Making your first trade in Forex successfully requires in-depth knowledge about trading basics and Forex trading strategies. The learning curve to trading currencies can seem overwhelming and complex, but when you have the right information by your side, it can make the entire process all the more easier.
Here are the three vital steps on to make your first trade in Forex:
The first step to enter a Forex trade is to understand what is Forex and understand the fundamental Forex trading terms. The key terms that one must know before they enter a Forex trade are:
Currency pairs: Since Forex is always traded in a pair of two currencies, they represent one's value against the other. For example, if the two currencies you wish to trade in are GBP and USD, the valuation will be defined as GBP/USD or vice versa.
Base: The base currency is the first currency in the pair. In our example of GBP/USD, the base currency is GBP.
Quote: This is the second currency in the pair. In our example of GBP/USD, the quote currency is USD.
Exchange rate: The exchange rate is the amount of quote currency needed to buy a single base currency unit. For example, if GBP/USD = 1.5, we need 1.5 USD to buy 1 GBP.
Bid: The bid price is the price at which you are willing to buy the currency pair, nothing above that and nothing below that.
Ask: The ask price is the price at which you are willing to sell the currency pair, nothing above that and nothing below that.
PIP: The slightest price change that occurs given an exchange rate is called pip. Traders use it to reference gains or losses.
Spread: Spread is the difference in PIps between the bid and ask prices, which can either result in a profit or a loss.
Leverage: Leverage is the trader's borrowed capital from the broker's credit. This allows the trader to trade huge sums without having to pay the entire amount immediately.
Understanding the factors that directly affect Forex helps you make intelligent trade moves and minimize the risk of losses. Some of the most important factors increasing trading risk in Forex include –
Interest rate: Rising interest rate means a more substantial exchange rate and vice versa.
Country: The country's economic stability matters a lot in Forex trading, a strong economy depicts a stronger currency in the market.
Counterparty: The broker or trading platform used for Forex trading comes with its own set of risks.
Leverage: The more the leverage, the higher the potential loss.
Transaction: Communication/confirmation errors can lead to losses.
Politics and economy: Political stability and economic conditions significantly impact a country's currency's Forex market performance.
Liquidity: Higher liquidity of the Forex market depicts demand and supply vary greatly, affecting market prices.
The last step into entering your first Forex trade is to find a reliable broker and the right trading platform. The broker is an individual or a firm facilitating your trade and providing you with leverage. Broker plays a significant role in your Forex trading since you buy and sell currencies through a broker.
If you are new to Forex trading, go for a platform that allows you to make demo accounts so that you can experiment and practice trading under actual market conditions, before investing actual money.
Trading in Forex never comes without risk. However, you can hedge your risk by knowing the basic information, including industry terms, economic conditions of the countries and political (in)stability of those economies, allowing yourself to make more favorable decisions. It is as risky as other trading options but often results in fast profits due to the high volatility in the Forex market.
At Blueberry Markets, we offer lightning fast trade, tight spreads, zero commissions on standard accounts and completely hassle free withdrawals within 24 hours. Create a demo account to practice Forex trading or sign up for a live account to start Forex trading with as less as $100
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