. A trade is composed of two parts: you must enter the market (buy), and then exit the market (sell). How long you intend to hold on to your position depends on your preference.
There are traders who open and close out all their positions in one trading day, which is referred to as day trading. The good thing about day trading is that you start off each day with a clean slate. You are not exposed to the risks of continuous decreases in the prices of currencies. By closing your positions within one trading day, you prevent yourself from holding onto a losing currency pair. If you want to make quick money, you day trade.
Long-term trading revolves around buy and hold strategies. You buy a currency pair and keep it as the price increases, and then sell it for a profit. When you do long-term trading you don’t have to worry about the day-to-day volatility in the market. You also are not pressured to make a trade every day, which helps you do all the research you want to enter and exit the market as you please. You still need to follow how the market moves. Long-term trading also has more chances to recover from a bad trade.
So which trading approach is better for you? Depends on the strategy that you use, so you try what works best for you and stick to it.
As a trader, it’s important to have a well-rounded view of different strategies and methods. Doing this will allow you to leverage Forex, so before jumping all in, educate yourself on how best to trade currencies.
Leave a Reply