There are a million and one ways to make money in this life, and one of the best ones is Forex trading. You’ve perhaps heard of this term before, but what does it mean? And how does it work?

Some of you are doubtless wondering if you need to go somewhere to make such transactions. Others might be thinking it’s something only banks, or the wealthy can do. It might surprise you to learn that anyone – even you – can partake in Forex trading!

In a nutshell, you buy and sell currency to make a profit. It’s the same as trading in any other commodity. Sometimes you’ll make lots of money, other times you might make a loss. Still, Forex trading is a less risky way of building up your pot of money. So, if you’re interested in finding out more, check out this beginner’s guide:

Tell me more about Forex trading

In layman’s terms, you are buying and selling currency on a trading platform. It’s just like buying goods at a wholesale price, and selling them to consumers at a higher retail price. You’re just dealing with money rather than physical goods.

There are various combinations of currencies that you can trade. Some of the most popular ones are as follows:

• Euros and US Dollars (EUR/USD);
• US Dollars and Japanese Yen (USD/JPY);
• British Pounds and US Dollars (GBP/USD); and
• US Dollars and Swiss Francs (USD/CHF).

Of course, there are plenty of currencies you can choose. But, the ones I’ve listed above offer the most liquidity. At this point, you might be wondering why you’d trade in currency as opposed to something else?

The answer is simple: there are fewer risks. Let’s talk about buying and selling company shares, for example. Prices are more volatile, and you have to spend more time making accurate predictions.

Currency is a better trade because you have more time to assess the market. Whereas with companies, something like reported sales figures could cause share prices to tumble.

How do you buy and sell currency?

If you’ve got small amounts of cash to exchange, you could do so using a bureau de change kiosk somewhere. The only downside to that approach is that the rates are seldom favorable in the long term.

The better option is to use an online trading platform, such as the ACM Gold Trading website. That way, you can do Forex transactions from the comfort of your home. Another bonus is you don’t have to carry around large amounts of cash with you.

When you use an online system, transactions get done via electronic means. You also have the potential to exchange thousands of units rather than tens or hundreds.

Which online trading system should you use?

As you may have guessed, there are plenty of websites you can use for Forex trading. But, which one should you select? Here are a few ways to narrow down your choices:

• Use a trader in the same country as you;
• Ensure they are a legitimate company;
• Don’t use a site that doesn’t offer encrypted transactions; and
• Try to get personal recommendations from friends and family.

Factors That Impact the Forex Market

Forex, also known as foreign exchange market is the biggest and the most volatile decentralized market where the currencies are traded. While making investments in a fragile market like forex you need to have a thorough knowledge, that at times can guide you when the market gets messy or to alter your strategies according to your needs with the changing market. Experienced and practiced traders build their strategies around the extensive research which can surely minimize the loss. It is very crucial when trading in the market such as forex to keep yourself updated, not just with the research work but also with the tools and trends of the market so that you can conduct the possibility of a loss efficiently and effectively.

It is very important to be aware of the factors that determine the anatomy of the market you are trading in. Getting stuck in the composite theories about the market can be grubby and it is better to first know about the basics of trading in Forex. A very essential thought to be kept in mind while trading in the markets is that these markets do not work in vacuum which means that the market is not completely untouched by foreign factors and moreover is related to various socio-economic factors which are same all over the globe. It is very fruitful to have a meticulous approach while understanding these factors and the relation between them to execute revised decisions. Discussed below are some factors and their impacts on the market.

Role of Macroeconomics

Comprehensive macroeconomics is an essential factor which basically drives the trading in the forex market. Conventionally the influence of macroeconomics is a major factor for the traders who decide the price of a currency over a given period of time. The economic state of a country is a crucial aspect when determining the price of its currency. The constant uninterrupted trading in the forex market undergoes changes in various economic events which also determine the economic state any country.

Foreign Trade

The trade in the international market between two nations is a very crucial factor in determining the value of the currency. For example, if the trade of the nation is inclined more towards the import than the export it means that the goods are being bought at a large scale which utilizes the domestic currency and hence a trade deficit will occur resulting in the downfall of the value of that currency. The country which is exporting goods will surely encounter a boost in their domestic currency. It can be easily concluded that the surpluses and the deficits while trading, influence the country’s economic health and its position in the foreign exchange market.

