This year has been challenging and consequential in many ways. Aside from the public health crisis that the world has suddenly been plunged into, another widely shared experience for millions of people around the globe is the pandemic’s resulting economic downturn.
Whether people felt it pretty quickly or after half a year of the spread of the virus, now, everyone is aware of how big of an impact it has had on their finances. Some lost their employment right away. Some have seen their savings drained. Some are constantly looking for ways to add new sources of income.
For many, forex has become a viable answer to their financial troubles. It’s safe because you can do it in the comfort of your own home. It has the potential to become extremely lucrative, with the right mindset and diligence. In a lot of ways, it is one of the easiest ways to start earning.
This article will help forex novices and hopefuls to understand just what it takes to start home-based forex trading.
What is Forex?
The word ‘forex’ is a portmanteau of two things – foreign currency and exchange. Exchanging one currency for another is done for a variety of reasons. Many do it for commerce. In fact, according to Investopedia’s data from the Bank of International Settlements, in terms of volume, an average of over $5.1 trillion change hands every day in forex.
Here are a few steps to take to get you started in the world of trading foreign currency from your home.
Build Your Knowledge
Although the technologies available now make forex trading simpler and more accessible to anyone, that doesn’t necessarily mean that the fundamental concepts behind it are also easier to understand. Now that you have some basic understanding of forex, it’s important that you keep building on that knowledge. Take your time to understand the market and how you plan on participating in it. Since you’re doing this from your home, you have the luxury to take all the time you need. This will transition well to the next step.
Our blog offers a wealth of knowledge for beginners and seasoned traders alike.
Design a Trading Strategy
There are a lot of ways to participate in the forex market. Designing your own strategy is essential if you want to make any profit trading foreign currencies. Basically, you need to figure out how certain indicators or triggers in the market will affect your trading. This also depends on how much risk you are comfortable in taking on. Strategies can also vary from focusing on long-term profits to making multiple trades focusing on short-term gains.
It’s important to understand, too, that your strategy needs time to develop in complexity. When you’re starting out, you need to let your strategy mature as you learn more about the market.
Practice What You’ve Learned
Now that you have your strategy laid out, you can start trading and testing it out. There are several platforms that will allow you to practice your approach without using (or earning) actual money.
You can also consult past graphs and studies to see how certain currencies perform over time and base your strategy there.
Like with any potentially profitable enterprise, there will always be a degree of risk involved. The more information you take in through studying and practicing, the better equipped you can be in mitigating the risks.
Choose the Right Broker
There is no shortage of available brokers out there. But not all forex brokers are created equal.
There are two most popular broker types in the forex market – those that use the ECN model or the STP model. Here are their main distinctions.
- STP Brokers pass your orders directly to a counterparty. These are usually other STP brokers, market brokers, or even ECN brokers. These brokers make money off of the spreads. STP brokers can trade against their clients which opens the possibility for instances of conflicts of interest – in some cases, your loss can be their gain.
- ECN brokers are the more common choice. This is because when you’re working with true ECN brokers, you will be provided with a clear view of the other side of the trade. This means you can see which entities are completing your trade – these may be money managers, commercial banks, funds, or institutional traders. ECN Brokers also can’t trade against their clients, eliminating the possibility of conflicts of interest.
We at Fair Forex are true ECN brokers. This means we can get you access to the interbank market. They are the primary exchange market.
Our company was founded by traders like yourself and we have vowed to always stay fair – we even put it in our name.
For more information on forex trading, read our other articles or feel free to give us a call at 1-844-600-FAIR.