Complete Guide to Learn Forex Trading Online
There are lots of online and offline forex study guides, in the form of seminars as well as articles and videos. However, will we immediately be able to practice forex trading after learning it? Prospective novice traders not only need knowledge about the meaning of forex, but also instructions on how to trade that are easy to understand.
More than that, prospective novice traders should also be aware of the various risks involved in forex. The profit potential of forex trading is indeed extraordinary. However, there are risks in any business, including the forex business. Without understanding these risks, we can fall into big losses and be fatal to our financial condition.
Well, this article is intended to provide a complete guide to learning forex so that you get a comprehensive picture of the steps that need to be taken to be able to transact yourself on an online forex trading platform. Let’s watch it together from beginning to end.
What is Forex Trading?
Have you ever exchanged foreign exchange (forex) via Money Changer? Or maybe you’ve visited a bank office whose walls display foreign exchange rates? At money changers and banks, you will see the exchange rate between one currency and another (foreign exchange rate) is always changing from time to time.
Changes in foreign exchange rates open up opportunities for all of us to profit by buying and selling foreign exchange at different exchange rates. Suppose you buy 200 Euros at 1.2 US Dollars per Euro today, then sell them back at 1.3 US Dollars per Euro tomorrow. From both transactions, you will get a profit of 20 US Dollars. It’s fantastic, isn’t it!?
That’s a simple overview of forex trading. However, forex trading is not exactly the same as currency exchange via banks and Money Changers. What is the difference? Here are some of the differences between forex trading and regular forex exchange:
When exchanging foreign currency via banks and Money Changer, you need to prepare the full amount of foreign currency that you want to sell or buy. However, forex traders can prepare funds in the amount of only a fraction of the value of forex to be traded, thanks to the existence of margin and leverage. For example, a forex broker provides a 1:100 leverage facility, so traders can make transactions worth 20,000 US Dollars, only by submitting 200 US Dollars of capital as margin (collateral).
Foreign exchange needs to be done face-to-face and involves transferring the full amount of money from your account to your bank account and Money Changer. However, forex trading does not require face-to-face because it is done online. Forex brokers will provide an online trading platform in the form of software that can be installed such as metatrader 4 or metatrader 5 on your laptop or mobile application for your cellphone.
Money Changers and banks generally only take advantage of the difference between the buying and selling rates. However, forex brokers quote more varied trading fees. Forex trading fees include spreads (difference in selling/buying rates) and trading commission per lot (only applies to volume already traded).
In simple terms, forex trading is an activity aimed at gaining profits from buying and selling foreign exchange using leverage and online trading platforms. Forex trading is done through brokers who connect traders with the currency market. Therefore, traders need to choose a forex broker carefully in order to use the most advanced facilities and get the best service.
Forex Business Advantage
After listening to the understanding of forex above, of course you understand the potential for lucrative profits in forex trading. However, the profit of this forex business is even greater than you imagine now, because it is not just a material profit.
Forex business attracts the attention of many people because of the huge profit potential, even though it can be done anywhere and anytime with low capital. Well, how can that be? The following is a full review of the top 5 (five) advantages of the forex business.
Forex Is The World’s Largest Financial Market
Data from the last triennial Bank for International Settlements (BIS) survey in 2016 stated that the daily trading volume in the forex market reached USD 5.1 trillion. The scale of this market is much larger than the scale of the global stock market which is only USD84 billion. The forex market is also global in nature and is carried out over-the-counter (over-the-counter), so it is not constrained by national borders like stock trading.
The huge volume of world forex trading allows us to make sales and purchases at any time
ja smoothly, without the queues that are common in the stock market. Transactions take place online and continuously for 24 hours. In short, the profit potential of the forex market is also many times greater than that of other financial markets.
Forex Trading Hours 24 Hours
As stated earlier, the forex market is global. Transactions are carried out through banks domiciled in various financial centers on all continents. Therefore, forex market opening hours continue to roll non-stop from the Sydney bank opening at 21.00 GMT on Monday (04.00/Monday WIB) until the New York bank closing at 20.00 GMT on Friday (04.00/Saturday WIB). A complete picture of 24-hour forex trading hours can be seen in the diagram below:
2. Forex Trading Hours
Forex trading hours are divided into four consecutive sessions, namely the Sydney and Tokyo sessions (often referred to as the Asian session), the London (European) session and the New York (America) session. Forex traders are free to choose the trading time in which session, according to their respective daily activity schedules. You can take advantage of your free time after work or anytime.
Can Trade Forex Wherever You Are
There are only two infrastructures needed to start trading forex, namely a gadget and an internet connection. Even for gadgets, you are free to choose a PC/laptop or mobile phone (as long as it has adequate specs). Download the online forex trading platform provided by the broker, then you can start trading forex wherever you are. You can trade while stuck in traffic, while waiting for a movie, while waiting for the kids at school, or anywhere else.
The world’s most popular forex trading platform, Metatrader, is available in software, webtrader and mobile applications. All versions are equipped with the capability to monitor foreign exchange rate movements in the forex market, perform market analysis, send buy/sell orders, deposit/withdraw funds, and monitor your account balance.
Can Trade Forex with Minimum Capital
In the discussion about the meaning of forex earlier, we have already mentioned about margin and leverage. The existence of margin and leverage allows traders to deposit only a small amount of capital to start trading forex. There are even forex brokers that allow us to start trading with capital starting from 1 US Dollar only!
However, higher capital is still needed to be successful in forex trading. Generally people start trading forex with a capital between 50-200 US Dollars, then add more when it is deemed necessary. Outside of money capital, traders only need to prepare a gadget, a reliable internet connection, and forex learning materials that can be used as a guide.
Anyone Can Trade Forex
There is an impression that the forex market players are elite people. Indeed, most of the forex market players belong to the moneyed group. For example, governments, central banks, commercial companies, banks, and other entities that need to send and receive foreign exchange payments all the time. However, there are also speculators who are involved in the forex market with small to large capital.
Most forex traders fall into this category of speculators, because they only want to profit from changes in foreign exchange rates without having the basic need to hold forex. The number of forex traders continues to grow every year, due to the huge profit potential and simple prerequisites. Anyone can play forex, even if they don’t have an educational background in economics. As long as there is sincerity and a willingness to learn, successful forex trading will be achieved.
Forex Business Risk
Every business has advantages and disadvantages. Similarly, there are some forex business risks that everyone should understand before starting to trade. To be precise, there are five (5) risks of volatility, liquidity, leverage, brokerage, and trader psychology. An understanding of these risks will determine how successful the trader’s profit will be, so it is important to pay attention to:
Forex Volatility Risk
The dynamics of fluctuating foreign exchange rates are called volatility. This volatility opens up profit opportunities for all forex market players. However, volatility can also result in the risk of loss. Profits will be obtained if the foreign exchange rate moves according to our estimates. However, losses will arise when the foreign exchange rate does not move (minimum volatility) or even moves fast in the opposite direction to our predictions (wrong prediction).
How to deal with this volatility risk? First of all, you have to understand that we can only predict market movements, but we can’t be sure it is 100% accurate. Therefore, loss is a natural thing to happen. When experiencing a wrong prediction, then we must dare to cut loss. Rather than bear excessive losses, it is better to experience limited losses.