Forex Trading for beginners

The forex market is a fascinating world of trading. The status of any economy whether developed or developing, business environment and company’s profit etc. are all reflected in the stock and commodity prices. This price is what we ultimate pay, which is none other than a specific currency. That is why the forex market is the reflection of an economy. The value of a nation's currency decides its economic development scale. Forex trading could be a challenging job for beginners without proper knowledge and skills. This market deals with high volatility and interconnection with other trading markets. Furthermore, the forex market is a synopsis of all other major markets. But once you get the knack of forex trading then other assets trading becomes a piece of cake for a newbie trader.

Let’s first understand Forex

What is Forex:

Forex is made up of two words Foreign and Exchange. Foreign exchange is an arrangement where one currency is being purchased or sold in exchange for another. This process is being carried out at a regulated exchange. A forex market is a place where traders can trade in different currency pairs to earn a profit.

Features of Forex Market:

• Currencies are always traded in pairs.
• The first currency is always the base currency and the second one is the quoted currency. That means the value of the base currency is described in terms of the quoted currency.
• This is a 24-hour market, which opens five days a week.
• Forex is a highly volatile and liquid market.
• This is the largest market in terms of market turnover.

For example, USD/JPY is a currency pair, where base currency =USD and quoted currency= JPY Major currency pairs: The pair which involves US dollar is a major currency pair.

• USD/JPY
• USD/CAD
• USD/CHF
• AUD/USD
• NZD/USD
• EUR/USD
• GBP/USD

Cross-currency pair: The pair which does not involve USD is a cross-currency pair. The top traded cross currency pairs are as follows:

Pair	Base Currency	Quote Currency
EUR/CHF	EUR	CHF
EUR/GBP	EUR	GBP
EUR/JPY	EUR	JPY
GBP/JPY	GBP	JPY
AUD/NZD	AUD	NZD
AUD/JPY	AUD	JPY
GBP/CAD	GBP	CAD

Exotic currency pair: The currency pair with one of the major currencies and one currency from the developing or emerging economy.

Top traded list of exotic currencies:

• USD/TRY (US dollar/ Turkish lira)
• USD/SEK (US dollar/Swedish krona)
• USD/ZAR (US dollar/South African rand)
• TRY/JPY (Turkish lira/ Japanese Yen)
• EUR/TRY (Euro/Turkish lira)
• EUR/MXN (Euro/Mexican peso)

Example Forex pair: USD/ JPY

BID-ASK rates: 114.95/114.99

Here, 1 USD= 114.95 Japanese yen

How a currency decides its value

Central banks are involved in currency trading, and it is their responsibility to manage the valuation of their respective currencies. Following are some of the factors which influence the exchange rate:

Interest Rates

If an economy has higher interest rates, it will offer comparatively better interest rates to investors. The currency will attract more buyers, and the value of that currency will be higher.

Balance of Trade (BoP)

A deficit in Balance of Trade (BoP) usually leads to the depreciation of the currency.

Inflation

An inverse relationship exists between inflation and exchange rate. Higher inflation results in lower currency value and vice versa.

Gross Domestic Product (GDP)

The economic indicator represents the overall health of the nation’s economy. A higher GDP reading implies higher currency value.

Employment Data

The higher employability rate indicates a sound economic system, which translates into higher currency valuation.

Forex Trading Strategies for beginners

There are various strategies available to trade but as a newbie in forex trading, it is better to get acquainted with the simple trading strategy first. Forex trading for beginners could be challenging if it is not done with proper research and training or with professional guidance.

Analysis based strategies

Technical analysis-based strategy :

Technical analysis is the projection of the future price action based on historical data. The analysis is done using graphs and charts.

Indicator based:

Indicators are technical tools applied to charts to make a trading decision. There are various technical indicators like moving averages and momentum oscillators.

Price action based:

This strategy involves identification of specific patterns and signals in the recent price movements.

Fundamental analysis-based strategy:

Fundamental analysis involves reading and analysing various economic news and indicators to make a trade decision.

News based:

A forex trader quickly analyse and act upon on the release of any major news.

Economic indicators:

This is one of the best forex trading strategies for beginners as a currency value is highly influenced by the economic factors like Consumer Price Inflation (CPI), Interest rates, Gross Domestic Product (GDP), and employment data etc.

Trading Style based strategies:

Intraday: Traders looks for daily movements in currency pairs.
Scalping: The focus is on small frequent intraday moves.
Positional: Trades captures long term movement in price.

Forex Trading tips for beginners:

• Trade with the best forex broker: It is wise to open a demo/ trading account with a licensed forex broker with best pre and post customer services.
• Research and learn before you trade: Educate and invest in yourself before staring your trading journey.
• Proper risk management: Always quantify and analysis how much loss you can take in a particular trade.
• Money management: Start with a small trading position and increase it gradually.
• Follow top traders: A new trader can always follow the top performer traders and should understand the logic behind their strategies.

Best forex platform for beginners

The best forex trading tip for beginners is to choose a licensed forex trading platform. If you are a beginner in forex trading, you should choose a forex broker, which provides education and research tools to update and prepare you for a profitable journey. Profit4x is the best forex trading platform, which gives leverage and the lowest spreads to trade. Profit4x is a licensed and regulated forex broker. Furthermore, the platform provides more than 20 cryptocurrency pairs to trade with the fastest execution and wide array of products facility. We offer the best of services in fund management and withdrawals