How To Choose The Best Forex Broker In 2022
One of the most important steps to consider if you are considering entering the forex market is choosing a reliable forex broker. Let’s first know who a forex broker is and what he does.
Forex brokers are people who help forex traders open trading accounts so that they can start trading. A stock exchange is needed through which traders can exchange their currencies based on the international banking system. Since forex traders cannot trade directly, they need brokers who can help them buy and sell currencies. The next question comes: how do brokers make money? Well, they charge commission. Since the percentage of commission can be very high, you need to make sure that you choose a trustworthy and reliable broker for yourself. You must consider certain factors that can help you choose a great broker.
- Explore The Forex Brokers Available On The Internet:
Firstly, you must understand that the forex market is vast, and you will find many forex brokers working. It is not feasible to go through each of them personally. Hence, you can search the internet to look out for a reliable broker with whom you can start trading. Additionally, you can check out their portfolio and costs so that you do not trap yourself with a scammer. If you are a new trader, be cautious and read every detail about the forex broker.
- Determine The Type Of Broker You Want To Work With:
There are various types of forex brokers available in the market, so you need to decide what type of broker can fulfill your trading needs perfectly. While there are advisory brokers who help discuss your investment, there are others who work on cheap commissions. Depending on your needs, you can select one. However, you should be careful when selecting a forex broker as they are going to manage your money.
- Compare The Commission Charges:
Every broker provides a complete chart of their commission rates to the clients. You can also compare the commissions of different brokers along with the services offered to scrutinize your list. In case your investment is more extensive, they will charge a higher commission. On the other hand, some brokers also charge per trade.
- Always Monitor Your Account:
You cannot by any chance let your broker become in charge of your trading account, which is a crucial aspect to keep in mind. It is not advisable to trust your broker blindly and keep an eye on your account so that there is not even the slightest possibility of a scam happening.
- Always Get An Idea How Your Broker Works:
From a technical standpoint, the working method of your chosen forex broker is significant. You can never become an experienced trader if you have no clue how your broker operates. So, learning about your broker’s strategies and techniques is a good idea. Additionally, before you choose any broker, you must ask him to explain to you about his functioning aspects.
- Leverage Limitations:
While some regulators have set the maximum leverage amount, others have no limitation on the amount of leverage. Depending on your leverage needs, you can decide on a forex broker, but you must never forget that the higher the leverage, the greater the risk.
- Threat Control Strategy:
Most forex brokers offer access to a demo account, especially to new traders. It assists them in understanding the trading environment well using virtual money. Demo accounts can greatly help to check the broker pricing and service quality. Hence, you can choose a broker that offers the facility of a demo account. But, keep in mind that the demo account comes with an expiry date, after which it stops working.
- Rules And Regulations:
You must always deal with authorized brokers as they are regulated. It assures the traders that if something goes wrong, then the regulator will be able to intervene.
- Check Its Recognition:
The best way to find if any forex broker is reliable is to check its reputation. Researching top forex brokers can assist you in choosing the right option. You can check the reviews, testimonials and awards, if any, that can speak of the broker’s reputation. All these things help you determine if the chosen broker is trustworthy or not.
- Check For Customer Support:
In case of any technical issue, you may wish to reach out to the broker instantly. This is only possible if the broker offers you a 24*7 customer support team to answer your queries. You must check if your issues will be sorted out efficiently or not.
There exist thousands of traders working in the financial market to cater to diverse trading needs. Hence, you must choose a forex broker best suited for your investment needs, tastes and preferences.
Common Trading Mistakes and How To Avoid Them
Trading might seem simple; as soon as the price goes up or down, traders must choose the right direction and relax and wait for the money to roll in! Isn’t it? Well, not entirely. This is so because the trading world is full of surprises, especially for those who don’t prepare well. Many ill-prepared forex traders don’t realize their mistakes while trading forex, which keeps them from becoming successful traders. Although making mistakes is a part of the trader’s journey, they should learn from their mistakes to be successful. So, whether you are trading for the first time or have been doing so for decades, there are some common mistakes all make. Some mistakes are costly; others are hard to accept. However, repeating the same mistake, again and again, is what makes a successful trader different from an unsuccessful one. Here are the common trading mistakes a forex trader often makes.
- Not Researching the Market Properly: Many traders open or close positions based on their gut. Although it might sometimes yield positive results, it is vital to back your feelings with proper research before executing a trade.
