Understand the various types of markets around the world. Here’s a brief introduction to financial markets and their scope.
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Foreign Exchange, popularly known as Forex or FX Trading, the most widely traded markets in the world with more than $5 trillion traded daily.
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CFD stands for Contract for Difference. CFD is an agreement between two parties to pay the difference between opening and closing price of a contract...
Read moreForex, FX – short for ‘foreign exchange’ – is trading currencies of different countries against each other.
There are many different players in the FX market. The objective of different participants can range from: to make profits, to hedge their risks or to pay for goods and services in a foreign currency. The main participants of trading are commercial banks, that’s why currency quotes are set at the interbank market. Apart from large commercial and central banks and multinational companies, many risk-seeking investors engage in different sorts of speculations. Among them are typical retail traders – individuals, who trade on the daily/weekly basis. Many traders analyse economic and political news, statistical releases and public engagement of influential persons to decipher the future movement of currency’s prices. Along with it or exclusively many use technical indicators to trade successfully.
Forex market is decentralized. In other words, there is no physical location where investors go to trade currencies. Forex traders use the internet to check the quotes of various currency pairs from different dealers and to obtain access to interbank currency market we will need to turn to a Forex broker.
A few reasons to start Forex trading are listed below:
How much lucrative is trading Forex? Claims that say one can double or triple money every month is misleading. However, in practice professional traders return 20-80% a month, so aiming for return of 20-30% is both a realistic and a reasonable expectation.
Forex trading is very risky and we should trade with money we can afford to lose. Nevertheless, bear in mind, there is no need to be afraid of the risk. As traders, we have to take a reasonable risk, with a high potential reward and make efforts to decrease risk. We will soon discussrisk management.
FX market is open 24 hours a day, 5 days a week. FX day always begins in Australia and New Zealand and then spreads to Asia, then Europe and, finally, the United States and Canada join in.
| Summer (aprox. April - October) | Winter (aprox. October - April) | |
|---|---|---|
| Australia | 22:00-07:00 | 21:00-06:00 |
| Japan | 23:00-08:00 | 23:00-08:00 |
| UK | 07:00-16:00 | 08:00-17:00 |
| USA | 12:00-21:00 | 13:00-22:00 |
All that you require isinternet access. FX are traded in platforms calledMetaTrader 5 (MT5). We can be easily downloaded from Platform tab or by login in client portal. Wealthway offers such software for different operating systems, including the ones for mobile devices.
We will use it to view and analyse the charts of financial instruments and make our trades.
MetaTrader 5 is an institutional multi-asset platform offering outstanding order execution capabilities and analysis tools. It is also widely used for automated trading systems (trading robots). MetaTrader 5 is an all-in-one platform for trading Forex, Stocks and Futures.
One of the frequently asked questions is what to choose – MetaTrader 4 or MetaTrader 5?
A common misconception is that MT5 is an upgrade of MT4. This is not really true. MT4 is geared for Forex trading whereas MT5 provides traders with access to CFDs, stocks and futures also apart from currencies. At the same time, it can be said that MetaTrader 5 offers a wider range of features. Let’s make a comparison
Hedging, i.e. the ability to open multiple positions (buy and sell) at the same time for the same symbol, is allowed is both terminals. Both versions of the program allow traders to use automated, i.e. to develop, test and apply Expert Advisors (trading robots) and technical indicators.
To make a conclusion, MetaTrader 5 contains more features but MT4 is suitable for beginning traders in forex.
Placing a trade means to buy or sell different currency pairs. For example, the current price of EUR/USD is 1.1000. If we expect the euro to go up compared to US dollar, we buy EUR/USD. To perform it, we need to open a trading program (MetaTrader 4 or MetaTrader 5), click on a “new order” and then choose 'buy'.
If the price of EUR/USD rises, we close the position and book profit. The profit depends on how much the rate of this currency pair has increased as well as on the size of the position.
