With a daily turnover of around $5.2 trillion in 2017, the Forex market is the largest financial market in the world. In fact, in terms of trading volume, the Forex market trades the entire annual economic output of the United States in just a few days! Let’s take a look at how you can join this exciting market.
What is Forex?
Forex (abbreviated from Foreign Exchange) is the marketplace for the world’s currencies. Billions worth of currencies exchange hand every single day on the Forex market, be it from multinational corporations that want to repatriate their overseas earnings, banks and hedge funds for trading purposes to the traveller who needs to exchange his or her domestic currency for an upcoming holiday trip.
Individual traders can also join the Forex market and trade on the rising and falling exchange rates of currencies. Just like stock traders who aim to buy a stock cheap and sell it later at a higher price, Forex traders try to buy a currency cheap and sell it later for a profit.
The retail Forex market (which is the place where you and I can trade) accounts for an impressive $185 billion in the total daily turnover of the market. With this in mind, there are many reasons to start trading on Forex for the man on the street.
1) Trade on your own schedule – You can trade Forex whenever and wherever you want. Unlike the stock market, Forex is open 24 hours a day, Monday through Friday. If you have a day job, you can analyse the market the evening before and place your trades on the next morning.
2) Low transaction costs – Forex trading has one of the lowest transactions costs of all major financial markets. Most Forex brokers don’t charge anything more than the spread, which is the difference between the bid and ask (buy and sell) price of a currency pair. If you exchange money in a bank, the spreads are much wider, and you’ll also be charged a commission.
3) There are eight major currencies – You have to follow only eight major currencies, also called the majors, to find high-probability trade setups. Moreover, since all currencies are quoted in pairs, there are dozens of potential trading opportunities which arise by analysing only a few currencies.
How to Start Trading on Forex?
Trading on Forex is as easy as it gets. All you need is a computer with internet access, a brokerage account and a trading platform. Since you’re reading this article, I assume that you’re already connected to the world wide web. This leaves us with the remaining three remaining points: a financial trading education, a brokerage account and a trading platform.
While you can enter the Forex market without any education, it’s recommended to take a forex training course such as My Trading Skills. This will provide with a solid foundation so you can reduce risk and increase your profitability in the markets.
To open a trading account with a Forex broker, all you have to do is to fill out a registration form on the broker’s website. Naturally, there are some other important points you need to consider before choosing the right broker for you, such as regulation, protection of client funds and transaction costs. However, once you pick a broker, opening an account is a straight-forward process.
Your broker provides you also with the trading platform. I recommend choosing a broker that offers MetaTrader, which is the most popular trading platform for retail Forex traders and offers tons of features for both the casual and advanced trader.
Becoming a Forex trader is a simple three-step process – choose a broker, open an account and start trading. Of course, you’ll need to learn the basics of Forex trading first and gain some experience before you become a consistently profitable trader – but in the end, it might be well worth the efforts.