The stock market is now a passive source of income that is attracting more and more world traders. Forex is one of the most interesting markets for both professional traders and beginners. If you want to trade Forex, here are the steps to take.

The Forex Market: What is it?

Forex trading, Foreign Exchange Market, is about making currency exchanges between different currencies. Forex is an asset that operates by currency pair on a financial market. In order to rate a currency, we must compare it with another currency, which will bring out a price difference between the two currencies. As a more concrete example, you can trade the euro/dollar, euro/Canadian dollar, etc.

The trader than bought and then resold the currency pair to realize a gain or loss. Opening a position on the currency market, such as trading any asset, requires prior economic analysis of currency price fluctuations or graphic analysis. Depending on the outcome of this analysis, the trader will open a buy position or a sell position.

Forex is a currency market that allows the use of a powerful leverage, which can go up to x800. But of course, a huge leverage effect increases the risk the trader takes by investing in these types of assets. If you are a beginner, it is never advisable to take so many risks, never!

Especially since the investment in Forex is quite complex.

To help you manage the risks that accompany the Forex market, it is important to trade through a broker, also called Broker, who offers you various risk management tools adapted to your needs. A broker also gives you the opportunity to open a demo account that will allow you to trade in simulation mode where you can test trading strategies.

How does a currency pair work?

A currency pair comprises a reference currency and a quote currency. For the EUR/USD pair, the reference currency is the euro and the quote currency is the dollar. There are major currency pairs such as EUR/USD, GBP/USD, etc. and exotic currency pairs such as HUF/EUR. We can trade these currency pairs via CFD, barrier products, Turbo 24 or vanity options.

The currency pair most used in France in Forex is the euro/dollar. This pair shows that the value of the euro will be compared to that of the dollar. If we transform it into a formula, it will give: 1 euro = X dollars.

So if 1 euro = 12,366 dollars for example, if you make an exchange of 5,000 euros in a dollar, you will get 6,183 dollars. I should note that the Broker on whom you trade will receive a commission on your transactions, so in reality the value of your exchange will decrease by the value of the Broker’s commission.

But the price of a currency, in our case the dollar, can vary according to a few factors, such as:

The political and economic stability of the country or union that owns the currency
The monetary policy of the country or union that owns the currency.

The number of currencies in circulation

Forex trading therefore comprises playing on the currency price variation, opening a position to buy a EUR/USD pair when the dollar price goes up, and a position to sell when it goes down.

How to start Forex trading?

To trade Forex in the best possible conditions, it is important to ensure that it follow the following steps:

Have access to a solid connection: as the market is open 24/7, it is important to access the information needed for your analysis in real time, but also to be always connected until your positions are closed, otherwise in case of a break, You risk losing your potential winnings. Traders sometimes opt for account hosting;

Choose your broker:

It is important to choose a broker of excellent reputation, because you entrust your money to him. So you risk being a fraudulent broker. A broker also has the role of facilitator of financial transactions, so you understand why you have to take the time to choose your broker well;

Open an investment account:

On your online broker’s platform, you must open an account by following the procedures they will communicate to you.

Deposit your capital into your investment account: the means available to make your first deposit differ from one broker to another. Your broker will surely give you more details about this step;

Install the trading software, which is the tool with which you will trade your currency pair or open your position. You should know that some brokers use their own software, but there are other standard programs that you can use.

Once you have completed these steps, you can start trading and opening your foreign exchange positions. But before you really start trading and investing your money, it’s a good idea to:

Understand the currency market. In particular, you need to become familiar with the functioning of barrier products, CFDs, binary options, short selling, turbo 24, or vanity options;

Learn about the trading strategies you can use and choose the strategy you are comfortable with;

Develop your chosen strategy from a demo trading account, which will allow you to trade in a risk-free environment. So you can try to open positions to buy or sell without worrying about losing your money.

It is only after these prerequisites, which can familiarize you with how the currency market works and the risks you incur each time you open a position, that it is advisable for a novice trader to trade Forex.

The Importance of Stop Orders in Forex Trading

When opening a position, it is important that you define the maximum risk you can bear in the event of failure. Indeed, the Forex market is a volatile market. To limit the risks associated with this volatility, you must establish an effective plan that defines the entry and exit points of your transaction.

To do this, you have at your disposal different stop order to help you manage the risks of your positions. The stop order will automatically close your open position when the trading price reaches the limit you have set in case of unfavourable developments in your analysis. So, instead of losing more money, you only lose what you will risk losing.