- Trading Without a Plan: Trading plans act as blueprints that govern your behavior in the forex market. They contain your strategy and how much capital you are willing to invest in the market. The most common mistake while trading forex is not having a trading plan. Or in other cases, he throws away his current trading plan whenever he has a bad day while trading. This should not be the case; a trading plan is a foundation for your trading activity. A bad day does not mean your trading plan is flawed.
- Over-reliance on Software: Of course, trading softwares is highly beneficial for traders as they offer complete automation. However, today many traders rely too much on this software, which should never have happened in the first place. Trading software is only there to assist you in trading, not to replace you! Moreover, they lack human judgment; because they are designed in a manner to be reactive in nature. Certain softwares have been responsible for causing market crashes in the past.
- Not Understanding Leverage: For most traders, trading with leverage appears an attractive option. Thus, they go for it without understanding its implications and end up blowing their entire trading account. It is a known fact that limited knowledge of leverage has made several forex traders stop trading.
- Letting Emotions Impair Decision Making: It’s not unknown for forex traders that emotional trading is not considered smart trading in the forex market. Whether happy or sad, emotions could deviate traders from their actual trading plan. For Example, after suffering a loss, the trader might open several positions without thinking with the hope that the market might move in a favorable direction. But it does not happen that way. Therefore, it is vital to remain objective at all times when trading.
How to Prevent Making Mistakes in Forex Trading?
- Conduct an in-depth market research
- Have an effective trading plan and stick to it
- Do not rely on software too much
- Understand the concept of leverage before using it and determine a favorable leverage ratio for yourself
- Cut your emotions when trading
- Check genuine forex broker reviews online
Every trader is bound to make mistakes, but it does not mean it is the end of his forex career. Every mistake should be seen as an opportunity to learn what worked and what didn’t work for you.
Best Online Forex Trading Tips For Beginners
The forex market allows participants from across the world to trade currencies. The market operates 24*5 and has a daily trading volume of more than $6 trillion, making it the largest financial market in the world. For people just starting their trading journey, forex trading might seem quite daunting and challenging to begin with. Hence, here are some best tips that forex beginners can use to have a smooth start in the forex market.
- Select The Right Forex Broker: The first tip for forex beginners to follow does not have a lot to do with trading itself but is a crucial thing to consider. It involves choosing the right forex broker. It is highly recommended that you do not settle for any random forex broker. Instead, shop around and check online reviews to ensure you choose one that matches your trading style. Additionally, ensure that the selected broker is regulated and licensed for the better protection of your funds.
- Create Your Trading Plan: After choosing the right broker, it is time to develop an in-depth trading plan. Many forex traders are too eager to start trading immediately without creating a plan beforehand. Without an effective trading plan, you are digging your own grave. In short, a trading plan is a vital component comprising a set of rules you must follow while trading. You must write these rules in advance as it would help you to apply them strictly when you start trading forex. You need a trading plan to ensure you don’t overtrade because of your lack of concentration and reckless trading behavior.
- Educate Yourself: One can never become a successful forex broker without devoting sufficient time to educating himself about the forex markets and how to trade. Therefore, the significant step for forex beginners is to educate themselves about how to master the art of trading. Although studying the forex market requires time and effort, it would be worth it. Moreover, learning never stops; no matter how experienced a trader is, there is always something more to learn. Therefore, keep reading the forex news and latest trends and always remember the forex basics.
- Begin Gradually: Before you start trading forex, you need to learn the basics and then go forward. Don’t be tempted to just jump into the market with the greed to make instant profits. You might even lose what you already have with this attitude! Additionally, don’t execute trades with big capital. Start with small amounts, and when you actually get a hold of how trading works, and increase the amount gradually. You can even start with a demo account first to get comfortable with yourself and the trading environment. Remember, you are not in a race; move at your own pace.
Video Source : UKspreadbetting
- Keep A Trading Journal: The best way for forex beginners to improve their trading strategies is by keeping a trading journal. This can help novice traders develop their skills by maintaining a detailed record of their trades, irrespective of whether they have won or lost. Also, they should set aside some time regularly to go through their historical trades and learn what mistakes they made and what they did right. Analyzing your successes and failures helps you grow as a forex trader.
