The forex market, also known as the FX or currency market, is one of the most dynamic, liquid and lucrative financial markets in the world. Not so long ago, forex trading was limited to only large financial institutions, corporations, central banks, hedge funds and very rich individuals across the world, especially in developed countries. Now it is possible for any entrepreneur to start trading in forex easily with the click of a mouse through an online retail forex broker thanks to the internet. All entrepreneurs who are new to the forex market must learn the basics of forex trading in order to make money and avoid mistakes that can lead to substantial losses.
Steps Entrepreneurs Can Take to Start Trading Forex
Open a Forex Trading Account
The first step for entrepreneurs to trade forex is to open a forex trading account with a reputable forex broker. It is very straightforward to open an account online. The process is simple and secure. An entrepreneur needs to fill in an online application form. Once the broker successfully completes the verification process, the broker will create an account number and send it to the entrepreneur by email to confirm that his or her account is open.
Fund the Account
Once the account is open, it has to be funded in order to start trading forex. Today, entrepreneurs can transfer funds to their FX account in a variety of ways. Generally, the funds will become available in the trading account instantly if they use credit cards to fund their account. There is a minimum deposit amount required for the initial deposit, depending on the broker and type of account.
Start Trading Forex
Once an entrepreneur has deposited funds in his or her online trading account, he or she can start trading in the foreign exchange or forex market 24 hours a day. A trader can trade Forex through spread betting, CFDs or spot. A renowned broker will provide a range of powerful trading platforms. The number of currency pairs available to trade on depends on the broker.
Entrepreneurs can open a position in the FX market by taking either a long or short position through their chosen trading platform. A long position is when a trader wants to buy a currency pair and a short position is when the trader wants to sell a currency pair. They can enter a trade either by buying or selling a currency pair, depending on whether they think the value of that currency pair will go up or down.
Each currency pair has a sell and a buy price. For example, if the live exchange rate of AUD/USD is 0.7767/0.7769 now, then the first price is the sell price (also known as the bid) and the second price is the buy price (also known as the ask or offer). The difference between the buy price and the sell price is known as the spread, which can vary depending on the currency pair and the broker. Spread can be fixed or variable, depending on the broker.
If you open a position in the forex market by either buying or selling a currency pair, you can see your unrealized profit or loss in real time with each move of the market price. If you want to close your trade, you need to do the opposite to the opening trade. If you opened the trade by buying a currency pair, you will need to sell that currency pair to close out the trade. By closing the trade, your net profit and loss, depending on the outcome of the trade, will be immediately reflected in your account balance.
Factors to Consider Before Getting into Forex Trading
Here are some important factors entrepreneurs should consider before they dive into forex trading in order to become successful and avoid risks that can lead to losses.
Choose an Account type
There are various types of Forex trading accounts, such as standard accounts, mini accounts and micro accounts. A standard Forex trading account allows traders to trade standard lots. Generally, a standard lot consists of 100,000 trading units of currency, a mini lot consists of 10,000 units of currency and a micro lot consists of 1,000 trading units. However, minimum lot size for different types of accounts varies from one broker to another. For beginner traders, the best advice is to start out small. Complete beginners can open a mini account to start trading and gaining experience while risking a very low amount of capital. You should never risk money you cannot afford to lose.
Understand the Fundamental and Technical Factors
The price of a currency pair depends on a number of fundamental and technical factors. Learning what fundamental and technical factors affect which currency is absolutely important before opening a trade. Major fundamental factors include economic indicators, politics and psychology. Economic indicators are reports released by a government or a private organization, which include a country’s economic growth, capital flows, trade flows and trade balance, employment data, retail sales, industrial production, consumer price index, etc. Economic indicators are used to predict a country’s economic state and any change in an indicator or report can affect the value of that particular country’s currency.
When trading in forex, it is important for entrepreneurs to consider the political circumstances surrounding the currencies they are trading. If a trader is largely trading on the AUD/USD currency pair, it is essential to become up to date with major economic indicators, any major political events, and economic and political uncertainties occuring in Australia and the USA. Understanding marketing psychology during the geopolitical uncertainty around the world is also important to predict which currencies are in great demand.
Find a Reputable Forex Trading Broker
When it comes to forex trading, an important factor to consider is to find a reliable retail forex broker online to help entrepreneurs achieve their success. A Forex broker connects an entrepreneur or trader to the Forex market. A good broker will provide the essential tools, leverage and data an entrepreneur will need to trade. Some brokers are better than others. Finding a reputable forex broker can be a very hard task as there are numerous brokers out there, including not so well-known brokers. So, it is important for entrepreneurs to research their options. That is where Forex Australia comes in. Forex Australia is a reputable Forex reviews website. Forex Australia, also called FX Australia, is Australia’s leading Forex broker comparison website.
This website reviews Forex trading brokers, giving both pros and cons for each of the brokers it promotes or reviews to help entrepreneurs find the best broker for their needs. This website caters mostly to beginners or newbies. Forex Australia has worked for many years in the industry, and is well connected with the reputable brokers in the industry.
An entrepreneur in Australia seeking to start trading in forex should connect with a forex broker whom is regulated by the Australian Security & Investments Commission (ASIC). Even those entrepreneurs who are not in Australia can work with an ASIC regulated forex broker.
If you choose a broker from the USA, the broker should be a member of the NFA (National Futures Association). Each country has its own regulating body. It is highly important to choose a broker which is regulated by the legitimate authority or regulator in its own country.
Forex Australia only lists brokers which are regulated by one of the major regulators, such as the NFA, ASIC, FCA and FSB.
One of the major benefits of Forex trading is leverage. Leverage simply means money borrowed by a trader from a broker. Without leverage, it would not be possible for retail FX traders to make money from the small change in a currency pair’s value. Basically, it allows traders to trade more money than they have in their accounts. By using leverage, they can buy or sell currencies by investing little of their own capital. Leverage is expressed in a ratio. Some brokers offer low leverage ratios like 50:1 and 100:1 while others offer high leverage limits like 100:1, 200:1, 500:1, etc.
If you have a standard trading account and your broker offers 100:1 leverage ratio to you, this means you can borrow 100 times your equity to trade in the FX market.
Forex trading can be a profitable venture even for entrepreneurs who have limited funds to invest in the forex market. These tips, mentioned above, combined with a strong trading strategy will help you to sustain the momentum when starting a forex trading business. Do active research online to stay current with the forex trends. Good luck and trade wisely.