What is Forex Trading

For starters, it’s an income opportunity accessible by anyone with a computer and internet access.  However, few truly understand this activity. To increase your chances of success, be sure to do your homework. The trading part is straightforward enough, as it involves exchanging one asset for another.

When it comes to Forex, this means trading currencies and related financial assets.

Governments, businesses, and retail investors all participate in this market, which is open 24 hours a day.

Because of this robust participation and availability, the Forex market is the world’s most liquid and accessible market.

What does Forex online trading look like in action?

 

Image: CAMMACD.MTF chart

 

The basics are pretty simple.

To turn a profit, a trader buys assets he believes will rise in value and sells ones he (or she) thinks will decline.

For example, if a euro is worth 1.1250 U.S. dollars and you think it will appreciate in the next 24 hours, you could place a Buy order.

Should the euro rise to 1.1300 against the greenback, you could close out this position for a 50-pip profit.

 

Image: CAMMACD.MTF chart 

 

The amount generated by such a Forex trade would depend on the initial amount invested.

Breaking the process down into its component steps reveals a more complicated situation.

 

Let’s start from the beginning:

1. First research available brokers, accounts and trading strategies

2. Then create and fund an account.

Now you are ready to begin Forex trading online with the very first baby steps.

Yes, it’s that simple to start.

However, regardless of which currency pair you want to trade and any particular strategy you want to use - you must prepare.

Forex traders frequently follow trends, and this might make it more tempting for a novice to set up positions without conducting the proper due diligence.

Religiously follow your trading plan!.

 

The trading plan at the very least should include:

1. The exact conditions needed to enter trades

2. Precise requirements for exiting trades

3. Money management plans

4. Expected volatility

5. Expected trade duration

6. The proximity of important economic events.

Once you have performed this analysis, you can place your trades through the relevant software package. Selecting a reliable and broad platform like the MT4 platform can help ensure your Forex online trading expertise can grow.

Online Forex trading is a unique way to make additional income or even a living! If you decide to take this route, you’ll have no boss, no schedule and no quota.

Sounds great, right?

Not so fast.

 

There are many variables you must consider before taking the plunge and becoming a professional trader:

1. There is no salary

2. Paying the bills will likely require consistent profitability, which is a challenge in itself.

 

However, if you have the right self-motivation and determination, this may be the role for you.

Keep in mind that as a professional Forex trader - all research, legal, accounting and high-level decision making will be your responsibility. Your discipline will be crucial.

 

The Advantages of Online Forex Trading

For starters, being your boss means you are in control. You have the freedom to pick your hours and live where you want.  Also, generating a consistent profit by trading Forex makes you recession proof. However, regardless of where the market is going, Forex traders have the opportunity to make money.

While everyone else may benefit from positive trends, you may be able to profit whether the broader economy is expanding or contracting. Once again, all of this may sound great, but it requires you to know what you are doing. How is all of this possible? The answer is simple.

 

The Spot Market

One key factor is the spot market, which refers to the online marketplaces where participants can buy/sell currencies and deliver them on the spot. This situation is currently easy to conceptualise.  A trader receives price quotes from his broker, who got them from a liquidity provider. Amid this situation, all market participants are connected, and prices are a function of supply and demand.

 

Contracts For (price) Differences (CFD)

CFDs have made trading available to more people than ever before, by allowing investors to make money on assets without owning them.  During the era of Charles Dow, trading did not exist. If investors wanted to turn a profit in Dow’s time, they could buy a stock and hold it in the hope that it would appreciate. However, if that asset lost value, those investors could be stuck with security that nobody wanted.

Thanks to the CFDs you can both buy and sell currency pairs. And selling shares is easy, so you can use CFDs to make a profit when markets are falling. Because you are trading on margin, CFDs can enhance the risk/return on your investment capital.

Keeping the risk under control is the most important aspect of trading. If you can manage it, without becoming greedy and religiously following your trading system, you will eventually succeed in making constant ROI with Forex trading.

In the upcoming blogs, I will share some tips for successful trading in the form of “Trinity”.

1. Good system - such as CAMMACD

2. Proper Risk Management

3. Using ATR for Intraday trades