Forex Trading Definition, How To Open A Trading Account, Prevent Loss, Guidelines.

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Forex Trading can also be called Foreign exchange trading. Forex trading is the process of buying and selling currencies with the main aim of making profit. It is among the biggest assets in the world that can be easily converted to cash without any loss in value. Furthermore, you can trade trillions of dollars ($) in a day.

Definition of Forex Trade

Forex trade can be defined as the process of exchanging one currency for another which is based on an agreed exchange price. Traders goal is to make some form of profit, in the price change of currencies due to market, economic, and political factors”. For instance, if you have an insight that Euro will increase against Dollars ($), you can make use of US Dollars to buy Euros and then you sell the Euro much later at a higher price”.

How to Open a Forex Trading Account: A Step-By-Step Guide

To open a forex trading account is simple but the main thing to put into consideration is to select a broker that is effective and reliable and at the same time that has a comprehensive understanding of the requirements for efficient trading. Below are the steps to guide you on how to open a forex trading account?

Step 1: Choose a Reliable Broker

1. Research for a reliable brokers:

Search for brokers who are controlled by financial laws and authorities (such as FCA in UK, SEC in USA, ASIC in Australia).
Look out for positive reviews and as well check the ratings on their official websites.

Compare each brokers, base on their spreads, fees, trading platforms and how swiftly they respond to customers.

2. Check Account types

Brokers render various kinds of accounts for example (standard, kini, micro, ECN). Select the account that is suitable for your trading strategy and capital.

Step 2: Complete the Registration Form

1.Visit the brokers Website:

Navigate through the broker’s official website and search for “open Account” or “sign up” feature or button.

2. Fill out the registration form

Make available your personal information such as full name, email address, phone number and country of residence.
Create username and password for your account.

3. Submit Required Documentation

Brokers need your identity and address to be verified. These consist of

Proof of identity: Submit a copy of passport, drivers license or any approved government means of identification.
Proof of address: current utility bill, bank statement or a government approved issued document showing your address.
Some brokers may need you to complete a financial questionnaire to know your trading experience and what Is suitable for

Step 3: Choose Your trading Account Type and Platform

1.Select account type

Select the type of trading account that you want( for example we have MetaTrader 4 (MT4), MetaTrader 5(MT5), cTrader). Download and install the trading platform if required.

Step 4: Fund Your Account

Log into your account

Make use of the credentials used during registration to log into your trading account on the broker website.

Navigate to the Deposit Section

Search for the funding feature in your account dashboard.

3. Choose a Funding Method:

Make your choice of depositing funds either bank transfer, credit/debit card, e-wallets like PayPal or skrill).

4. Enter Deposit Amount:

Specify how much you desire to deposit. Ensures the money deposited meets the requirement of the broker’s minimum deposit.

5. Complete the Transaction:

Make sure you follow the exact instructions for the transaction to be finalized or completed. Your deposited funds should show in the trading account.

Step 5: Download and Set Up the Trading Platform

Download and install the trading platform from the brokers website

Strictly follow instruction of the installation process in your device (for example windows, mac, android).

Log into the platform

Configure your settings

Set up your preferred features like chart types, indicator and tools.

Step 6: Start Trading

Practice with a Demo Account

If you are a beginner as a forex trader, make use of the demo account to practice trading with virtual or unreal money so as to know the trading strategy to use on live account.

Place Your First Trade

Immediately you are done make use of demo account, you can now switch to the live account and place your first trade.
Select your currency pair (EUR/USD), decide whether to buy or sell and enter the trade size.

Monitor Your Trades:

Always monitor your trades , check fundamental analysis to know the performance of your trade and manage according to your trading plan.

Things to Avoid to Prevent Loss in Forex Trade

Avoid making use of much leverage because it can increase your loss. You can make use of much leverage only when you are an expert or confident in your trade.
Prevent Emotional Trading

Prevent greed or fear to make your decisions. Be on your trading plan and make the best decision depending on your analysis.

Avoid Chasing Losses

Do not instantly try to get back your loss with a bigger, riskier trade. Be on your budget and plan.

Avoid Ignoring Risk Management

At all times use stop-loss orders and manage your position sizes to limit potential losses.

Always learn and update your knowledge and have understanding of the market before you trade the original money. The more understanding you have, the less you are prone to risk and you enable you have a better trading experience.

How to Trade Forex as a Beginner

Learn the basics:

Currency pairs: currencies are been sold in pairs, for example EUR/USD(Euro/US Dollar). The initial or first currency is the called the Base currency, and the later or second currency is called the Quote currency. “The exchange rate gives an insight of how much of quote currency you need to purchase one unit of base currency”.
Pips: it is the smallest price move in a currency pair. For instance for popular pairs we know, it is the fourth decimal place (0.0001).
Leverage: this helps you manage a wide position with a less amount of money. Lets say for instance, we have a leverage of 60:1 (that is 60 ratio 1) meaning you can take charge of $60,000 with $1000.
Margin: it is the how much money used to open a leveraged position.

2. Choose a Reliable Broker

Search for a reliable broker( a broker is an entity that arranges transaction between a buyer and seller). Reliable brokers such as (FCA in the UK, SEC in the US, ASIC in Australia) which is trusted and as as well as controlled by a reliable financial authority, has positive customer reviews, competitive spreads and render a user friendly platform.

3. Open a Trading Account:

Demo Account: you can begin by opening a demo account . this enables you to practice everything about trading with virtual money. With this you feel very comfortable to trade on the platform and you are able to test the best strategy use to make profit in your trading.

Live account: immediately are comfortable with your demo account and you know your strategy to trade, you can now open a live account, choose your account that is suitable for needs and risk tolerance.

Fund Your Account

Put money into your trading account by bank transfer or credit card . begin with a particular amount you can afford to loose.

5. Create A Trading Plan

Set goals: set out plans on what you will like to gain from the trading platform. Do you want want a monthly income or a long term investment.

Risk tolerance: check the amount of risk you are comfortable to take per trade( for example 1-2% of trading capital).
Trading strategy: take a decision on how you want to strategies when trading, what trading style (either making use of day trading, swing trading) build your strategies on technical and primary Analysis.

Currencies to Trade On

Forex trading incudes trading currencies in pairs. This pairs are most widely traded on and renders increased liquidity and lower spreads. Below are the most widely trade pairs

EUR/USD (Euro/US Dollar)
USD/JPY (US Dollar/Japanese Yen)
GBP/USD (British Pound/US Dollar)
USD/CHF (US Dollar/Swiss Franc)
AUD/USD (Australian Dollar/US Dollar)
USD/CAD (US Dollar/Canadian Dollar)