Remember, to be a successful forex trader; you need preparation, patience and stubbornness. With the tips mentioned above, you can get yourself prepared and go ahead. Here is one more bonus tip, perhaps the most important one. The key to a successful forex career is practice. With continued practice, you will have a chance to achieve successful results in forex trading. So, never give up and keep on practicing!
Exciting Benefits Of Forex Trading
Forex trading has become a new trend among millennials. Many people have recently been attracted to forex as a full-time career, making it a high-potential investment instrument. In addition to this, automation has been a game changer, enabling traders to trade like a pro. The introduction of several trading solutions in the market has offered investors an opportunity to trade efficiently and securely. Forex trading is not just about executing a trade but doing it at the right time and place. With trading software, traders can formulate their strategies based on real-time information.
If you are here, it is likely that you are interested to know what forex trading has on your plate for you. Although trading forex is unpredictable, it is one of the most profitable ways to earn money. Here are some of the benefits of trading forex.
- High Volatility: The forex market is highly volatile, but if you prepare yourself for how to manage this instability, you can earn significant rewards. There are different risk management strategies that you can use for this purpose, such as one-click trade. With such a strategy, you will never miss out on changes in market prices.
- No Central Exchange: There is no centralized exchange system to control the forex market because it operates in a global and digital environment. Fortunately, this works in favor of you as there are certain independent regulators for each country to make sure the traders are protected at all costs. Regulated brokers are strictly monitored and hence work fairly and transparently. They ensure that the brokers have valid licenses and follow all the set regulations to safeguard the interests of their clients.
- Suitable for All Trading Styles: Irrespective of your trading style, the forex market offers you a chance to make money. A trader’s trading style and approach depend upon his objectives and resources. Here are some of the common trading styles:
- Swing Trading
- Day Trading
Also Read: Best Online Forex Trading Tips For Beginners
Forex Trading Works Best for All the Trading Styles Mentioned Above.
- Biggest Global Market: It’s a known fact that the forex market is the largest in the world. Hence, traders worldwide can connect with brokers to trade via a reliable trading platform. All you need is a smartphone or laptop with a stable internet connection, and you are good to go. The forex market is highly accessible, with an average transaction of $6.6 trillion every day. Thus, forex trading is the most profitable avenue for youngsters interested in trading these days.
- Round The Clock Availability: The best thing about the forex market is that it is open 24*5. Additionally, it is not affected by market demands, meaning the traders don’t have to wait for any opening bell. One can trade anywhere and anytime as long as the market is open. However, if you wish to make the best out of it, you must learn about the forex trading hours during weekends. Also, you should know when to put a stop to mitigate the potential losses.
- Easy Accessibility: Ease of access is one of the most incredible benefits of trading forex. It’s really simple to start trading forex; anyone can do it with a small amount of capital. So, if you are just beginning your trading journey, try your luck with forex trading with an initial capital of as low as $1! Hence, money is not at all an issue in forex trading. But, a successful trader needs to have sufficient trading knowledge and skills.
Understanding Leverage In The Forex Market
Leverage is a trading technique which involves the usage of borrowed money to trade a currency, security or stock. However, leverage is the most commonly used concept in forex trading as compared to others. By borrowing funds from brokers, the traders can open large positions in the currency pair. Consequently, leverage can magnify the profits from favorable movements in the rate of a currency exchange. Many experts consider leverage as a double-edged sword, thus, it can magnify losses too. Therefore, it is vital that traders understand how to keep leverage under control and have suitable risk management strategies to mitigate the potential losses in forex trading.
The forex market is one of the largest markets in the entire world where currency exchanges worth $5 trillions occur every day. Forex trading refers to the process of buying and selling the currencies with the main objective that the rate moves in favor of the investor. These currency rates are presented as bid and ask prices. The price at which the currency is bought is known as ask price, and the price art which it is sold refers to as bid price.
One can say that leverage in forex trading gives the traders the power to manage something big with something so small. For newcomers, the forex market might appear boring, which moves at a snail’s speed. Hence, the forex market is slow, especially when you compare it with the stock market. However, leverage is something that makes the forex market the most opportunistic market that can make you rich. Leverage works on the principle that you don’t have to “be rich” to become rich. It is the best way to generate unlimited wealth in the forex market.
