If you want to build wealth, your 9-to-5 job is not enough to make you rich. For people who want to be financially independent, a side hustle such as businesses and investments is of great help. One of the fastest ways you can grow your wealth with a speculative risk is trading in foreign exchange or forex.

What is Forex Trading?

FX or foreign exchange (forex) trading is the exchange of different currencies on a decentralized global market. It is one of the most widely traded markets worldwide. When trading forex, you simultaneously buy and sell the world’s currencies on this market.

When you trade forex, you trade in currency pairs such as CAD/USD (Canadian dollar vs US dollar). The first currency of the pair is called the “base currency,” while the second is the “counter currency”. Based on the given example, in CAD/USD, the base currency is CAD, and the country currency is USD.

You will then speculate on whether the price of one country’s currency will rise or fall against another country’s currency and take a position accordingly (either buy or sell). You will buy or go long if you think the base currency will rise against the counter currency. On the other hand, you will sell or go short if you believe the base currency will fall against the counter currency. If your speculation is correct, you will earn a profit. If not, you can make a loss.

Suggested Read: Bulls? Bears? Haircuts? 40 trading phrases explained

How to Trade in the Forex Market

As you know, forex trading will help you earn money, but there are risks to watch out for. Without proper knowledge and guidance, you may burn all your equity in a matter of seconds. So, for beginners, here are some tips you should remember when trading in the forex market.

1. Learn trading terminologies

Before you start trading, you must have an idea about basic forex terminologies such as pip, spread, margin, leverage, bear market, bull market, broker, bid, exchange, close, day trading, dividend, long trade (buy), short trade (sell), and blue-chip stocks.

2. Understand how to read forex charts

To know what strategy you should use when trading, you should learn even the basics of forex charts. There are three different options available when you use the MetaTrader platform when it comes to charts: line charts, bar charts, or candlestick charts.

3. Choose the best forex trading style for you

Trading can be your part-time or full-time work. Depending on your circumstance, you may choose to trade numerous times within the day for different lengths of time. You can choose between the following trading styles: currency scalping, intraday trades, swing trading, or position trading.

4. Research and choose the best forex broker

To start trading forex, you should choose a forex broker. Using a forex broker, you can trade by buying a currency pair and close the strategy by selling the same pair or vice versa, depending on the market situation. Most forex brokers allow foreign exchange transactions between numerous pairs of currencies for versatility.

If you’re not yet sure what strategies to do when you trade, most brokers will give you trade signals indicating the currency pair you can trade, what time you can trade, and if you should buy or sell the currency pair. Your broker will also often dictate which trading platform you should use. MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are usually the apps used in trading.

Because it takes skills to determine the best strategy in forex trading, expect brokers to charge additional fees per transaction or a monthly fee for you to access their software and trading products.

As time goes by, as you become more familiar with trading, you will also learn the basic strategies you can apply when trading.

5. Learn the software (MT4, MT5) by using demo accounts

Since you’ll be using trading software to open and close positions in trading, you should learn how to use them. To avoid losing your money, these platforms have demo accounts you can use to get the hang of knowing how to trade.

Trading forex can be overwhelming but take it one step at a time until you get the hang of it. Make sure that you spend time being updated on the news, new strategies, and resources. And remember that you should only trade money you can afford to lose. Take it slow and steady, and as you become more aware of the tricks and trades of forex trading, the more you can grow your money.

If you plan on exchanging currencies or sending money, choose RemitBee’s services. Our services are fast and safe. We also give you the best currency exchange rate to get the most out of your hard-earned money.

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