- Start Forex Trading
- Forex for Beginners
- Maximize Gains by Currency Exchange
Forex trading is a great way to increase the value of your money. Unlike the stock exchange, you exchange foreign currencies. Though it may seem complicated at first as the broker fees, the bid price and the asking price may seem a little off, Forex trading is easy to get started with.
Just like any other form of investment and trading, there are a couple of terms that you should know beforehand. If you’re living in the United States, the base currency for you is going to be the U.S. dollar. That’s of course unless you have something else you want to trade but for the sake of this post, we’ll take the U.S. dollar as our base currency.
Now that you know what base currency is, the most basic of Forex trading, let’s move on to other things.
Forex Trading Terms (Jargon)
Other than the base currency which the currency you have, the currency you want to buy is the quote currency.
The ask price is the price that your broker will ask you for in exchange for buying the quote currency. Since the broker will take his or her part from this, it’s always going to be higher than the bid price.
The bid price is the price that you can sell your base currency to a broker. This is also referred to as buy price.
There is always going to be a difference in buy price and ask price. With that being said, the difference between the two is the spread. This is basically the commission that the broker gets.
All of these terms are also known as trading jargon and lingo. The terms listed above are the most basic of the trading jargon. As you begin trading and spare more time to it, we recommend reading a couple of books about trading jargon to feel more comfortable with your trades.
Where to trade?
You’ll need to choose a forex trading platform or a brokerage firm to begin making trades. Not all brokerage firms offer forex trading. So make sure that the brokerage firms you want to trade on offer this option to you.
Choosing the right forex trading platform makes the biggest difference. If you trade on a platform where the bid and the ask price is vast, you’ll not be making enough profits. Instead, you’ll lose money because of the spread.
So it is important to choose the right broker according to your needs. Also, choosing a brokerage firm that offers multiple outlets for customer service should be your goal. This is the best kind of brokerage firms for beginners.
Best Forex Trader in the United States
We highly recommend forex.com for beginners. It is the biggest forex broker in the country and you can reduce your costs with cash rebates. The overall fees are very low compared to most other forex trading platforms. You can convert the quote currency to your base currency for lower than 0.5%.
This is especially good for beginners because regardless of your experience in finance, we recommend not buying quote currencies that are worth more than $5,000. If you start small, things may turn out very large in the future. So take your time and get used to how forex trading works before investing your savings in forex trading.
When should you convert to base currency?
Let’s assume you exchanged your $1,000 worth of U.S. dollar to the “x” currency. You still have $1,000 but if we subtract the broker’s commission, you now have about $995. Once the currency you bought (quote) reaches the peak point, you must convert your quote currency back to the base currency.
This way, you might have $1,100 and for that day, the profit you make will be $100 and so on. To make as many profits as you can, you’ll have to have a good understanding of the world economy. So make your research wisely and buy quote currencies that you see a potential in.