Political Influence

The political anatomy of the country is also a major factor that immensely affects the foreign trade and the value of the currency of that particular nation. People who constantly trade in the foreign markets keep a check on the political movements of the country to determine or predict the rise and the downfall in the value. For example, a political event like an election can have a major influence on the currency markets because the exchange rates will favor the government who claims to provide a better and stable economic platform.

Economy of the Country

A forex trader keenly studies the reports of the countries based on their economy and it is very important to maintain a constant research work in market which encounters quick changes. Many traders prefer referring the GDP which illustrates the health and the performance of the economic conditions as the goods and services executed by any nation are tabulated as the GDP. Another crucial factor while discussing the economy is Inflation as the effects of this particular sustained increase in the conventional price levels can never be declared as beneficial or detrimental.

Immediate Events

Any crucial event in the country will be reflected on its economy and will eventually affect the sentiments of the foreign trading market. These immediate events can be civil disorder, natural calamity; elections etc and they can also be incorporeal such as rumors related to any immediate event. It is often experienced that the emotions involved like greed, fear, confidence or even overconfidence can drag the entire foreign market with itself.

The country’s economic health plays a very crucial role in influencing the entire Forex market. To determine a value of any currency it is very important to have a thorough knowledge about that particular country’s economic conditions.

Earn In Forex Trading With No Investment

While only a part of the title is true, but when we talk about investment that is required to trade in the foreign exchange market, in monetary terms that is pretty negligible. Do you know that more than half of the forex trades happening globally are immensely leveraged? Hence, the minimum amount of the money required for a forex trade is just 0.5% of the total trade value which is indeed a negligible amount for most people. However, we must not forget that forex trade like any other business is subject to several risks and an individual is responsible for the outcome of the full trade value, irrespective of the amount of money invested.

Now that you know about the amount of money required for forex trading, let us discuss more about the various aspects of foreign exchange trading or forex.

What is Forex?

Similar to stock trading, forex trading involves the buying and selling of foreign currencies and generating profits through the continuously fluctuating prices of the various currencies. So the game is simple, just try to buy currencies when their prices are low and sell them when their prices are higher to earn a profit. But as easy as it sounds, most people would want to know that more than 80% of forex trades end in losses and it is only that the most experiences traders that make profit. This means that trading in forex is risky and even though you are required to pay only a small amount of money to trade, you can lose much more.

Why Is Forex Trading So Risky?

Most risks in forex trading are a result of human error and leveraging. Because you can make more trades than the money you have in your pockets, it often becomes a honey pot for people, who are lured in the market to earn quick profits. Foreign exchange is one of the most fluctuating markets in the world and there is a high chance that the trade you make will result in losses. Forex trading is also a tedious process, as the markets are open 24 hours for 6 days during a week and tracking investments can take a lot of time. It also takes a lot of time to analyze and learn the basics of stock trading before you can make regular profits at the market. Despite of the several risk management tools such as take profit and stop losses, one has to pay a special premium price for each time they use them to curb their losses.

Is Forex Trading The Right Choice For You?

Whether trading is right for you or not depends on how well you can act under pressure, analyze the situations with calmness, and use the leverage and the various risk management tools properly. It must be noted that even the oldest players in the forex market tend to lose money time to time due to the highly fluctuating prices of the currencies. For being successful in the forex market one needs to be able to make some really pinpoint predictions though years of experience in forex trading. Learning to use the online trading platform is also a tough task and one needs to know how to handle the various risk management tools as well. Using these tools at wrong points can also result in an early exit from the market without taking full advantage of a certain situation.

Learn To Trade in Foreign Exchange

Learning foreign exchange trading takes years of experience and there are several courses, seminars and programs that one can attend to know more about foreign exchange. You can also visit the various online programs and others can also help you get more information about the various things that you need to keep in mind when you trade for the first time. There are several companies which might try to sell you the idea of investment in foreign exchange and claiming it to be a ‘get rich quick’ scheme. However, no matter what you do there is no particular way to predict the movement of the market which remains as one of the most volatile marketplaces in the world.

Luke is an experienced forex trader and also likes to write articles about finance, forex, and trading on various websites and blogs around the internet. He likes to spend his free time researching about the latest happenings in the market.