Forex trading is the act of exchanging one currency for the other to satisfy a business need. Forex trading involves two currencies and the rate at which you buy or sell is determine by the market forces. So many people exchange one currency for the other for different reasons. some do it because they want to travel to another country and because they can’t spend their country’s currency there they’ll have to go exchange it to the currency of the country they are travelling to. people exchange currencies for a lot of reasons. A company that has vendors offshore may be exchanging currencies to pay their vendors. so every time of the day round the clock the currency market is always active and fluctuating.
Another reasons why a lot of people trade currencies is for speculative reasons to lock in some profits from currency rate fluctuations, this is one of the reasons you are reading this. you are probably looking for an opportunity where you can take advantage of currencies rates changes to rake in some profits.
Who are the major Forex trading participants?
The participants of the currency markets includes the banks and/or the liquidity providers, the central banks, the commercial banks, investments houses, hedge funds, companies, retail traders (you and I), etc.
How do you get involve in Forex trading?
As a retail trader you can decide to do this either offline or online. You do this offline when you anticipate that a particular currency can gain strength over the other. In the next future, you can decide to buy that currency possibly from the bearau de change or from the bank and sell off the one you have on you.. and so if after some time the one you bought gain strength as you had expected then the value of the money you have would increased, and so if you decide to exchange back to the former currency at this time you will be getting a high amount of money when you exchange.
If you want to trade online you will have to trade through a retail Forex broker or through the banks, for you to do this, you must open an account with the broker and send your money to them that you want to be using to trade.
To successfully know how to trade and make money there are two approaches you can adopt which can either be.
I. Fundamental Analysis
II. Technical Analysis
i. Fundamental Analysis:
Is way of trading as a trader base on the following factors; economic, social, political forces that affects the law of demand and supply. Any country that her economy is flourishing her currency will also do fine compare to the currency of an economy that is doing very bad. The US dollar will do great when the unemployment rate is very low, compare to an economy that has high rate of unemployment. The value of US dollar will increase because its economy is doing well. I think you understand that. Then let’s move to the;
ii. Technical Analysis
Is another way of trading by which you as a trader look at chart before you execute a trade. Chart help traders to know the trend and pattern, which helps individual trader to get into a trade and win through the opportunities he/she detects .So we use chart and pattern to monitor the strength and weakness of a trade or currency.
It is always good to consider both analysis before you go into any trade.
To learn more on how to trade the spot currencies or the OTC market, you can visit our blog here frequently as you will find useful information that can help you gain the right insight to trading. If you want to take our courses you can subscribe for our basic lessons here