Scam Or Capital Gain: A Beginners Guide To Forex Investment

Forex investment tends to be a financial topic appealing but doubtful to many. The foreign exchange market has been receiving tons of newcomers. While some are excelling at it, others are struggling to make ends meet. This promising trading industry has turned the investments upside down, affecting the price of cotton imported from Bangladesh to the amount you pay for a margarita while traveling in Bali. The volatile and dynamic nature is why many investors and potential investors retract their steps from getting involved in forex trading.

Before you commence the trading industry, you must understand:

  • What is forex trading?
  • How to start forex trading?

What is forex trading?

In layman’s language, forex trading is similar to currency exchange you may do while traveling to a different country- A trader buys a currency and trades with another. The exchange rate constantly alters or fluctuates based on the supply and demand of the market. 

All the forex investment undertakings and operations conducted over the counter (OTC)- no physical exchange and a global network of banks and other financial organizations oversee the market., very similar to the New York Exchange. According to the CEO of UpTrader, the average regular turnover of the Forex market was $6.6 trillion by mid-2019. 

Financial experts predict that the market will grow exponentially, credit to globalization and expansion in remote working. These conditions make the brokerage business more viable than the traditional businesses, which cannot attain equilibrium by inevitable economic fluctuations and cries. Many trade activities in the forex market occur between institutional traders, fund managers, and multinational corporations. 

The investors and traders do not necessarily intend to take physical possession of the currencies themselves; they speculate against future exchange rate fluctuations. Forex businesses can function without a national license. However, a license and certification from an esteemed regulator brings forth trust and appeals to investors. 

In Europe, a license can cost anything between $70,000 – $1.2 million, while issuing and completing paperwork can take upto two years; additionally, if your license from offshore jurisdictions can cost you an average of $1,500, with the licensing taking within two weeks. 

How to start Forex trading?

The forex traders have done so for the sole aim of exchanging currencies and speculate about future prices and currency fluctuations, similar to stock trading. Forex traders attempt to buy currencies when they think the value will increase relative to the other currencies or away with currencies with values decreasing over time. 

Here’s a guide on how to start forex trading:

Learn The Basics

Forex trading can be complex and difficult for a newbie. Before jumping on the bandwagon of forex trading, we recommend you take time to learn the basics of forex investment and trade. There are many courses over the internet that can hone your skills to comprehend the nuances of forex trading. 

Choosing A Credible Broker

Under forex trading, you need a reliable broker that connects you to the cross banking system. Brokers have online portfolios where you can open accounts to access and start trading. Make sure you choose a registered and licensed broker who offers an easy platform. Consider trading options, conditions, policies, and user reviews. It is better to consult a seasoned trader to get a better idea. 

Demo Account And Trading 

Open a demo account to test your skills first. A demo account is akin to a live trading account with a few differences. Practicing on a demo account will reduce the chances of incurring losses on the real platform once you’ve gained the confidence to trade with real money, open a live forex account. Some brokers also allow you to transform your demo account into a real money account.