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How to trade Forex like a pro in 5 step
Many find it hard to understand how to trade Forex, however, we will explain that in 5 steps, and there you can master it like a pro.
Making money online is a simple phrase that has been at the top of Nigerian youth search on Google. Many find it hard to understand how to trade Forex, however, we will explain that in 5 steps, and there you can master it like a pro.
What is Forex Trading
In simple terms, Forex Trading is the exchanging of one currency for the other. Currencies are bought and sold against other currencies at the time.
As an example, when you travel abroad, you are exchanging Naira for Dollar or other currencies.
Forex market is an over the counter 24 hours market. The price of a currency is determined by how one particular currency is in demand against another currency.
There are lots of currencies that get traded on the Forex market but there are mainly seven major currency pairs that are regularly and largely traded.
They constitute 75% of the entire Forex market. Here are the seven pairs:
- EUR/USD i.e., The Euro and US dollar
- USD/JPY i.e. The US dollar and Japanese Yen
- The British pound sterling and US dollar: GBP/USD
- The US dollar and Swiss Franc: USD/CHF
- The Australian dollar and US dollar: AUD/USD
- The US dollar and Canadian dollar: USD/CAD
- The New Zealand dollar and US dollar: NZD/USD
A large volume of trades in the Forex market is from activities by banks and institutions like large businesses, hedge funds etc. Meanwhile, other fractions come from retail trader ie me and you. We are minute in the eyes of the voluminous activities going on in Forex trading.
Therefore, how is money made in Forex trading? If a trader, for example, believes that the price of the U.S. Dollar would go up against the British Pounds due to certain fundamentals. He will BUY the currency pair USD/GBP, believing the price will go up.
Traders make money only if the currency they buy or sell moves in a favourable direction. If the trader in this example buys the GBP/USD at 1.2000 and eventually the prices go up to 1.2250, then the change in the difference of the price is the profit that the trader stands to gain.
Five steps to Trade Forex Like A Pro
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Learn Forex Trading
A good place to start your understanding of the Forex market is to learn why price moves, who are who control the market; learn the fundamental and technical analysis of the market. And also what are the risk involved.
Almost all financial market news websites have dedicated resources for keeping track of news related to the forex market and how it might affect the price in the market.
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Finding a Regulated Broker
Brokers are institutions that provide you with a platform to trade the forex market; without them, you really can’t trade. There are dedicated brokers for Forex who have designed a trading platform for traders to trade on the forex market & CFDs only. All you need to do is to find a good broker and register yourself.
But the problem that exists with brokers is that there are regulated brokers and there are unregulated brokers. As a trader, you should only seek to trade with regulated brokers.
The reason why you must trade only with regulated brokers is that there needs to be some protection against bad practised, which can be possible only through local regulators in your country that regulate and governs the market participants.
Eamples are: HotForex, FXTM, FCM, XM etc.
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Opening a Trading Account
Another thing you must consider is opening a trading account with your preferred broker; once you decide which broker you want to register yourself with, then you are required to submit all your KYC documents to the broker for verification, generally the ID proof & the Address proof.
This step is crucial, so traders should ensure that all their documents are authentic. If the broker feels your documents are not authentic then they can reject your application and not let you open your account. Even worse, you could face issues during the withdrawal of your funds.
The most general documents needed are residence proof, national identity proof, bank statement etc.
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Downloading The Platform
Once you have downloaded the platform then you can log in and understand the interface of the platform and how it works. One of the best ways to navigate through an app is to see all the webinars that guide you through a step-by-step process to start trading on the platform. An example of such a platform you can download is MT4. Although most brokers have their own platform aside from this, MT4 is the best.
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Monitoring Your Trades and Keeping Improving
Cool, isn’t it? Once you have deposited money and are ready to begin trading then start small and always trade with stop-loss protection. Since forex trades are mostly short term and don’t extend for days, as a trader you need to watch the market constantly & watch for news that could cause major market fluctuations.
Caution
Forex is a very risky venture; brokers offered you CFD instruments believing you have understood leverage and how it works. If you were not careful, you can end up going bankrupt in a few minutes.
Conversely, it is due to the late number of losses for retail traders in the past due to high leverage, that regulators have put restrictions on brokers in terms of leverage ratio they can offer. Despite reducing leverage, it is highly possible for you to lose more than your investment.
This is the reason why Professional traders & major investors say that you should not trade in the Forex market or any other leveraged instrument if you don’t understand the risks.
Always remember, never invest or trade with money that you cannot afford to lose