If you want to start Forex trading, where do you start?
You need to know how Forex trading works, how best to select trades and how to get a trading account up and running.
Step one: How Forex trading works
Forex trading involves trading different currency pairs. You can either opt to trade the rand against different major currencies or opt to trade international currencies.
All currencies come in pairs.
The value of one currency is relative to the value of another. Just think about the price quotes you see when you buy currency to go on an overseas trip.
Most currencies are quoted to four decimal places and this is where pips come in. For example, say the EURO/DOLLAR is 1.12400 If it moves to 1.12403, that’s a move of three pips. The movement of pips determines your profits and losses when trading Forex.
Step two: How can you pick Forex trades
Technical analysis is probably the easiest way to trade Forex. As the Forex market is strongly trend driven, you can use different indicators and tools to pick the best trading strategy for you.
Once you decide what currency pairs you want to trade, you can focus on what trading strategy and technical analysis indicators work best.
Step three: Opening a Forex trading account
To trade, you’ll need a Forex trading account.
If you decide to trade the rand against international currencies, you’ll need to open an account with a stock broker that allows you to trade currency derivatives. If you already have an account with a broker, you may be able to trade currencies through them.
On the other hand, if you decide to trade international currencies, Forex trading through a spread trading account is probably easiest.
You don’t have to worry about using your offshore allowance as all trades are rand denominated. So there you have it, how to start Forex trading in three steps.