Learn Forex Trading: Basic Terms and Definitions

Many people are looking into trading to escape the rat race and gain financial independence. It is a promising dream to be able to trade and control your income from virtually anywhere in the world. With so many different financial markets available to trade, however, it can be confusing to decide which one you should learn about. You can trade everything from Apple stock options to pork belly futures! All of the different markets can have their advantages and disadvantages. In my opinion however, Forex is the best market to trade.

There are many advantages of trading Forex rather than stocks or futures. I want to go over just a few of them with you today. For starters, most brokers are commission free. There is no fees whatsoever with your transactions! Retail brokers are compensated by something called the “bid-ask spread” which is usually no more than a few pips. https://economiafinanzaonline.it/investire-ai-tempi-della-crisi/guide/ It is typically less than 0.1% of the price under normal market conditions. Unless you are the type of trader that is scalping, this is a negligible cost and a very fair price of doing business.

Another advantage is that there is no fixed lot size in Forex. With futures and stocks, the minimum is one contract or one share. Some brokers don’t even let you make a stock transaction unless it is in a block of 100 shares. This is horrible for money management. It makes it very hard to risk a fixed percentage of your account when placing a trade. With Forex however, you can trade as small a unit as something called a nano lot. This is 0.001 of a lot. It makes position sizing much more precise and you are able to control your money and risk much better! Also because you are able to position size so accurately, there is a lower barrier to entry than other markets. You can open an account with as little money as $25 and still be able to position size to risk a fixed percentage of your account. This is very good for new traders that are not willing to open a big account just yet.

One of my favorite things about the Forex market is that it is a 24 hour market. From Monday through Friday, the market is never closed. This makes it easy for people that are working all day and want to take up trading part time. Some people develop their¬†Forex strategy¬†around this. You can choose your own hours of when you want to trade. Another reason I love this is that your stop loss is always hit. With stocks and futures, if you have a stop loss at a certain area, price can gap through it overnight potentially leaving you with a much bigger loss than you had anticipated. Not with Forex. If you have your orders in place, you can go to sleep not worrying that you will wake up to a huge loss. Your orders will trigger while you’re sleeping!

Another advantage of Forex compared to other markets is that it is so much bigger than other markets. It is estimated that US$4 trillion changes hands every day. This means that no one can control the market. Even the huge central banks and hedge funds cannot control the market price for an extended period of time. This makes it much fairer of a game for everyone involved.

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