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What You Need to Know About Trading Forex

This is a guest post.

Trading on the financial markets seems like something that only those at the top of the business pyramid can take part in. While you need a certain amount of knowledge to trade in any market, trading forex can be done by just about anyone, and it offers potentially great opportunities to make profits from trading.

However, you might wonder what forex is. Short for “foreign exchange,” forex trading is where you trade on whether one currency pair e.g. GB Pound will strengthen or weaken in value against another currency such as the US dollar. All forex prices are quoted in terms of one currency versus another i.e. GBP/USD or sterling vs US dollar.

By going long on a currency pair, you are essentially buying the first currency (i.e. GB Pound) and selling the latter (i.e. US dollars) on expectations that the GBP Pound will strengthen or the US Dollar will weaken. Alternatively by going short a currency pair, you are selling the first currency (GB Pound) and going long the latter (US dollar) on expectations that the GB Pound will weaken or the US Dollar will strengthen.

forex trading

There is a how to trade Forex guide on City Index if you want to learn more.

If you want to start trading forex, you should read the guide first, and do some research on the currency markets to help identify any trends in price movements. Then, you should find a currency pair you want to trade with.

Next, you decide whether to ‘go long’ or ‘buy’, which means you expect the first currency of the pair to strengthen in value, or ‘go short’, which means you expect the first currency to weaken in value. If you make the right decision, you stand to make a profit from the price movement from the start of the trade to the time you decide to close it, in your favour. Alternatively, if the opposite happens, you lose money.

Forex trading is a leveraged product and as such, there is the potential to lose more than your initial deposit. There are risk management tools available to help curb losses to acceptable levels dictated by you.

Forex trading is very risky but if done right, could help you to make a secondary income, which you could put to good use. it could go towards paying off your mortgage, be spent on a week’s holiday abroad, buy a new car, fund home improvements or even be set aside for any emergencies or to replenish your savings account.

The possibility of sizeable trading profits, not to mention 24-hour trading, availability of specialist websites and smartphone apps and access to various financial news sources make forex trading an attractive proposition to people who want to dip their toe into the currency markets.

This is a guest post.

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