A currency trader, also known as a foreign exchange trader or forex trader, is a person who trades, buys, and sells currencies on the foreign exchange. Compared to other financial markets, the forex market has no actual trading center or location. It operates 24 hours a day through a global network of banks, businesses, and traders. This means that the currency exchange rate fluctuates in value against other currencies all days and nights, providing plenty of trading opportunities to take advantage.
The Foreign Exchange Market
The foreign exchange market, often called the Forex, is the world’s largest financial market. It supports international trade and investment through foreign exchange transactions. In 2016, daily FX volume was about USD 5,100 billion, based on data from the International Settlement Bank (BIS). Financial centers around the world hold the function as anchors of exchanges between a range of different types of buyers and sellers, investors making a profit from the fluctuation of exchange rates. Every currency in the world is traded through this vast, highly decentralized marketplace, with 15 regional markets and thousands of specialist traders.
Making Your First Trades
Once you’ve opened your account, you begin trading by selecting the currencies you want to trade. Choosing the currency pairs to trade is the first decision you must make as a forex trader. As the value of one of the currency pairs rises, the other falls. Most beginning traders should trade only the most-widely traded currencies, such as the U.S. dollar (USD), the British pound (GBP), or the Euro (EUR) because they are the most liquid and have the smallest spreads. New traders tend to start with the currency they are familiar with before moving on to look for opportunities in the currency they are less exposed to.
A Typical Currency Trade
After selecting the market, you must decide on the current trading price and the direction in which you think the market will fluctuate. The forex pair is quoted as one currency (base currency) with another (quote currency), therefore:
– If you think that the base currency will strengthen against the quote currency or the quote currency will depreciate against the base currency, you will buy the currency pair.
– If you think the base currency will weaken against the quote currency or the quote currency will appreciate against the base currency, you will sell.
Each currency pair has two prices. The first is the buying price, while the second is the selling price. The difference between the two prices is quoted as the difference, which is your profitable currency trade. For example, the British pound is currently worth about 1.151 US dollars, you always buy at the higher price — 1.1511 in this instance — and sell at the lower price. Say you buy 10,000 GBP at 1.1511. If the pound rises to a selling price of 1.1622, you may then sell your position. Your profit equals 10,000*(1.1662 – 1.1511), which is $151.00. You’ve made your first profitable currency trade.
As you can see from the trade described above, currency trades are highly leveraged, sometimes by as much as 1,000 to 1. Beginning traders may be attracted to the possibility of making large trades from a relatively small account, but this also means that even a small account can lose a lot of money. Your losses aren’t limited to your deposit. That’s why adding order code is crucial. An order code is an instruction to trade automatically at some point in the future when the exchange rate meets a specific predetermined level. Stop-loss and limited orders are used to ensure that profit will be taken and losses are minimized. In addition, in an open position, your profits and losses (P&L) fluctuate according to market price movement. That’s why tracking your P&L on time is so important. This way, you can easily add or close trading positions as needed. Closing a trade is similar to opening a position. If you initially purchased 5 units, you must sell the same number of units when closing. When you close a trade, your profits and losses are reflected in your trading account.
Start to trade slowly or invest in Ethersmart
A good way to begin is to understand, analyze, and predict the market carefully. After that, you can practice to open a Forex account, take risks, and start trading. However, our Ethersmart will support you in every step; all you need is to choose your suitable package, invest, and let Ethersmart take care of your investment.
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