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How to trade forex

by , 03 February 2015

If you're eager to start trading forex, where do you begin?

You have two ways to trade. You can use currency futures or you can spread trade forex.

Let's take a closer look…


How to trade forex with currency futures


If you want to trade forex, one option you have is trading currency futures through the Johannesburg Stock Exchange’s Currency Derivatives Market.

If you want to trade these currency futures, you’ll need to open an account with a stock broker who offers trading of currency futures.

Through currency futures, you can trade a number of major currencies against the rand. These currencies include:

  • The US dollar;
  • The euro;
  • The yen;
  • The Swiss franc;
  • The pound;
  • The Australian dollar;
  • The Canadian dollar;
  • The New Zealand dollar; and
  • The Chinese yuan.

Trading currency futures works in a similar way to trading other futures, like single stock futures. You buy contracts (one contract is equal to 1,000 units of the base currency) of currency pairs by way of a margin.


How to trade forex with spread trading


If you find the futures market a bit confusing to understand or you want to trade major currencies excluding the rand, spread trading might be better suited to you.

You can trade a number of major currency pairs such as the US dollar/pound, US dollar/euro and the euro/yen.

Instead of trading contracts as with currency futures, with spread trading you decide on how many rand per point (or pip) movement you want to trade. Some forex traders find this way of trading much more transparent as they can see exactly how much they’re risking.

With currency futures, the broker makes his money through fees. With spread trading, the spread trading company makes its money through the forex price spread.

So there you have it, how to trade forex.

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How to trade forex
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