What is forex trading.
Foreign exchange or forex trading is an international over-the-Counter commercial market in which one can trade currencies using a variety of financial instruments. This market essentially determines international exchange rates for each currency traded. It includes all sides of the buying, selling and trading currencies in current or predicted value prices.
To successfully trade in the forex trading market, you need to understand its mechanics and strategies. One of the most basic things that you should learn is when to enter and exit the market, which is known as the entry and exit position in forex trading. A trader may either enter or exit the market during his/her open position and at any given time he/she can either close the position or take a stop loss.
Every trader has an entry and exit strategy to follow. For a novice trader it is important that he/she gets acquainted with these basic principles in forex trading. For instance, when you enter a position in a stock market, your stop loss amount is automatically set by the broker. You are then allocated a specific percentage of your capital to buy or sell a particular currency pair. This allows you to decide whether to enter or exit the trade depending on the direction of the market trend. And this is how a novice trader decides when to enter and exit his trade in the stock market.
Now online brokers have no role to play in the decision making process. You can log on to the web site of any online broker and decide on your own. It is highly important that the broker you choose is registered with the SEBI (Securities Exchange Board) and is a member of NSE (National Securities Exchange). These brokers are regulated by the SEBI and they follow all the rules and regulations imposed by them. But still it is advisable that you check out the credentials of a broker before you start trading.
In addition, you will also need to know what currency pairs you wish to trade in. There are various types of currency pairs available in forex trading. You can choose from among them depending on your requirement and preferences. It is important to choose a broker who understands the nuances of trading foreign currencies for you.
After you have chosen the broker, the next step is to create an account. You need to open an account with the brokerage firm that lets you trade via the net. Once you have made your choice of currency pairs and opened your account, the next step is to get ready with the capital required to make the trade. The best way of ensuring that you have enough cash is to make an initial deposit in your account. And once you are confident of your ability to trade forex trading and are ready with your initial deposit, you can now opt for leveraged trading.
Leverage is one of the factors that influence the profit or loss in forex trading. The larger your initial deposit is, the larger amount of money you can leverage and earn. There are many brokers who offer low-leveraged trading. So you can choose among them and start forex trading.
Finally, over-the Counter (OTC) forex trading is not governed by any set of laws and regulations like that of the stock market. The main reason behind this is that the nature of OTC trading is not supervised. There is no regulation regarding the fees or commissions charged by brokers. As a result, you can engage in transactions without following any set of laws and can enjoy the profit or loss without any penalties.