What is Forex and how can one benefit from it?

Updated on November 10, 2021

Maybe you have heard about Forex from your friend or advertisement but don’t know exactly what it is. However, you know it has to do with money, a lot of money. Or you simply know that Forex is a highly liquid market with the great potential to bring profit to individual traders. But don’t have a clue where to start from and in what way it could bring your profit. Here we will briefly try to explain it to you. 

What is Forex?

Forex simply stands for Foreign currency exchange. It used to be available as a market only to big players, big institutions and banks, otherwise called market makers. More than a few years it became so popular among retail traders that they became market makers in their own way. The number of individual traders is always on the rise. Naturally, it came with the internet. You don’t need to go to the counter of your bank and be required to trade currencies or concretely like in Forex currency pairs. In Forex, traders trade currency pairs, and there are numerous pairs to be exchanged. There are different strategies to apply—everything according to your preferences.

Forex is particularly important since it’s a market that relies on the global export-import sector. There is always liquidity on it. It just depends on the economic data and events, what is the best moment and the meat currency pair to trade with,

How do you profit?

You buy the currency pairs betting their price will increase and vice versa. The profit may vary on many factors. Your minimum deposit, leverage use, and currency pair chosen. Forex compounding calculator might be a great help to calculate the interest rates and many more to include in your trading plan. 

Which pair to choose?

Generally, a newbie goes for the most common pair, including the USD. It’s not that we don’t recommend more volatile currencies, but before learning the ropes, it’s always better to choose the most stable currencies. Besides the American dollar, these are the Japanese Yen, Canadian Dollar, Swiss Franc. 

How one can start trading currencies

If you have enough money only dedicated for investing purposes, then your first reflex is to find a good broker. A good broker will allow you to have access to free trading materials, demo accounts before starting trading. 

They offer excellent client support and maybe in your native language. English is sometimes enough but beware. 

There is no room for misunderstandings in this business since your money is at stake. Most importantly, the trustworthy broker is regulated, works in compliance with the laws in your country, and transparently indicates its business details on the website. What else should you look for?

Of course, depending on your trading plan, you look for the best spreads (difference between the ask bid price), minimum deposits, leverage allowed, trading instruments offered etc. 

And also, the brokerage might also take care of updating your trading knowledge by offering ebooks, tutorials and training courses. Once you open an account, you can first start demo trading and just after you feel comfortable enough, you pass on real trading. Success will come with enough discipline to stick to the trading plan and winning strategy. 

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