Video Source : Trader’s Guide
Many traders use leverage to maximize the profits from forex trading. Thus, the forex market is one of the markets where the leverage is the highest. In simple terms, leverage refers to a loan offered to a trader by a broker. Some brokers might limit the leverage amount for novice traders, while others do not hesitate to offer high leverage to their clients. These brokers are often known as high leverage forex brokers. Although leverage enhances the ability to earn significant profits, it can also work against traders. If the currency involved in one of the trades moves opposite to what you would have believed, leverage will magnify your losses. To prevent it, forex traders have to implement a strict trading strategy, such as stop-loss orders to minimize potential losses.
Also Read: Pros And Cons Of Trading Forex
What is the Best Leverage Ratio for Forex Beginners?
Undoubtedly, leverage is one of the main attractions of the forex market. Without it, investors might have to wait for several months to see even a 10% change in his position. As attractive as leverage may seem, it is indeed a risky strategy. Here are the three rules to keep in mind to choose the best leverage ratio:
- Always begin with low leverage when trading forex
- Always utilize a stop-loss order to safeguard your funds and minimize your losses
- Always keep a maximum of 1%-2% of your capital as leverage for each trade
How to Manage Leveraged Risks?
We all know the phrase, “With great power comes greater responsibilities”. This particular phrase genuinely applies to the forex market due to the higher application of leverage. Leverage can be a boon if the market is in your favor, but it can soon turn into a nightmare if the market moves against you. However, it does not mean you should not try forex trading. All you need to do is to have a risk management strategy in place such as employing stop-loss on every trade.
Pros And Cons Of Trading Forex
Just like any other trading activity, forex trading also has both favorable and unfavorable characteristics for any forex trader. Thus, individuals wishing to enter the forex market must weigh its advantages and disadvantages to determine if it is a lucrative and suitable market for their needs.
Pros of Forex Trading
It is a known fact that trading forex has some risk attached to it; however, the foreign exchange market has proved beneficial for many traders. Many consider trading forex a profitable and attractive opportunity. The benefits of trading forex are as follows:
- Accessibility: The forex market is one of the most accessible markets for traders. It allows traders to open a forex account within a period of a maximum of three days. Additionally, the traders can begin trading with a very nominal amount. Nowadays, forex trading can also be done online; therefore, irrespective of where you live, you can buy or sell trading assets from any corner of the world using your smartphones or laptops. They can access real-time pricing, charts and news using online trading platforms. Furthermore, the forex market is available 24*7, enabling traders to fit trading according to their schedules.
- Leverage: The best thing about forex trading is that the leverage is higher in the forex market than in any other market. A forex broker can offer you leverage as high as 2000:1, which has the potential to magnify your profits considerably.
- Liquidity: The forex market, by far, is the most liquid market, enticing many traders globally. Additionally, it is the largest market where trading is done in large volumes. This makes it easier for traders to sell the assets as and when they wish to.
- Fewer Fees and Commissions: Forex trading costs are often determined by the difference between the buying and selling prices the forex brokers disclose in real-time. Unlike equity trading, which is subjected to hefty commissions and hidden fees, forex trading is free from such costs. Hence, the entire process is transparent and fair.
Cons of Forex Trading
Although there are numerous reasons you should trade forex, sometimes, traders have to face the adverse effects. Here are several cons you must get familiar with before jumping into the foreign exchange market.
- Volatility: Like any other market, the forex market also shows volatility at some point. However, it negatively impacts traders who hope for short-term profits but get exposed to extreme volatility, making their trading strategies unprofitable for them.
- Small Traders Are at a Disadvantage: In the forex market, the bulk of forex trading is done by prominent market players such as hedge funds, banks, and financial institutions. Due to the access to better technology and other resources, they have the advantage of influencing price movements in the market. This is a disadvantage for small traders who often find it hard to stay abreast of the fast-moving market conditions to ensure their trades turn out profitable.
Video Source : NetPicks Smart Trading
- No Centralized Exchange: One of the biggest drawbacks of the forex market is the absence of a central exchange which limits regulatory oversight. This makes it compulsory for a trader to diligently check the broker’s reputation and trading practices before signing up for a trading account. Also, based on the country the brokers operate in, sometimes it is hard for the trader to file a complaint if the broker has mistreated him.
Forex trading is an accessible, flexible and lucrative activity where transparency is maintained. Considering certain risks attached to forex trading can offer a wide range of opportunities to traders willing to earn significant profits.
