The Ins and Outs Of Online Forex Trading

Online forex brokers with user friendly platforms like MetaTrader provide retail traders with a straight forward way to start trading FX online.

chart on a screen

New traders who just want to get a feel for forex trading can use a free demo trading account where an online brokerage account is loaded with a theoretical amount of money, such as 50,000 US dollars for demo purposes. You then start trading like you would trade if youwere trading live with real money and not on a demo account.

FX trading can be hard due to the sheer volatility and pace that the currency markets move at. Once you get used to the directional swings, master the online FX trading software and work out a strategy you are on the right path.

The popularity of FX trading online

Fx trading online  is available globally 24-hours a day, Monday through Friday. The development of online forex trading platforms allow trading to be conducted from any location that has internet access and cellular connections.

The fact that Foreign Exchange is a non-centralized global financial market is key to its trading popularity. Stability in the FX market is provided by a wide range of international financial institutions and tight market prices are available to both retail and institutional investors.

Currency Trading: An Overview of The Basics

The global forex market is the world’s most liquid and most significant market. In 2019 the daily turnover in FX was reported as being over 6 trillion US dollars. To put this in perspective, the New York Stock Exchange has a daily turnover of 25 billion US dollars

major currencies

Currency trading, also known as forex trading, is a 24-hour market operating across three trading sessions in Europe, the United States, and Asia.

Although the trading sessions overlap, the major currency pairs of each market will have more volume during specific trading sessions. The markets are 24 hours, but not quite 24/7 as Saturday is when no trading takes place in the major markets.

Currency prices can be very volatile. Factors affecting the movement of currencies include Geo-politics, Macroeconomic data, unexpected events such as catastrophes, and market supply and demand and trade flows.

Retail foreign exchange has grown substantially

The major players in the currency markets have traditionally been banks, investment funds, large corporations, and sophisticated private investors.

The advent of online brokers and electronic trading platforms means retail investors have the same market access as the large players. In 2019, retail foreign exchange was 5% of all daily global FX turnover.

Foreign exchange sees currency pairs traded as one against the other. It means that when you buy one currency, you are selling the other currency in the pair. Currencies quote in pips, which are a percentage in points to four decimal places and represents 1/100 of one percent of a currency.

The quotation system is entirely different from the securities markets where you either buy or sell a single stock, bond, or exchange-listed fund.

The forex market has 8 currencies that largely contribute to daily turnover

Despite such a huge daily turnover, the forex market has relatively few major currency pairs contributing to this significant turnover. Around 18 currency pairs dominate turnover, and the most traded currencies are Sterling, the Swiss Franc, the Euro, US Dollar, Japanese Yen, and the Australian dollar.

Compared to the thousands of individual stocks that we can buy or sell, the currency market seems very slimmed down. All the major currencies are available in a variety of trading forms. It includes spot and forward foreign exchange and derivatives, including futures and options.

Does Forex Trading Have a Hidden Secret or Magic Formula?

trader at his desk

There is no magic formula or secret behind profitable forex trading. Successful traders make money day in and day out because they have a robust trading system that works no matter what.

Like experienced traders, you will need to have a Forex trading strategy before you place your first live trade. If you want to trade profitably, you will have to follow your trading plan religiously.

Having a robust forex strategy is crucial in volatile currency markets

Due to the volatility of the Foreign Exchange Market, it is sometimes challenging to react coherently in a fast move. To make the right trading decision in fast-moving markets it is vital to follow a trading plan.

In the middle of a volatile trading day, a robust trading system is essential due to the following two factors:

Emotion and stress

A trading strategy takes away emotion, which is not a useful attribute when you are under pressure and need to think clearly and rationally.

Having a forex strategy means that you do your research before you place a trade and do not have to analyze complicated technical indicators and signals in real-time and avoid confusion and make the wrong decision. You start to work on autopilot, and it becomes second nature to follow your trading system because you know it works due to statistical expectancy.

Discipline and risk management

Money management is an essential part of any successful forex trading strategy. Knowing how much money you are prepared to lose dictates the forex strategy and the path that you will follow.

If your strategy is to have just 1% of your capital at risk, as long as your stop-loss is reflective of this, you will remain true to your system even in volatile markets.

Trading The FX Markets With Software

forex geometry

The Foreign Exchange market is dynamic and fast-moving. Forex trading software helps traders monitor an ever-changing market to make informed trading decisions.

Currency trading involves taking strategic short term or long term positions of currency pairs to make a profit from their changing values.

forex trader at a desk

Economies go through periods of both growth and decline, and these changes reflect the relative values of the currencies associated with each marketplace.

Having the proper positioning using an underlying trading strategy with software and knowing when to exit the market can lead to substantial profits over short and long term time frames.

Getting started with forex software

The software and online tools available for retail investors allow the monitoring of markets and the sending of notices and alerts to users through various desktop and mobile devices.

Trading the forex market with a good strategy and software can produce profits of anywhere from five to thirty percent in a matter of moments. Still, without the proper management, it is capable of producing the same type of losses.