When you are trading with a forex broker, recognizing that there is no central marketplace for foreign exchange is the most important thing. FX makes it essential for traders to choose their broker carefully. The Foreign Exchange market is one of the most fast-paced and exciting markets around. When compared globally, this market’s volume has already overtaken all other markets.

One unique factor that differentiates this international market is that there is no central marketplace for foreign exchange. You can trade currencies at any hour of the day or night whenever you are ready to enter into a transaction. This market provides plenty of opportunities for investors, but traders need to understand the basics behind currency movements to be successful. Here you will find the complete guidance of forex trading for beginners UK with utmost Trading values and strategies.

GO AHEAD THEN!

What Is the Forex Trading Market?

Forex trading is like any other exchange market, which involves buying and selling currencies on agreed terms. The basic principle behind this trading is that the demand for it determines the prices of one money. For instance, if people want to buy a particular currency, its value will increase and vice versa.

This type of market trades 24 hours a day and five days a week. The most popular trading hours are from 9:00 am to 5:00 pm EST. There is no primary marketplace for foreign exchange and different dealers, known as “market makers,” who facilitate the transactions. Every market maker has two prices – one which indicates his bid price and the other that shows his ask price.

FOREX TRADING STRATEGIES:

Though there are many types of FOREX trading strategies, the most popular ones involve the following:

1. Fundamental Analysis – A trader can be successful with fundamental analysis by evaluating economic reports that include retail sales, inflation rates, and unemployment figures. Generally speaking, if these numbers are on the rise, it will be bullish for a currency.
2. Technical Analysis – A technical analysis can be done by simply examining charts that display the currency rate in the market over a while. Traders have to analyze these charts to predict future movements in the price of a currency pair.
3. Hedging Strategies – This strategy is meant for risk management and can be assumed by traders who can simultaneously sell and buy a currency. Big financial institutions adopt this strategy across the world.
4. Arbitrage Strategies – The arbitrage strategies involve taking advantage of price differentials between two markets for the same security and buying in one market and selling in another, thus making a profit. However, this strategy cannot be exercised by individual investors.
5. Copy Trading services: A new type of strategy emerging in the market involves forex copy trading services. It uses social trading platforms that allow traders to follow the trades of successful Forex traders and execute similar trades themselves.

Forex Terminologies:

You need to know the several terminologies used in the forex market, some of which are:

1. PIP or point – A changing unit in a currency quote equals 0.0001 in value. For instance, if the USD/JPY/EUR currency pair quotes at 120.45, it means that one US dollar will buy you 120.45 yen.

2. Lot – It is a unit to measure the size of your trade position in terms of the base currency. On average, one standard lot size for most currency pairs is 100,000 units of the base currency. Though, this can differ from broker to broker and should be verified before making any transaction.

3- Forex brokers: Many types of FOREX brokers deal in the market. Familiar brokers include forex banks, ECN or DMA brokers, and Market Makers or STP/Dealing desk brokers who provide a central limit order book as an exchange platform. It is essential to check a broker’s reputation and credentials before opening an account with him.

Forex Charts:

Charts play a vital role in the foreign exchange market as they provide essential trading information, including currency pairs, time frames, and prices. There are several sorts of forex charts that traders can use to analyze the market.

FOREX CHARTS:

There are three types of forex charts that can be used by traders while analyzing a currency pair. These include:

1- Line chart – It is a straightforward representation of price movements on a given time frame and usually displays the daily high, low, and last trade price for a currency pair.

2- Bar chart – This is a simple representation of price movements on a given time frame and usually displays the open, close, and high/low prices for a currency pair. Traders generally prefer to use this type of forex chart as it provides more information than line charts.

3- Candlestick chart – It is similar to a bar chart but displays the opening, closing, and high/low prices concerning a displayed candle. Traders usually prefer candlestick charts over bar charts because they can compare the beginning and closing price for any time.

4 – Pivot Points–  The pivot point is a technical indicator by various names such as Support, Resistance, and Turning Points. This pivot point calculates the average of the high, low, and closing prices for a given period which differs from product to product. It can be measured using statistical methods or an average price over a certain number of periods.

What Are The Advantages Of Trading Forex?

