Forex trading is nothing but trading in currencies of different countries i.e., Exchange of one country currency for another country currency. Now, you might think who decides the rate at which the currencies can be exchanged? The answer is so simple; there are certain economic factors such as, the purchasing power of the currency in respective countries, inflation and many other geopolitical aspects that influence currency exchange rate. All these factors that are micro and macro in nature affect a country’s currency value and also exchange value.
Next comes, why do we trade Forex or why do we exchange? As the world is progressing rapidly, the volume of transactions between the countries also getting multiplied exponentially thus makes it necessary for each and every country on the map to indulge in a foreign exchange transaction. Not only for business dealings, people who are traveling abroad also increasing rapidly in these days. And those who are traveling would require foreign exchange. Every country has a mechanism through which they buy and sell currency of different countries so, that countries can provide for their respective citizen’s Forex requirements. As you know what and why of Forex transactions, now the next question should be how to trade in Forex?
How to do Forex Trading: It’s as simple as buying some article in your own country with your domestic currency. The only difference between these two transactions is that the former is limited to national boundaries while the later is executed at international level. Besides, national and international differences Forex trading happens in pairs i.e., you buy and sell a pair of currencies simultaneously. The exchange rate between currencies is nothing but the rate at which one currency can be bought or sold at another country’s currency.
Tips to trade in Forex: For a beginner or an experienced trader trading in foreign exchange is both a science as well as an art. There are certain fundamentals needed to be applied to avoid risks while it is an art as there are certain techniques you need to apply as per time of trading. Let’s look at few tips that can be used or applied in both the cases,
• Assess risk tolerance: Assess your risk appetite, capital allocations for Forex trading right from the beginning.
• Set a goal: Set your financial goals before in hand and the goals should be compatible with your risk appetite.
• Pick an adviser: An experienced broker or adviser is always handy in case you are a beginner.