If our assumption was wrong and EUR/USD declined after we bought it, we will have a loss. The size of our loss will depend on extent of fall during this time and the size of the position.
Traders who expect the prices to rise are called ‘bulls’, while those who expect a decline are referred to as ‘bears’. A buy trade is also known as a ‘long position’, while sell trade is also called a ‘short’ position.
Currency pairs tend to move in trends, i.e. to rise or fall for significant periods of time. “A trend is your friend” is a common saying among traders. A series of higher highs, is an uptrend and a sequence of lower lows and lower highs is a downtrend. The idea of trend trading is to open positions at the start of the trend and get a big profit as it progresses.
It’s common-sense to buy at a lower price and sell at a higher price. We need analyse the chart and the economic undercurrents of the currencies that form a pair and decide which direction it will move next.
CFD is the short form used for ‘Contract for Difference’. It is a contract between two parties agreeing to exchange the difference in the value of security or other asset between the time when CFD opens and the time when CFD closes.
CFDs are derivatives based on an underlying instrument. The trader does not have ownership of the underlying asset. But, he can participate in the movement in price of the asset. Effectively, it is possible to earn profit in both rising and falling market. While in rising market, the trader will look to buy a CFD and sell it later, in falling market, he will try to sell a CFD position and then buy it back later.
FX & CFD trading is typically done through brokers. Brokers or brokerage are companies that offer people with access to the interbank market. It means, the broker can give us access to a live currency-quotes, and place our orders to buy/sell currencies with just a few clicks. When we choose to stop our trade, the broker closes the position on the interbank currency market and credits our account with the gain or loss. It will just take us only two minutes to open an account with the forex broker of our choice and begin our trading career. As a benefit for the services, a trader has to pay his broker a spread or commission.
When selecting a broker, give important attention to the company’s goodwill, age, regulation, reviews, and support. Wealthway is affording high-quality services to its clients since 2017 and is widely acknowledged as one of the leaders in the currency market. Its global success doesn’t stop the company from being extremely customer-driven and conscious of the needs of every single trader. Wealthway support is always ready to help us and is at your service 24/7. Furthermore, it’s important which trading requirements a broker grants. Especially, compare the execution speed, spreads, swaps, and commission. Wealthway can boast split-second execution, spreads from 0 pips, market analysis, training, education, and other promotional offers. Wealthway always strives to offer us the best trading experience ever.
Worried about losses of your own money in trading, now don’t worry, we have need not spend our own money on forex right away. Most brokers offer their practice demo accounts, which will allow us to test out the forex market with virtual money using real market data. Practicing on the demo account is a good way to learn how to trade. We will be able to practice by clicking the buttons and understanding everything much faster.
Still, everything has advantages and disadvantages. A demo account has them too. As we have said above, a demo account will let us practice our skills without wasting real money. Even if we make a blunder, we won’t lose anything. It sounds tempting but there are pitfalls.
Firstly, demo accounts offer a fuller amount of money compared to what a trader uses during a real trade. A trader can decide any amount of money for practice. Nevertheless, people usually choose more than that what they really trade with. They take extra money for mistakes. But on a real (live) account, traders won’t have that much money for their faults. Furthermore, with big capital, the trader doesn’t experience real losses as they are easier regained by a big capital than by a small one.
Secondly, another major disadvantage of the demo account is the lack of real sentiments. It can be described by psychology. When we have nothing to lose, we do not feel fear. Fear influences trader’s action and few traders can control their emotions. As a result, it doesn’t make much sense to practice our skills while we do not know how we will behave in a stressful situation.
Yet, if we follow certain rules, the demo account can be a really useful tool for practice.
Besides, there are circumstances when we definitely should use the demo account.
Making a judgment, we can say that a demo account is a good choice for training. We can test our strategies without losing money if they are expensive. But we should remember about the weaknesses of demo trading.
Pay heed to the fact that the minimum real deposit at Wealthway starts from just $10. This means that we can start trading with modest amounts of money and thus limit our risks, while still having a chance to reap profits on the live account!