FX Trading: Easy Ways to Trade Forexby Elliot C. Financial Analyst
Fx trading for beginners can be tricky. More so, forex trading strategies aren’t that easy to learn too.
But there are ways to learn it. Thanks to the help of forex trading brokers, you can expose yourself to fx trading.
But before we discuss these easy ways to trade forex, let’s first introduce you to the forex market.
FX Trading: Easy Trading
The foreign exchange market is a remarkable market that beats other markets in many ways.
For instance, it’s the largest financial market out there, beating the stock markets. It also has the largest trading volume, with trillions’ worth of transactions every day.
Now, you might ask, “But exactly how to start forex trading?”
The answer is simple: you’ve probably done it before. When you, for instance, go abroad and exchange your country’s currency to the local currency, that’s already forex trading.
That’s because fx trading is simply exchanging one currency for another.
Forex trading is also easy as fun. There are many ways to trade forex, the simplest of which is the one we’ve just mentioned.
But if you’re hot to learn how to trade forex, here are some ways to trade forex.
In the spot forex market, you can trade currencies right away or “on the spot.” Of course, you’ll follow the current market price.
It’s the biggest market here since you’re actually trading the assets. You can benefit from its simplicity, tight spreads, 24-hour market operations, and liquidity.
You can also enjoy huge benefits from forex trading brokers, which usually provide charts, news, and research for free.
The price in the spot forex market follows the law of supply and demands. But it’s also an amalgamation of many factors, such as:
- Interest rates
- Economic performance
- Sentiment toward political situations
- Perception of future performance
And since we’re on the topic, note that forex trading strategies rely on these factors. If you’re doing some fundamental analysis, you’ll have to study these. If you’re doing the technical, you’ll still study these.
Futures are a kind of derivatives that let you trade currencies through contracts. Let’s first see what futures are.
A futures contract is a deal to buy or sell a specific asset at a future price at a future time. These follow standards for number and quality since they trade on an exchange.
In the transaction, the buyer needs to buy the underlying asset at the future date and price. The seller must provide the underlying to the buyer at the expiration date. This type of contracts started in 1972, with the Chicago Mercantile Exchange as the creator.
You can do fx trading in this market if you’re already familiar with currencies’ behaviors. Now, this is a bit of an advanced strategy. But you can learn it when you study forex trading for beginners.
But futures aren’t your only options (See what we did there?). Options are another type of derivatives that let you trade forex with more flexibility.
In a nutshell, options give you the right but not the obligation to buy or sell an asset. The other party to you, of course, will have the obligation to sell or buy.
The contract also has an expiration dates and also trades on an exchange. Here are some of the exchanges that offer options trading:
- Chicago Mercantile Exchange (CME)
- International Securities Exchange (ISE)
- Philadelphia Stock Exchange (PHLX)
Options trading with currencies lets you use a bunch of forex trading strategies with silly names. Don’t believe it? Search the following and see for yourself:
- Covered Call
- Married Put
- Bull Call Spread
- Bear Put Spread
- Protective Collar
- Long Straddle
- Long Strangle
- Long Call Butterfly Spread
- Iron Condor
- Iron Butterfly
Weird names, but they work.
We can safely say that currency options make fx trading more interesting, right?
Now this. A currency ETF (exchange-traded fund) tracks the performance of a single currency in the forex market against the greenback. It may also use a basket of currencies.
You can use currency ETFs for fx trading. If you want transactions outside of the futures of fx market, but you still want exposure, this if for you.
But take note of this: trading currency ETFs is more on speculations on spot exchange rates. The most important aspect of currency ETFs would be exposure to spot exchange rates.
What does this mean?
This means you are betting either of two things: the core currency performs well, or the counter currency slips. In other words, you go long on the robust currency and short on the other simultaneously.
On top of those, investing in currency ETFs also let you benefit from diversification. You can hedge against possible economic events that might ruin traditional trading.
Different assets provide different risk-reward opportunities. You can also gain exposure to different currencies.
With diversification, you can maximize possible gains and minimize potential risks.
Forex Trading Brokers and Forex Trading Scams
Now, it’s possible you’re not planning to get the service of any broker. But we doubt that. Assuming you will get one, you got to remember to be careful.
Most forex trading brokers offer these ways to trade forex. But others don’t. If you’re thinking of using one method here that the broker doesn’t offer, you can reconsider.
At the same time, three of those ways are pretty complex for a beginner. Some forex brokers can take advantage of that and convince you you’re doing well when you’re not. The goal is to get you spend more on transactions for them to get bigger commissions or fees.
And since we’re on it, let us warn you against forex broker scams. Fx trading may be the biggest financial market, but it doesn’t have any central authority or regulator. Forex brokers do have regulators, but not all of them are regulated.
Created on Dec 24th 2019 00:35. Viewed 549 times.