What Is Forex Trade: A Brief Guide to Basics

Financial prosperity is one of the basic needs of every human, and the source of stable life. As major occupations can rarely meet such expectations, people shift their attention to investment opportunities, like Forex trade.

Forex trade has existed for decades, yet it’s now that it is gaining in popularity due to its financially beneficial nature. What is Forex and how to become a successful trader? Let’s delve into the topic.

What Is Forex?

Forex is simply a foreign currency exchange market. Although it sounds too complex, in reality, every one of us participated in it while traveling – all the OTC currency exchanges make up part of the Forex market. However, with professional trading, the stakes and profits get much higher.

Forex trade is the process of buying/selling currency to make a profit. The daily volume of transactions reaches $7.5 trillion, which makes it the largest and most liquid currency market on a global scale.

Forex market works non-stop 24 hours a day, with a weekend break; the market, as well as the price quotes, are always dynamic.

Back in the day, the Forex market was dominated by banks and financial institutions, yet now, it is more retail-oriented, allowing for the participation of everyone willing to trade.

Forex market, despite having a global extension, features no physical building and trading venues. Instead, all the transactions are performed through the networks, trading platforms like Justmarkets, and trading terminals.

What Are the Basics of Forex?

The whole Forex world revolves around currencies and their value against each other.

The basic Forex unit is the currency pair – EUR/USD, USD/GBP, AUD/USD, etc., with the value of one currency quoted against the other.

For instance, one of the most common pairs – EUR/USD.

The first currency – EUR – is the base currency, and the second – USD – is the quote currency; the figures show how much USD must be paid for one EUR.

The traders need to speculate on the price going up or down and make the bids respectively. Provided the predictions are correct, the trader gets the profit, or else, loses money. In fact, it is the most important thing about Forex trade – its profitability is based on currency fluctuations, thus, it is possible to earn money at any time, regardless of the economic situation in the world.

How to Start Forex Trading?

Forex is not rocket science, yet, it requires preparation and a decent knowledge of world affairs. At the beginning of a trade, everything will seem to be too complicated, however, with time and practice it will eventually become the major source of profit.

1. Knowledge

Knowledge is the first and foremost tool for Forex's success. It is important to explore as much as possible about the trading world, and how everything works. Instead of just looking through all the online guides, find one or two comprehensive blogs, and study the entire range of articles and advice. Having built a basic understanding of the Forex trade, you can add other helpful resources.

2. Trading platform

The trading platform is one of the major tools for performing trades. There are two types on offer – MetaTrader 4 and MetaTrader 5. While they are both high-functional solutions, MetaTrader5 offers a more extensive set of functions and will come in handy for more seasoned traders.

3. Trading style

At the beginning of a trading journey, traders usually focus on situational profits; however, after getting used to the market activity, it is important to elaborate on the trading strategy, establish the guidelines, and define the trading roadmap.

Overall, there are four trading styles to consider:

i. Scalp trading – a very short-term trade, which takes seconds to minutes.

ii. Day trading - short-term trade, which takes one day.

iii. Swing trading – a medium-term trade, which can take days to weeks.

iv. Position trading – a long-term trade, which can take months to years.

Usually trading newbies get involved with scalp and day trading, slowly moving on to swing and position trading.

4. Practice

Practice makes it perfect, yet it can cost a lot in trading. Luckily, there are two approaches to help – demo accounts and copy trading.

• Demo accounts are offered by the majority of Forex brokers. The users are offered an opportunity to trade for free, with visual money, without risking available funds. While it is a short-term practice, it is still a good idea to get to know the Forex world.

• Copy trading is a relatively new trend. The novice traders may follow more knowledgeable traders and copy their transactions. While their profits may be lower than expected, it allows them to see how things really work in trade.

5. Commitment

Forex is based on currency behavior, however, it isn’t only about currency.

Forex is the reflection of global matters and geopolitics. Therefore, successful Forex trade requires a decent understanding of world affairs, and an ability to see the connection between local conflicts and global economic changes.

The Final Thoughts

Our world is facing one of its most turbulent periods, which deteriorates our financial capabilities and causes devaluation of personal savings.

Forex is by far the only solution, which allows to preserve and multiply the value of money, thus surviving in the period of financial instabilities. Forex trade brings profit regardless of the upward or downward movements of currency prices; the most important thing is to speculate on the movement correctly.

Don’t miss your chance to stay on top of the changes, and make stable income on the world’s instabilities.