While the stock market became popular for new investors and beginner traders in the last years, the forex market remains still a bit of a mystery to some. With higher risk, smaller profits, and more of a learning curve to get started, there is still an interesting potential of making profitable investments in the currency exchange market.
Today, there are many options for those that want to start diversifying their profile and making interesting investments.
Forex brokers have a variety of tools for traders to invest their money, even now there are PayPal forex brokers, making the whole process way easier and faster.
But, let’s start at the beginning.
What is Forex?
Forex, also called FX or currency exchange, is the trade of one currency for another, earning a profit from the difference between them.
While many exchange currency for different reasons, like tourism or business, there is also the possibility of exchanging it to make a profit.
Currencies are presented in pairs, like EUR-USD. Since some currencies are common, like dollars, euros, and pounds, they usually have a small commission for their exchange or none at all. More exotic or rare currencies may have what we call high spreads, meaning that the fees towards the broker are higher, in other words, it costs more to exchange those currencies and there are fewer chances of making a good profit.
The Forex Market
The Forex market is one of the most interesting investment markets. It’s open 5 and a half days a week, 24 hours a day, meaning that at any given time, there is always something happening in there.
What is more, the market is very active with more than 5 billion dollars being dealt with every day and quotes that change constantly. More risk means more profit and vice versa.
The Forex market is completely online, meaning that transactions are dealt with in a fast manner, and orders are filled live. It’s a market that sees lots of changes and fast movements.
How to become a forex trader?
There are a few steps any person interested in becoming a forex trader should follow. We are going to walk you through them.
Find a forex broker
Finding a broker is the first step and quite an important one for that matter. Traders want their broker to have a good reputation, a powerful online platform, and reliable customer support.
However, there are other aspects that traders should also consider, like lower spreads and fast execution.
Put money in your forex account
Usually, not a lot of money is necessary to get started in the forex world. Most forex brokers work with margin, so you may need to have in your account just 1% of what you’re looking into investing in certain currency pair.
Try it out
Most brokers offer a demo account that allows traders to make deals with fake money, giving them an overview of what it is like to invest in the forex market, and helping them decide on a solid strategy.
Working on this demo account is a very important step into becoming a forex trader. New investors should take their time and use it as an educational experience that will help them close better deals in the future.
Start small investing in forex
A good idea for those starting to try the forex market and maybe being overwhelmed by how much is there is to start small.
After trying out the platform and different strategies, choose the one that suits your trading style better, and move into the real forex market slowly. Your broker may be able to offer some support adapted to your level of expertise.