How to trade Forex

Currencies have a growing following among investors as an effective alternative to securities and debt issues. From our Finance blog we talk to you about how to trade in Forex.

Retail currency exchange basically consists of the purchase and sale of foreign currencies, led by the US dollar, the British pound, the euro and the Japanese yen as will be specified in later lines. This market is open 24 hours a day for those who intend to make their own decisions following international economic trends, politics and the individual fundamentals of each country.

Online brokerage accounts can be opened with just a few dollars through brokerage firms that can provide clients with access to more capital to facilitate all transactions.

As in any other financial and stock market area, you must always opt for the most economical options. So, for example, when  investing in Forex , one of the most interesting brokers that we recommend from our Finance blog is IG Markets , among other things, due to the fact that it is not necessary to store real bitcoins, you will have direct access to the market without complications in between and the spreads are from 0.80 points in EUR/USD and AUD/USD.

Some keys to operating in Forex

One of the main differences with respect to the traditional stock market is the Forex or currency market. It does not have a centralized location, since it functions as a kind of global electronic network of banks, financial institutions and individual traders who are able to sell and buy foreign currency.

Although it may seem otherwise, you can start trading in Forex with a small percentage of money, because in this way you do not run unnecessary risks. When opening a brokerage account in the foreign exchange market, it must be remembered that the procedure is very similar to that undertaken in the stock sector.

Regarding the ideal times or moment to trade, it must be kept in mind that the moment will depend on the type of currencies we intend to use, as well as the type of markets in which we carry out such operations. It must not be forgotten that there are four sessions or time periods corresponding to the Asian, European and American session.

In the first case ( Asian session ) the most important weight is held by Tokyo, Hong Kong and Singapore. We are facing a phase in which, as a general rule, large fluctuations in currencies do not usually occur. Although the level of volatility in the European session (London) is considerable, the truth is that the currency movement is greater in the American phase (United States), given that it has a considerable percentage of European investors who operate in its interior. Of all these sessions, the one with the best movements in the prices of the currency pairs is the London session. To be more exact, the one in Tokyo opens at one in the morning and closes at 10 a.m. For its part, the one in London opens at 9 a.m. and closes at 6 p.m. and the one in the United States has hours from 2 p.m. to 11 p.m.

Secondly, we must keep in mind that in Forex , there is a certain number of currencies that have the support of a considerable percentage of participants. The known major currencies  we are referring to are the dollar (USD), the euro (EUR), the yen (JPY), the pound sterling (GBP), the Swiss franc (CHF), as well as the Canadian dollars ( CAD), Australian (AUD) and New Zealand (NZD). In any case, what is present in 80% of Forex transactions is the USD.

On the other hand, we must not overlook currency interest rates. In this sense, it must be kept in mind that when a Central Bank raises interest rates, the currency of the country in question automatically rises and vice versa.

Likewise, to trade in Forex, as indicated by certain traders, they can use what is known as a market order or a limit order, among many others. A market order can give a trader the ability to obtain the currency at any exchange rate that is currently traded in that area, while a limit order allows the trader to specify a certain entry price.

One of the tools that can be used when traders have open positions is known as a stop-loss order. This order has a preset limit to automatically close a position when a certain bid or ask price is reached in order to prevent certain additional losses if the price goes against you.

The information presented in the previous lines includes only some brief recommendations on how to trade in Forex. How was your experience? What advice would you provide?

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