Things To Consider When Choosing A Forex Broker
Are you considering becoming a forex trader? Do you want to start out as a professional forex trader but don’t know where to begin? If your answer to the above mentioned questions is yes, then you need to find a reliable forex broker to help you. When you associate with a good forex broker, you experience various benefits. However, the real challenge is to find a broker compatible with your trading needs.
When you check online, you will find numerous forex brokers willing to win your hearts. However, before you get tempted to choose one, here are some considerations for choosing the best one.
Commissions and Spreads: Forex brokers earn through commissions. At the same time, there are some who charge a particular percentage of your spread. Hence, shop around and understand how various forex brokers make money in the foreign exchange market.
Account Features: In the forex market, you will see that every broker has different offerings for their clients. However, the most important features to compare different brokers are margin and leverage, initial minimum deposit requirements and deposit and withdrawal conditions. A trader interested in investing in cents should look for a forex broker who offers a forex cent account.
Video Source : Rayner Teo
Efforts To Deposit And Withdraw: Funding and withdrawal policies can differ from broker to broker. There are brokers who only permit their clients to invest through credit cards, PayPal, checks or online bank transfers. Similarly, check the withdrawal payment options as well. Additionally, compare the remuneration charged for withdrawing funds, if any.
Customer Service: It is true that the forex market never sleeps. This is the reason traders need to choose a forex broker who offers 24*7 customer support. If the chosen forex broker does not provide broker access to reliable customer service, it can lead to major losses. Therefore, before signing up for any forex broker, you need to test out the broker’s customer support by contacting them through calls, email and online.
Regulatory Compliance: Regulatory compliances and licenses are more important than just getting convinced by the broker’s fancy website. Similar to other businesses, it is also vital that you check the forex broker’s reputation that you wish to deal with. Check out the regulators the broker is associated with.
Trading Platform: A trading platform is a portal where the investors actually trade. Therefore, as a trader, it is your responsibility to ensure that the broker’s trading platform has all the essential technical analysis tools he needs for an effective trading experience. A good trading platform is a must to enter and exit trades easily and conveniently.
To conclude, it is vital to choose a reliable forex broker that can help you execute trades smoothly. Moreover, a trustworthy broker is essential for the safety and security of funds. Hence, when looking for a forex broker, always consider the factors mentioned above to make the right decision. Choose a forex broker you feel confident in; then, you will be able to allocate more time and attention to come up with an effective forex policy. If you are still confused about how to proceed and compare several forex brokers, you can check brokers review online to make your search easier.
How To Choose The Best Online Forex Broker
The foreign exchange allows you to place bets on the world’s currencies by buying and selling currency pairs through brokers. The forex trading market’s volume is large, where more than $6 trillion in transactions are executed every day, which makes it even larger than the stock market. However efficiently and quickly you can earn profits in forex trading, you need to select a online forex broker.
Before selecting a forex broker, here are the features that you must consider.
Variety of Markets to Trade: A good forex broker provides a wide range of trading products to traders. Even if your primary focus is on currencies, it is good to know that there are other options available. For Example, traders can feel happy if the broker allows them to trade oil, cryptocurrencies or indices. On the other hand, it can get quite frustrating if these trading products are not present in the broker’s offerings. If you are confused about what a particular forex broker has on the plate for you, you always have the option to browse through several forex broker reviews available online.
Types of Brokers: One of the important things to know about a forex broker is how they operate in the forex market. Here are the types of brokers available for you to choose from:
- Market Makers
- Direct Market Access
- Electronic Communication Network
You Can Choose Any of the Above Four Brokers Based on Your Needs and Requirements.
Execution Speed: For most forex traders, the speed at which the trades are executed is most important. Therefore, you can check if the particular broker offers trading robots so that multiple transactions can be executed in a shorter time. If you are a scalper, even a delay of a millisecond would cost you money. Therefore, it is best to check the execution speed of the broker so that you get an idea of how they operate in the live trading environment.
Trading Platforms: Most forex brokers you see today let their clients have access to the most popular trading platforms, such as MetaTrader. In addition to this, if the chosen broker can provide you access to additional trading tools and resources, you can definitely go ahead with them. Some of these complementary tools are:
- A copy trading option allows traders to copy the strategies of other traders.
- Automated technical analysis for better decision-making.
