How Does Online Forex Trading Work
Forex stands for foreign exchange, and therefore online Forex trading is the trading of foreign currency. This kind of trading has gone on for as long as there have been different states with different forms of currency.
For most of history, Forex trading has been something that only happened between states and banks when various different states would exchange goods.
That kind of trading still goes on today. In fact, online Forex trading takes place any time you make a purchase from another country as the money you pay has to be traded for/converted into the currency that the country you are purchasing from uses.
Where in the past, Forex trading was always a physical exchange of currency, today there is an online market that anyone has been able to use since the end of the Brenton Woods System.
Through this online market, anybody with an internet connection, device, and a little bit of money to invest can try there hand at online Forex trading to make a profit. But how exactly does that work?
When you begin to partake in online Forex trading, you will invest a certain amount of money into the process. Depending on the broker you use, you will be able to control a certain total of currency based on the amount that you were able to invest.
With some brokers, experienced traders can control a large sum of money with little investment of their own. Now, with that money, the trader will trade with a certain currency pair. For example, a person could trade US dollars and Australian dollars and then eventually trade back again to US dollars.
At first glance, it does not sound like someone could make much or any money doing that. Actually, when someone learns how to understand the market, they can make a significant sum.
There are two main ways that this happens in Forex trading.
The first way has to do with the interest rate. With this method, a person trades at a certain interest rate. When the interest rate shifts and they trade back, they earn or lose, depending on the circumstances, the difference. The trader’s main goal is to buy at a high-interest rate and then sell when it shifts lower.
The other way a person can make money with online Forex trading is by buying when the exchange rate is one ratio and then waiting until it shifts to a different rate that benefits them, and making the trade again.
For example, if a trader has US dollars and trades it for Australian dollars when the exchange rate is 1:1. They will then wait until the exchange rate shifts to make the trade again. If they predicted the market correctly, the shift would benefit them. For example, it may shift to 1.5:1. That means that when they trade back, they will make fifty percent more than they originally invested.
These shifts in the exchange and interest rates are happening all the time, though not always that drastically.
It is important to know that with either method, there is risk involved, especially if you invest a large sum or use a lot of leverage.
Skilled Forex traders get pretty good at predicting which way interest and exchange rates are going to change and are then able to make good investments. But there is always the chance, especially in the beginning, that the market will not shift in the way that you expected it to, and you will lose money.
That is why, in the beginning, it is best to start out small and use all the tools and resources you have available to you to make the best decision.
How to Start with Forex Online Trading
Online Forex Trading Education
Before you even begin to partake in online Forex trading or even pick a broker, you need to spend some time getting educated on the subject.
As mentioned above, every time you make a Forex trade, you are dealing with a certain level of risk.
Just like the saying says, bigger risk can mean a bigger reward. If you do not understand the risk you are taking or the grounds that you are making your predictions on, you are likely to run into problems that will prevent you from making money and may even result in you losing money.
Depending on how much you invest and how much leverage you use, you could end up losing a lot of money. As you research and learn about online Forex trading and the Forex market, you will be able to assess risk and make accurate predictions that could result in you making enough money to make Forex trading your full-time job if that is what you want.
When you begin to educate yourself, you can go two different routes.
You can educate your self by reading articles and gathering as much information as you can, or you can sign up for an online course.
If you decide to go the route of teaching yourself, there are lots of resources out there. You can read articles like this one, watch youtube videos, and purchase books or e-books.
On the other hand, if you decide to go the route of taking a course, there are many different courses that you can enroll in that will help teach you the craft even if you do not know anything about the subject yet.
At EA Forex Academy, there are comprehensive courses that have taught over 22,000 people how to trade Forex online.
But what exactly do you need to focus on learning?
There are two main things that you need to focus on learning before you even begin to practice on a Forex demo account. First, you need to learn the currency.
There are tons of currency pairs out there, so it will be hard for you to learn them all, but you can start by picking a couple that you plan to trade with and learn everything you can about them.
Figure out if those currency pairs actually make money and, if so, learn about patterns in their interest and exchange rates.
That leads directly to the second thing you need to focus on learning, market patterns. All of your trades will be made off of predictions you make about the market. You need to understand common market patterns along with indicators that could show a future shift.
Internet Connectivity
You can do this before, during, or after your research, but it has to be done before you start with online Forex trading. You need to ensure that you have a good internet connection and a device that you can use.
First of all, online Forex trading takes place online (obviously), so you need to have the ability to log on to your broker to see and make trades whenever you need. Sometimes trading is a quick thing, and if your internet is slow or your device is old and has a problem, you could lose out on money.
If you plan to make online Forex trading a job, you could start out with the device and internet you already have or buy a cheap one. Then as you make money, you can reinvest some of it into Forex trading and upgrade your internet and buy a better device. Some people prefer to have one device for their Forex trading and a completely separate one for their personal use.
If you do decide to make Forex trading your full-time job, you may be able to write off your computer or your internet on your taxes as a business expense.
Online Forex Trading Brokers
After you have done your research and have a device and internet, you can find a Forex trading broker to use. There are lots of options out there, and you need to ensure that you pick one that will both work for you and is safe.
The first thing you need to do is figure out what your trading style is or will be. You need to figure out how often you plan to trade (is it a hobby or a job), what time(s) of day do you want to trade, how much leverage do you want to be able to use, and what tools that you expect to have available to you.
