There are a number of advantages of forex trading including low transaction costs, a 24-hour market, and the ability to use leverage to boost your position.
At the same time, all these benefits are of little use, if you don’t have the proper forex education. Understand, the entry position of forex can often make it seem like anyone can engage in forex trading.
While this is more or less true, it is only the educated trader that can actually make a profit.
Of course, since there isn’t a university for forex, many new traders might feel confused about how to learn to trade forex. Well, there are, in fact, quite a few avenues to select from. So, without any further ado, here is what you need to know about forex education:
Forex Trading Education in Australia
The first question that most would-be traders have regarding this form of trading is, “what is forex and how does it work?” So, let’s start at the very beginning and define this form of trading. Simply, forex trading is the buying and selling of currency.
Now, when it comes to forex, the value of one currency is determined against another. It is how the value of the currencies are established. This is why you will find that traders buy and sell currency pairs. So, when buying and selling currencies, this is what it will look like:
Value = base currency/quote currency
An example would be AUD/CAD = 0.95 (one Australian dollar is equal to 0.95 Canadian dollars)
How Trading Works
The next part of the question involves how this trading actually takes place. Well, in this case, the first thing to understand is that the forex market is an international one. As such, there isn’t a central marketplace but rather transactions taking place across computer networks. These transactions are known as electronic over-the-counter transactions.
The benefit of such a network is that there are few limits on the trades. You will find that they take place across most time zones, twenty-four hours a day. Forex trades can also be placed for five and half days of the week as well.
What You Need to Begin Forex Trading
The next question that the hopeful trader will ask is “how do I get into forex trading?” Unfortunately, the answer to this particular query isn’t quite as clear cut as many potential traders might hope. Although technically, what you need to start trading is capital and a broker, these aren’t going to help you get far. Check out our Australian Forex Brokers page.
Without the right knowledge to back you up, you can essentially end up losing all your money. So, before you place your first trade, you need to put in the work and actually learn about forex trading.
Where to Learn About Forex
As mentioned, most people are confused about where they can learn about forex trading. Fortunately, you can glean everything you need to know without leaving the comfort of your home. There are a number of forex education websites that give you information regarding every aspect of trading.
As you can imagine, though, not all these sources are equally good. To be on the safe side, you need to be careful about just where you get your information from. There are two ways to do this – stick with educational websites or look for a good broker.
The first avenue is fairly common as there are plenty of financial-related websites around. The issue here, of course, is that the information can be quite disjointed. You also have to do a fair amount of searching to find what you need.
If you want to learn forex trading step by step, the best thing to do is find a good broker. The top forex brokers have plenty of educational resources for you to look through. Best of all, these are often organised in the form of e-books or tutorials. As such, they are easier to go through and understand.
Naturally, the next query you will have is “what is the best forex broker for beginners?” Since there are so many brokers to select from, it is best if you stick with well-reputed platforms like etoro. Not only are the interfaces simple enough for novices, but this broker also has lots of educational resources. You will find there is a Training Academy that you can join as well as plenty of webinars.
What to Learn About Forex Trading
Now, forex trading is a lot more complex than many people imagine. So, there are quite a few topics you will need to delve into before you are ready to start trading. Nevertheless, here are some of the key points you need to understand:
- Know How to Manage Capital: if you want to be a successful trader, you need to know how to manage your money. One of the first things you should learn is how to calculate the right amount of money to place on any trade. Also, know how much capital to retain in your account to avoid too many losses.
- Understand Trading Spread: the difference between a currency’s ask and bid price is known as the spread. Of course, with forex, you need to take into account how two currencies will perform against one another. Therefore, you should always have an understanding of the current and future spread.
- Calculate Possible Profit: on this note, you should have some idea of what your possible profit should be. It is important that you carefully select your currency pairs so that when you do so, there is a high chance of you making a profit at a later date.
- Take Risk Into Account: as with any form of trading, there is always a certain level of risk associated with forex. While this shouldn’t discourage you from trading, it does help to consider this risk when placing your trade. This way, you will be able to limit just how much you lose in any situation.
- Use Leverage Wisely: forex brokers offer leverage which, in turn, lets you buy a lot more currency than you typically could. While this certainly does provide you with an advantage, it could also set you up for disaster if the trade goes badly and you can’t cover the leverage. Fortunately, you can avoid such a scenario by staying well within your means.
These are the top things you need to know about forex education. Once you have mastered the most important factors, you will discover that it is a lot easier to be a successful forex trader.