Traders of foreign currencies benefit from changes in exchange rates. Here is the guide on how the Forex market actually operates.
Forex Trading Guide
With financial markets gone digital, any individual can reap profits without leaving home. Thanks to Forex trading, this goal is achievable. The activity that has taken over different continents is now gaining traction in South Africa. Thanks to international brokers, ordinary employment is no longer the only way to earn a livelihood or boost one’s income.
Where To Start
If you are thinking of joining the vibrant community of traders in Nigeria, begin by learning the basics of the currency market. Not only is it global, but it is also the largest in the world. Its daily turnover exceeds that of the stock market by more than ten times! The total value of transactions amounts to trillions of US dollars.
In simple terms, this is where national currencies are constantly bought and sold by companies, institutions, and individuals. Hence, as a retail trader, you will be operating alongside hedge funds, large banks, and other big players whose activity constitutes an overwhelming majority of transactions.
Your primary step is to pick a reliable broker, such as Alpari. This provider is part of a well-established international brand, and it is subject to strict supervision by the Cyprus Securities and Exchange Commission. Brokers act as intermediaries, providing access to the global marketplace through dedicated software platforms. These tools (MetaTrader 4 and 5) are packed with efficient forecasting tools that facilitate trading activities.
How the Profit Is Made
As the name suggests, you will be engaged in the exchange of currencies. As their rates are constantly in flux, a trade could result in profit or loss depending on the timing. The general logic of stocks (buy low and sell high) applies.
The values of currencies are shown in pairs, the most popular of which is GBP/USD. As a trader, you could purchase X amount of British pounds for Y amount of US dollars, wait for the rate to change, and sell the pounds back getting more US dollars in return. The biggest Forex Broker Nigeria provides expert guidance and state-of-the-art forecasting tools to anyone willing to try their skills in the market.
All pairs have two corresponding prices – one applied to sell and the other one to buying. For instance, the asking (buying) price for GBP/USD could be 1.27366, which means a single pound will cost just over 1 dollar 27 cents. Meanwhile, the bid (selling) price for the same currency will be 1.27363, which is a little lower.
The gap between the two indicators is referred to as the spread. A single unit (0.0001) is called “pip”.Therefore, a change from 1.27363 to 1.27373 is referred to as a “one pip move”.
Since the exchange rates are always changing, a trader needs to be aware of the most common factors prompting the trends. National currencies gain or lose value depending on a host of circumstances, from interest rates to geopolitical shifts. Hence, they belong to the domains of microeconomics and macroeconomics alike. Here are some of the most powerful market forces:
- Local and global politics;
- Fiscal policies of different nations;
- Economic development;
- Exports and imports;
- Interest rates.
The need to follow such aspects may seem daunting. However, with abundant automated tools, forecasting aids, and guidance from your broker, you will gradually comprehend the logic. Beginners may first practice trades in the demo mode, with no actual risks involved.
Moreover, the option of copy trading allows you to essentially delegate the job to a professional strategy manager. They will invest a portion of your funds for a moderate fee. This way, you can earn a profit with little effort required, as long as you keep an eye on their trades replicated in your account.
All transfers to and from personal accounts are easily performed through a variety of channels. From bank cards and transfers to PayPal and Skrill, you are sure to find suitable means of payment.
Overall, currency trading provides an opportunity to derive monetary gains from changes in the rates. Thanks to credible intermediaries, this finance tool brings actual profits to traders on all continents.