Introduction - Forex Trading for Beginners
What is Forex Trading
Understand what you trade and how it behaves
What is FOREX?
Forex or foreign exchange is the exchange of one currency for another. The Foreign Exchange (FX) market is the largest financial market in the world. FX volume exceeds $5 trillion a day, according to the latest data from Bank of International Settlement.
What is forex trading?
Forex trading is the process of simultaneously buying one currency and selling of another. It is the most liquid financial markets in the world.
The main attraction to FX market is the potentially high return offered. The reasons for people to speculate in FX market will vary from one individual to another. It all boils down to earning extra money. Just like other forms of speculation, money is made when the investors/traders correctly anticipate the movement in a market. For example, if an investor thinks that the Euro (EUR) is going to rise relative to the US Dollar then he would open a EURUSD position by buying Euros and selling Dollars. For example the EUR was bought at EURUSD 1.3500.
Later, the Euro rises in value relative to the US Dollar, so that the EURUSD is now exchanging hands at 1.4000. The investor then sold of his EUR holding at 1.4000 for a gain of $0.0500 (USD). This move of only 5 cent does not seem very large, but given that trading in Forex involves trading on margin (leverage), investors/traders can have very large returns (or losses) with these small movements in exchange rates. The normal size of Forex transactions is 100,000 units, this small move would be worth $5000 to the speculator (0.0500 X $100,000 = $5000).
Several reasons to exchange foreign currency for domestic currency:
1. to pay for goods and services in the foreign country
2. to invest in its financial assets
3. to hedge against unfavorable rates of exchange in the future
4. to profit from currency fluctuations
Advantages of Forex Trading
Automated Tradings: Expert Advisors (EA) and Robots
With Expert Advisors you either program or purchase a program to trade on your behalf. EA’s are exclusive to MT4. Robots are very popular within Forex trading and there are hundreds of thousands available to choose from. Some are free and others are commercial. Some EAs are designed for specific markets and for certain trading styles. Therfore it is best that you check the EAs you are interested in using. Agrodana Futures does not supply Expert Advisors but we do allow you to use any EA you choose, on any market of your choice.
Before you begin trading you should understand that trading is not that straight forward. In order to decide what to trade, how you wish to trade a particular market or when you should make the trade, you will need to analyze the markets first. We can divide analysis into two core components: Fundamental and Technical. These topic is covered in more details here.
Automated Tradings | Expert Advisors (EA) and Robots
With the advancement of technology, our MT4 trading platform allows you to take advantage of its auto trading feature. Clients can trade both manually or automatically. Manual trading is the traditional approach, where a trader analyses the markets, enters, manages and exits a trade by their own observation. Automated trading is when trading is executed by either a signal provider or an alogorithm on behalf of the trader. A common tendency for manual traders is they want to be in control of the process and the outcome of the results. Wheras an automated trader may not have time to learn to trade, monitor the market, or may wish to avoid the emotional ups and down trading can present you with.
Lastly, another thing that traders need to understand is their own trading styles. How long do you intend to keep a trade? How frequent do you want to trade? When do you want to trade? Those questions need answering and will determine your trading styles. For more information about trading strategies, you can check out the “Understanding Trading Strategy” page.
This is trader who opens and closes a trade within the same day. Emphasis is on technical analysis with short time frame.
Analyze, enter, manage and exit their positions using Technical Analysis.
Associated with long term trades. Any trades made would be in the direction of the prevailing trend.
Tend to Specialise in ‘Big News’ events such as US Non-Farm Payrolls and trade during, or around the release of an important news release.