1- The market operates 24/5(nonstop) throughout the year. So, there is always an opportunity to be successful in trading.

2- The possibilities to make money are limitless as currency rates change every moment.

3- It provides a direct way to invest in international markets without prior knowledge or experience about them.

4- It provides flexibility, i.e., with just a few mouse clicks, you may buy or sell any currency at the most optimum rate.

5- Unlike other markets, there are no commissions, taxes, or brokerage fees involved in trading Forex.

What are the Disadvantages of Forex Trading?

1- The market is open 24/5 throughout the year, which means there are always new entrants. Hence, it is essential to be good at whatever you do to survive in this market.

2- There exists no central marketplace for foreign exchange, and therefore one cannot get the real-time prices on their screens unless they connect with a market maker.

3- These markets are very volatile, which means that the prices can move up or down quickly, thus increasing the risk of trading forex.

4- One must be conscious of online trading scams and fraudulent activities related to the foreign exchange market as any central body does not regulate it. This makes it riskier for traders who wish to trade in an individual capacity.

5- One needs a lot of money for trading as there is no way out from involving much risk when you are trading forex.

6- The market’s volatile nature makes the margin money requirement very high, which means that one has to have substantial capital or else they cannot trade in this market.

How To Start Forex Trading?

1- A forex trader needs to open a trading account with any brokers registered with FCA, NFA, or CFTC.

2- A forex broker needs to be authorized by Financial Conduct Authority (FCA) in the UK, National Futures Association (NFA) in the US, or Commodity Futures Trading Commission(CFTC)

3- A forex broker needs to have a minimum net capital of not less than $20million.

4- A trader can choose from a wide range of trading account types, including mini, standard, ECN, and cTrader.

5- Also, traders can choose between a fixed spread account and a floating spread account (variable spreads). A Forex broker normally charges either commission or mark-up/swap for each trade done by the trader.

6- When opening an account with any Forex broker, one needs to provide personal information regarding name, e-mail id, contact number, etc. After the account’s opening, traders can fund their trading account with the desired amount of money and start trading in the Forex market.

7- A trader must be mindful about selecting a Forex broker as not all brokers are reliable or genuine.

Brokers That You Need To Avoid:

1- Scammers: These brokers entice traders with unrealistic promises and charge hefty amounts from them.

2- Brokers who allow a high minimum deposit: A broker should not demand a very high amount as an initial deposit. Because such brokers do not have any trading history, it becomes difficult for traders to ascertain the safety of their investments.

3- Non-regulated brokers: The Forex market is not regulated by any central body to be considered a safe investment. Hence, if a broker does not have a license from an authorized body, traders should avoid such brokers as they may be scammers.

Precautions That A Forex Trader Should Take While Trading In The Foreign Exchange Market?

1- A trader should never allow any broker to take over their trading decisions. The only way a trader can be successful in this market is by making decisions on their own.

2- Try to benefit from any free software or educational tools provided by a broker to learn the basics of foreign exchange. A trader should not try to copy trades from other sources as it might be against trading regulations and hence illegal.

3- Try to avoid trading during major economic news announcements such as FOMC meetings, US non-farm payrolls, etc. These news announcements can be highly volatile, and it is better to avoid such situations as far as possible.

4- Do not trust any tip offered by some unknown person on social media websites like Facebook, Twitter, etc. These tips might turn out to be harmful to traders who do not have enough knowledge about forex trading.

FREQUENTLY ASKED QUESTIONS:

1- Is the Forex Trading market a risky place for investment?

As said earlier, the Forex market is one of the most fast-paced and exciting markets globally. However, this does not mean that it’s a shelter to invest in it. Any well-informed person knows that there is always some risk involved in every trade or investment which one makes. But it is up to the trader/ investor to take all steps to reduce risk levels and protect their investment in this market.

2- Is there any currency that is considered safe for trading?

Yes, the UK is considered relatively safer than most other currencies in the world. They are traded widely, and their demand is also somewhat higher among traders. Hence, the UK is considered safer for trading than some other currencies, which may be unstable and thus not suitable for trading purposes.

3- How do I know if my Forex broker is reliable or not?

It’s always advisable to check for a Forex broker’s license before opening a trading account. One should also check for their credentials and references from other people dealing with them in the past.