- Tools to help traders with market analysis, sentiment, and insights
Regulation: As a trader, choosing a licensed and regulated forex broker is important. At the most basic level, it will assure you that there are certain regulations in place to protect you if something goes wrong. Hence, in case there is any dispute with a broker, you can go to the regulator so that the issue can be addressed fairly.
Customer Support: Just like any other service, multiple things can go wrong on a daily basis. No broker is immune to technical glitches, but as a trader, you must know if the broker is reachable and accountable for such issues. Hence, it would help if you choose a forex broker that can resolve issues fairly. It’s also worth considering the language in which customer support is offered.
Risk Management Options: Most brokers offer a risk-free demo account for traders to open trade in a replica trading environment through virtual funds. Demo accounts are useful to test the broker’s products, pricing policy and services. Demo accounts expire after a set time period, but you can learn a lot within this set time limit. You can also test forex strategies without risking your real money.
Benefits Of Choosing A Regulated Forex Broker
Most professional forex brokers you see today are regulated by some renowned authorities. Additionally, they have obtained a license to operate in the forex market. When you choose a regulated broker, it brings a certain level of confidence and credibility to the broker’s functioning. So, if you are planning to step into the world of forex but aren’t sure from whom to take help, don’t worry. All you need to check is if the broker is regulated or not. Here are the reasons why it can be beneficial for you to opt for a regulated forex broker.
- Protection: No wonder forex traders want to be protected at all costs. Hence, to ensure the safety of their funds, traders should only prefer regulated brokers as they can provide them with a secure platform to trade. These days, a potential trader is likely to approach a regulated broker so that he can trade with complete peace of mind. The absence of the regulatory status would mean you cannot trust the broker completely with the security of funds. Hence, your assets are exposed to huge risks.
- Credibility: Additionally, a regulatory status ensures the credibility of the forex broker. If the broker was able to meet all the required criteria to obtain the license from a recognised authority, it signifies that the broker will do whatever it takes to adhere to the standard guidelines. Therefore, potential investors view a regulator broker as reliable and trustworthy.
- Transparency: If you don’t want to fall prey to fraudulent forex brokers, you must ensure that the chosen broker does not hide something from you. The broker should maintain transparency at all levels throughout the trading process. Potential traders should always choose those brokers who are transparent in their operations and do not hinder the information access that the clients require.
- Customer Support: Regulated forex brokers are known to offer excellent customer support to their clients. The level of service offered by the brokers undoubtedly attracts more potential investors. Hence, regulated brokers are a top choice of many traders as they are interested in preserving their reputation and goodwill, which they effectively do so by offering high-quality customer service.
- Advanced System: A regulated forex broker is required to keep up with the latest industry happenings and events, which makes him competitive and better than unregulated brokers. Regulated brokers are on top of all the current forex developments to offer the best services to their clients.
An unregulated forex broker is not bound to adhere to the consumer protection regulations like protecting customers’ funds, providing clear and transparent information and disclosing how it executes trades. Additionally, they are least bothered about resolving customers’ queries and issues. Although they may promise good trading conditions, tight spreads, and ridiculously high forex leverage, it is recommended to avoid them as the probability of these companies being fraudulent are really high. If you choose an unregulated broker and experience some sort of unfair treatment, such as the inability to withdraw funds or manipulation in trades, you would be in no position to get protection under some law and regulation. Therefore, one must only select a regulated forex broker for trading purposes.
An Introduction To Forex Brokers
Everyone who wishes to trade in the forex market needs a broker. But what exactly does a broker do in forex trading? Let’s understand this with the help of an example. When you need apples, you go to a street market. The apple is a commodity you wish to buy, and the street market is the place where you can actually purchase apples; because it is where people sell apples. Similarly, imagine you sell apples and have to find customers; for this, you will go to the street market. Thus, the street market is a place where they both come together to buy and sell apples. The forex market works in a similar manner. To buy and sell currencies, you need a place where the exchange can occur. But in forex markets, the buyers and sellers can be miles apart from each other. Hence, it requires a mechanism to match both of their interests; that’s where a forex brokers comes in.
Understanding the Forex Broker
Forex is short for foreign exchange. Transactions in the forex market are always executed between two currencies, which form a currency pair. A forex broker can be a retail forex broker or an individual forex broker. While a retail forex broker has influential clients such as large financial services, investment banks and more, on the other hand, an individual forex broker only handles a small volume of the overall forex market.
