Forex Trading for Beginners 2020
Let’s introduce you to the world of Forex with this Forex trading for beginners 2020 guide. The word “Forex” is a combination of the words “Foreign Currency” and “Exchange”. This involves the process of changing one currency to another, and this can be for a variety of reasons.
Forex trading is all about making a profit in the foreign currency exchange market by betting one currency against another. Today, we want to take you on a step by step journey of Forex trading for beginners 2020.
Right now, we want to provide you with a good introduction to Forex trading for beginners 2020. Here you will learn exactly what Forex is, how it works, what the pros and cons of it are, and so much more. Yes, there is a lot to know, but with our simple guide, you can learn all of the important basics in no time at all.
Forex Trading for Beginners 2020 – The Forex Market – What is it?
Simply put, the Forex market is where currencies are traded against one another. You might not realize it, but currency exchange is an important part of everyday life, particularly when it comes to conducting business in a foreign country.
For instance, if you want to import Swiss watches from Switzerland, and you live in the USA, you would have to exchange the USD into either the Swiss Franc or the Euro in order to make that purchase.
What is interesting to note in this Forex trading for beginners 2020 guide is that it is traded electronically, and there is no physical marketplace where this is done.
Keep in mind that the Forex market is open 24 hours per day, and just over 5 days per week. This is true across virtually all time zones, as foreign exchange currency trading is performed in various financial centers worldwide.
Forex Trading for Beginners 2020 – How We Can Trade it?
What is important to note here is that Forex trading is really only possible thanks to the internet. Remember that before the internet, the only ones who were trading currencies were big banks and massive multinational corporations.
However, thanks to the internet, it has become possible for the average Joe to trade currencies from home.
Banks and brokers have provided individual people with avenues for foreign currency exchange trading. These entities, such as the brokers, have made it possible for normal people to engage in Forex trading, even with very limited capital.
How Forex Trading Leads to Profits
You are probably wondering how Forex trading actually puts money in your pocket. Although the actual process of profiting in the foreign exchange currency market is fairly difficult, in theory, it’s actually pretty simple.
This Forex trading for beginners 2020 guide is just an introduction, so we want to keep things very simple right now. In essence, this kind of trading involves pitting two currencies against one another, so for example, the USD (United States Dollar) vs the JPY (Japanese Yen).
What traders do, for example, is to say that the USD will decrease in value compared to the JPY. If a trader gets it right, the resulting difference in price between the two currencies, after a set period of time, will be the profit.
Of course, there is a lot more to it than this, but those are the basics. That said, if you have a solid knowledge base, opening the right positions, or placing the right bets, so to speak, can lead to massive profits, especially when leverage is involved.
The Pros & Cons of Forex Trading
Something else important that needs to be talked about in this Forex trading for beginners 2020 guide is that there are both advantages and disadvantages to the foreign currency exchange market. Let’s take a look at the major pros and the big cons.
- The Forex market is open for a long time each week, this being 24 hours per day and 5 days per week. Due to time zones, the day starts in Australia and ends in New York, with major financial centers being in Hong Kong, Sydney, Tokyo, Paris, Frankfurt, London, and New York.
- When it comes to the daily volume of trading, the Forex market is by far the biggest market in the world, the market that has by far the most liquidity. Therefore, entering and exiting positions is possible within a fraction of a second, thus providing tons of profit opportunities.
- Due to there being such a large flow of trading in the Forex market, it is extremely hard for a rogue trader or an individual party to influence the price of a currency. This helps create both safety and transparency for traders across the world.
- It is possible for the average person to trade foreign currencies with minimal investments. Of course, leveraging positions helps a lot in this regard, but even without leveraging, traders can invest minimal amounts and still make profits.
- Leverage can be a big bonus in FX trading, but also a problem, especially for newbies. Using leverage, a trader can control a very large position with a small amount of money. Sure, this is a good thing if the trade goes your way, but if things go south, you can end up losing and even owing a great deal of money.
- Currency traders need to have an in-depth understanding of economics, particularly the fundamentals of economics, as well as indicators used to determine where and when to place trades. Simply put, an in-depth grasp of the big economies from the world, as well as economic fundamentals, is required to be successful.
- Forex traders do have to be careful when dealing with foreign currencies, particularly when using brokers located in countries that have little or no regulations. It is up to each country to make individual regulations for FX trading, so having the right broker that is regulated by the right country is a big deal.
Forex Trading for Beginners 2020 – Final Thoughts
We hope that this Forex trading for beginners 2020 guide has helped you learn the basics of the foreign currency exchange market.
Stay tuned because in the following days, weeks, and months, we will be covering absolutely everything you need to know in order to become a professional and profitable FX trader.