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Forex trading basics: What you need to know to get started

by , 09 July 2014

If you're looking for a way to generate substantial profits over the short-term, forex (or foreign exchange) trading is one way to do it.

By trading the world's currencies, you can nip in and out the market, hopefully making tidy gains along the way.

But how does it all work? Let's take a look…

How the forex market works

Unlike the stock markets of the world, which operate ‘normal’ working hours, the forex market barely sleeps. Early on a Monday morning, forex trading (or currency trading) begins in the East until the forex market shuts its ceases trading late on a Friday evening in the US.

And all of this occurs online, the team of experts at FSP Invest in The Secrets to Forex Trading explain. So all you need to trade forex is a computer and an Internet connection.

How to profit from trading forex

Currencies come in pairs. Think about when you change money for an overseas trip: You exchange your rands for dollars, or whatever your chosen currency is.

To trade forex, you buy a currency pair. And if your trade goes according to plan, sell it at a higher price later.

You profit from fluctuations in the currency market. And even though these fluctuations might not be huge, when you trade you do so on margin. This multiplies your gains.

When you trade forex, you can get leverage up to around 1:100. If your currency pair trade rose just 0.6%, your profit would be 60% if you traded with leverage of 1:100.

How to trade forex

In South Africa, there are two main options open to you to trade currencies:
  • You can spread trade; or
  • You can use currency futures.
As trading currencies uses leverage, your risks are higher than buying shares, for example. But you can limit your downside by using stop losses. This means if a trade goes against you, you know how much you stand to lose.

So there you have it, what you need to know to get started forex trading.

*********** Hot off the press ************

Former restaurant manager reveals why you DON’T need to be an expert to make up to 55% in a single day from the currency markets...

There’s no studying involved. No special software required. And absolutely no maths at any point.

All you need is a cell phone, internet access and the ability to follow one simple instruction...

Get the inside scoop here.

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Forex trading basics: What you need to know to get started
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