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Foreign currency market is the largest financial market in the world and is attracting more and more interest among traders. With an average daily trading volume of $5 trillion, many currency pairs can be traded 24/7. In this quick guide, you will learn how to trade Forex successfully.

What is Forex Trading?

Forex trading is the activity of taking positions on currency price fluctuations. It should be noted that currency trading is a common business conducted 24/7 by various entities such as governments, banks, and individuals. After understanding Forex works, investors attempt to profit from currency price fluctuations based on economic or chart analysis.

How to trade Forex?

Forex trading is characterized by buying one currency and selling another simultaneously. When trading Forex, traders try to make money by profiting from the ups and downs of the currency. To access the markets, one must register with the brokerage platform. Be careful, though, when choosing yours, and read reviews such as Kowela review, where you can find all the info related to trading conditions.

Analyze the currency market

The Forex market is managed by a global network of banks in four major trading centers covering different time zones in London, New York, Sydney, and Tokyo. This market is open 24 hours a day, based on direct trading between two parties, known as an over-the-counter (OTC) market, rather than an exchange like stocks or commodities.

There are three types of forex markets:

●       The spot foreign exchange market,

●       The forward exchange market,

●       The future currency market.

Evaluating Forex Market Gains and Losses

Currency prices fluctuate constantly, and traders position themselves by buying and selling currency pairs. For example, if the EUR/USD pair is bought at 1.1000 and rises to 1.1050, the trader will receive 50 pips (minus the spread). The cash consideration depends on the number of lots purchased. Conversely, if the EUR/USD fell to 1.0950 on the same trade, the trader would lose 50 pips (plus the spread). The same effect occurs for the sale of a currency pair.

Know the best times to trade Forex

The Forex market is open day and night on weekdays, but trading conditions are not always the same. Indeed, the hours of the world markets alternate and sometimes overlap, thus modifying the trading conditions. The best trading hours are between 9 a.m. and 6 p.m., especially between 3:30 p.m. and 6 p.m., when the London and New York markets are open at the same time.

Define your trading style

Depending on their risk aversion and trading feasibility, Forex traders can choose one of the following three Forex trading techniques:

Forex scalping is a one-day technique. All positions must be closed at the end of the day. It is a very dynamic style of trading. Forex scalping takes place in very short time frames, such as 5 minutes or 1 minute, which gives you plenty of trading opportunities.

Forex day trading is another technique limited to a single day. All positions must be closed at the end of the trading day. This trading style allows you to take positions in 15 or 30-minute intervals. Therefore, fewer positions will be taken compared to scalping, and the target per trade will be smaller.

The last technique is Forex Swing Trading. This technique is the best option for traders with full-time jobs. Graphical analysis is not permanent. A few minutes a week is enough.