As you look at brokers, you want to make sure that they offer everything that you need for your trading plan/style. After that, you should compare the cost. What commissions does the broker ask for, do they have a minimum deposit, what are their margin rates, what trading limits do they place on their traders, etc.
Finally, you want to make sure that the broker you choose is safe. There are different groups that regulate Forex traders that are divided into three tiers.
Tier one jurisdictions are generally the safest as there are the most regulations on what the brokers can do. However, some traders are willing to trust word of mouth and do not necessarily require tier-one supervision. You have to decide what you are willing to risk.
Open a Demo Account
Once you pick a broker, you should open a demo account. A demo account will allow you to practice online Forex trading without making any real investment. This can help you learn the broker or platform that you chose, as well as put all that online Forex trading education to test.
You should stick with demo trading until you feel confident in your abilities. No matter how much research you do, practice makes perfect, and you want to make sure that you know what you are doing before you risk your real money.
Choose the Right Online Forex Trading Platform
While you are using your demo account, you should figure out what trading platform you want to use.
The two most popular trading platforms out there are MetaTrader 4 and MetaTrader 5.
Most Forex traders use one of those two platforms no matter which broker they use.
However, there are various platforms out there, and many brokers offer their own platform that comes with certain special tools that MetaTrader 4 and MetaTrader 5 do not.
Whichever platform you end up choosing, you should practice with on your demo account before opening a live account, so you know how it specifically works.
Open a Live Account
Once you feel like you have a good handle on how online Forex trading works, you can open a live account. This is when you start investing and making trades with your real money.
Even though you have practiced on the demo account, you should still start with small investments and small leverage until you really get the hang on it. No matter how much you practice on a demo account, trading with real money will feel different.
Fund the Account
When you open your live account, you will have to fund the account. This basically means that you will have to put money into your account to trade. This may be all the money that you get to trade in the beginning, or you may get to start out using leverage depending on the broker that you choose.
Many Forex brokers have a minimum deposit amount for new traders. If this is the case, start with that amount and work your way up as you are successful and figure out the best techniques.
If there is not a minimum amount, start with an amount that you will be okay if you lose. You do not want to do something major like investing your entires saving account your first time trying real online Forex trading.
Enter Your First Trade
After you fund your account, you can complete your first trade. This trade can be both scary and exciting all at once, but as long as you did not invest too much money, it will be fine even if it does not go well. As you make the trade, trust your online Forex trading education and continue to learn as you go.
Forex Trading Robots
One of the nicest things about modern online Forex trading is that you can do it without even actually sitting at your computer. You can make robots that will do the trading for you and make money as you carry on living your life.
A Forex trading robot is basically coding that you can input a trading strategy into. You can then upload it to your broker, and the code will make the trades for you based on the strategy that you input.
This will both allow you to do other things than sit in front of your computer, and it will take the emotion out of it. When a trader (naturally) feels too much emotion as they trade their money, they are more likely to make careless mistakes as they think less logically.
Even if you do not know how to code, you can still use Forex trading robots without programming skills. There are sites on the internet that will allow you to test and input strategies and then will make the code for you. Often, these websites will even offer classes and resources that will teach you how to use the robots.
Forex Trading as a Job
Many people use Forex trading as supplemental income on top of their regular job. This provides them with extra money to do fun things and travel; however, you can eventually make online Forex trading your full-time job if you want to.
Before you quit your regular job (unless you have plenty of savings), it is a good idea to practice Forex trading for a while. Figure out how it works and start making some money. Once you start making enough money, you can make Forex trading your full-time job.
If you decided to do so, you might want to invest in a good computer, good internet, and maybe some online Forex trading software that can help you make decisions (though what you really need is completely up to you).
There are many benefits to using online Forex trading as your full-time job. First, you will work for yourself, so you no longer have to deal with a pesky boss or annoying meetings.
Second, it is an online job. You will be able to travel wherever you want as long as you will still have access to the internet. Finally, you could end up making significantly more money than what you are currently making at your job.
Starting online Forex trading could also be a great option for you to try if you are currently unemployed and cannot find another job.
Conclusion
Currency trading is a great option for everyone to make a little extra money or start working for themselves. It is even easy for beginners to enter the field, but online Forex trading education is key before diving headfirst into forex trading.
Using online courses like EA Forex Academy makes that process easy. After that, it just takes a little bit of time on a demo account. And then you can get started making real trades and making real money.
If this sounds like something that you are interested in, do not waste any more time and get started today!
How online Forex trading works?
Forex stands for foreign exchange, and therefore online Forex trading is the trading of foreign currency through an online market that anyone has access to. At this online market, anybody with an internet connection, device, and money to invest can try making a profit with online Forex trading.
How to start online Forex trading from home?
Before you begin with Forex trading, you need to have a good education on the subject to get familiar with major terminology. Then you need a good internet connection and a device that you can use for trading. After you got a device and good internet, you need to find a Forex trading broker to place your trade. Then you need to choose a trading platform where you will open your trading account. First, it is better to start with a demo account and once you’re ready and know what you are doing, you can fund the account and go live by placing your first trade.
What is online Forex trading?
Online Forex trading is the trading of foreign currency over the internet.