Role of a Forex Broker in Forex Trading
A forex broker is an intermediary that lets the buyers and sellers come together for the exchange of currencies. He acts as a middleman between you and the forex market. The broker’s objective is to match you up with a seller or buyer based on your needs. In simple words, whether you need to find a buyer or seller for currency exchange, you need to go to a broker. Without a reliable forex broker, you cannot access the forex market.
Reputed forex brokers allow their customers to trade in numerous currencies, including those of developed and emerging countries. With the help of a forex broker, a trader can open a trade by purchasing a currency pair and closing it by selling the same currency pair. For Example, a trader who wishes to purchase US dollars for euros will purchase the USD/EUR currency pair. This means buying US dollars with euros. However, to close the trade, he will need to sell the currency pair, which is equivalent to buying euros with US dollars. If the exchange rate is higher at the time of closing of trade, the trader makes a profit and vice versa.
Also Read: How to Choose the Best Online Forex Broker
The Trading Platform
A trading platform is what you use for trading. A trading platform is a type of software which helps you actually buy and sell currencies. Global forex brokers allow various trading platforms which can be downloaded and installed on your laptop or PC. However, some forex brokers offer you to trade through web browsers. It is beneficial for traders as web browser trading platforms let them trade even without downloading software on computers.
Basic Forex Trading Strategies
Forex trading can be tricky, to begin with, but if you know the right strategies, it can become a piece of cake. As a beginner trader, you need to find suitable forex trading strategies that will work for you to be successful in the foreign exchange market.
Meaning of a Forex Strategy
A trading strategy in forex is a predefined set of rules for a trader to let him know when he should enter the trade, the ways to manage it and the right time to close it. The trading strategy varies from one trader to other, and the traders must try many strategies before finding the “perfect one”. Even if they find a forex strategy that will deliver promising results, traders often do not stick to a particular strategy for a long period. If you are a beginner, it is best to choose some basic strategies first and try them through the risk-free demo accounts offered by various global brokers.
Also read: What is the Forex Market?
Basic Forex Trading Strategies Available for Beginners:
Price Action Strategy: It is a type of forex trading strategy that lets traders make decisions on the basis of changes in the prices of a specific instrument rather than incorporating technical indicators. There are various benefits of price action strategy, such as keeping your chart clean and a lesser risk of information overload. Additionally, the strategy can help you better understand the forex market and identify patterns smoothly.
Trend Trading Strategy: This kind of strategy allows traders to identify trade opportunities based on the upward or downward direction of the trend. The basic principle on which this strategy works is that a particular trading instrument continues to move in the exact direction as may be the current trend.
Position Trading Strategy: The main objective of the position trading strategy is to gain profits through long-term trend movements by neglecting short-term noises that occur regularly. This trading strategy particularly attracts long-term traders who tend to hold their positions open for a long time, including weeks, months and even years sometimes. Position trading is a challenging trading style as it needs traders to have a lot of patience and discipline to ignore all the noises and stay calm even if the position is moving against the trader.
Video Source : The Trading Channel
Day Trading Strategy: Unlike scalpers, day traders don’t hold trades for mere seconds. Additionally, they focus on a particular session or time of day. Day traders are usually slower than the scalpers as they only take 2-3 trades daily. The strategy is apt for those who wish to close the positions before the end of the trading day but don’t want to take the pressure of scalping.
Scalping Strategy: In scalping, traders try to take advantage of minor price movements during the day. The duration of the trade varies from a few seconds to minutes. To be a good scalper, you must be good with figures and can make decisions rapidly even if there is a lot of pressure. Scalpers usually spend most of their time on the screen and keep their focus on some specific markets only. The biggest advantage of the scalping strategy is that you are not required to hold your positions overnight.
Every trader has their own trading skill set that they can use to identify their edge. Accordingly, they can tailor their trading strategy. However, they should never stick to one trading strategy; as the market constantly evolves, so does the trader’s personality. Therefore, they can take many free personality tests that can help them get better insights into their personality to come up with a great trading strategy. One can find the best trading strategy by trying various strategies out through a demo account with virtual funds. You can find several online forex brokers that offer the facility of risk-free demo accounts. However, the countless options available can confuse you; therefore, you can also check out the brokers review online to better understand the features of the broker in question.