The global pandemic has brought Forex into the spotlight once again. Millions of people are making money online by buying and selling world currencies.
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Retail trading has existed for three decades, but many consumers are only discovering its potential. Here are the key facts to help you decide if Forex is worth trying.
1. This is the Largest Market
The global foreign exchange is the biggest financial market. Every day, it sees transactions between institutions and individuals worth over 5 trillion US dollars. Currency exchange is an integral part of international trade and tourism. This market is open 24 hours a day, 5 full days a week.
2. Education Is Free
The internet has a plethora of resources. The best brokers will teach you all about Forex trading free of charge. The sheer amount of articles, books, podcasts, video tutorials, and other information is staggering.
3. Traders Are Not Investors
There are two ways to profit from foreign currencies. Investors hold on to their assets for extended periods (months or years), as they focus on long-term trends in the market. Traders buy and sell frequently to profit from the difference between the buying and selling price.
Some trading strategies are more relaxed than others. Scalping is the most hectic, as positions are extremely short-lived — they last several minutes or seconds. Swing traders, on the other hand, are content with a few trades per week.
4. Any Currency Pair Can Be Profitable
All currencies are traded in pairs, as they are valued against one another. For instance, the price for EUR/USD shows the value of one Euro in American dollars. Every broker offers dozens of combinations classified as Major, Minor, and Exotic.
Majors represent the biggest world currencies, and these pairs normally include the USD. Minors are also connected to developed economies, but they do not include the American currency. Finally, exotics are linked to emerging systems.
These types offer different liquidity and volatility, but the conditions for profit are the same. You need a good understanding of the economies represented by your pair. For example, if you have extensive knowledge of the South African system, you may benefit from the dynamics of the rand, which is relatively volatile.
5. Success Does Not Come Easy
Millions of people take up Forex every year, but few of them succeed in the long run. Why? Because a trader needs a specific mindset. First, you should learn and improve your skills continuously. Secondly, it is crucial to hedge risks, as the market is beyond your control. Finally, emotions cause mistakes. Trading well means trading mindfully.
Where to Start
Begin by opening a demo account with a trusted broker in your original. It will give you a chance to explore their software for free and develop your skills step by step. There is no universal recipe for success, but those who learn and persevere achieve a lot.