Online Forex Trading! How Forex Trading Works

Online Forex Trading: How Forex Trading Works

You probably already know that online forex trading is one of the most popular businesses for young people who want to get involved or, in any case, for those who have some savings on their side and want to start working for their money.

This is because through online trading, you can invest in a wide range of financial products that, in one way or another, can help you make money, even if you don’t do anything.

Obviously, not all that glitters is gold, as it is necessary to know the basics of these activities and, above all, understand the risks involved.

In fact, trading forex always involves more or less high risks, based on the capital invested and on the asset in which you operate.

But before we delve into the subject, let’s try to understand what forex trading is and how it works.

What is Forex?

For Forex, we usually refer to Forex (or Foreign Exchange) or international currency exchange venues. The forex field, in fact, includes all the traditional currencies present across the world.

To be clear, when we talk about this sector, we refer to currencies such as the euro, the dollar, the pound sterling, the franc, the yen, and any other existing FIAT currency.

In fact, it is also good to distinguish FIAT coins from cryptocurrencies. FIAT coins are coins like the ones listed above, while cryptocurrencies are digital currencies like Bitcoin, Ethereum, Litecoin, and so on.

To talk a little about forex numbers, know that we are talking about a sector that, on average, has volumes of around 5 billion dollars. That’s because anyone, anytime and anywhere in the world, can exchange one currency for another.

The needs may be different, like sending money to distant relatives or friends, but lately, one of the main reasons users use forex is trading.

So, online forex trading was born. It is a type of digital exchange that takes advantage of the fact that currencies change all the time.

Also Read: Online trading: How does it work and how do you get started?

Forex trading: What is it?

Now that we know what forex is, let’s try to understand what forex trading is, a kind of secondary branch of this market. Normally, when you exchange, for example, 1 euro for a dollar, the objective is not to make a profit.

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In fact, these exchanges often occur for needs belonging to the physical world, such as those mentioned above. Those who know what forex trading is, however, know very well that the main objective is to make targeted trades to make a profit.

A practical example is exchanging euros for dollars and, when the market is favorable, euros for dollars. If you make the correct predictions, you can make a profit on every successful trade.

Later, we will also see how some users manage to profit regardless of market conditions.

How does forex trading work?

How does forex trading work

Of course, understanding how forex trading works and knowing just the basics is not easy, also because for many, it is a completely new industry.

Simply put, the world of forex works almost like the world of stocks, but with some substantial differences. First, the forex market is not inside the stock exchange as multiple currencies are traded between two parties.

This market is also known as the counter, literally ‘off the counter”. In particular, the market is based on a network of banks that follow different time zones, including London, New York, Tokyo, and Sydney.

That’s why in online forex trading it is possible to execute transactions 24/7, unlike stock markets, which can be closed on holidays, weekends, or after 9 pm.

Also, online brokers that allow real-time forex trading allow you to use different types of markets.

Also Read: The best Forex trading strategies

Online Forex Trading: Types of Markets

A good way to understand how forex trading works is to know the main markets, which are spot, forward, and futures.

Starting from the bottom, the spot is a type of market that allows the user to exchange one currency for another. In this case, the exchange is immediate or, in any case, takes place in a short time while waiting for confirmation of the sale.

Forward markets, on the other hand, allow you to buy or sell a certain amount of money at a certain price on a predefined date. So, the user decides to sell X euros on the XX/XX/XXX day in order to satisfy his needs without too much haste. Here, the risk is slightly higher, but the potential for economic return increases at the same time.

Futures markets, on the other hand, are the riskiest as they are legally binding. These work like forwards, but once the position is open, you have to hold it.

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However, most users trade by taking advantage of high price volatility without actually keeping the coins they use.

This is combined with using leverage to increase profits.

Forex: What is leverage?

Surely you have heard of financial leverage when trying to study online forex trading. Well, the use of leverage is very common, both as a form of testing for beginners and as a high-risk but potentially high-profit tool.

This tool allows you to “leverage” in a favorable market moment or on a good forecast without necessarily having to deposit more money. Your own funds, in fact, are multiplied to increase the open position.

This allows for a higher economic return if the forecast is successful. However, it should be noted that exposure also increases in the opposite direction, i.e., in the case of losses.

X10 leverage, for example, allows you to win or lose 10 times more than normal.

Investing in cryptocurrencies: What is the difference with online forex trading?

Investing in cryptocurrencies

By relying on the best online trading platforms, among which Nextmarkets stands out, it is not only possible to start trading forex online but also to diversify investments, as in online cryptocurrency trading.

These, in fact, are alternative currencies that have advanced a lot in recent years, recording record numbers and becoming attractive even to large institutions. In this sense, forex traders will hardly refuse to trade cryptocurrencies.

Its volatility, on the other hand, is really high, and the number of assets to choose from is almost infinite. However, the high risk behind these financial products must be emphasized, as some cryptocurrencies often end up by the wayside and completely lose their value.

As for the differences, the main one is that the currencies that can be traded in forex are also present in the physical world. Otherwise, you will never come across a physical bitcoin or etherium, only in digital form within a wallet or exchange platform.

Online Forex Trading: Is It Legal?

Real-time forex activities, despite being often discussed by non-experts in the field, are sometimes called illicit, illegal, or even non-existent. In fact, the forex market has been around since the 1970s.

The problem is that before digital tools came along, this kind of market was only for people with a lot of money and a lot of knowledge about finance and economics.

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However, now, with investment platforms and online trading apps like NextMarkets, you can implement your forex strategy in real time and without any hassle.

Deposits are also minimal, so anyone familiar with mobile devices can start investing.

And considering the very high number of users who have always wanted to make their capital work, trading volumes are growing exponentially.

As for being legal, trading foreign currencies has never been against the law, and it’s easy to let the government know about it when you file your taxes.

Forex getting started: Why choose Nextmarkets

If you are a beginner and you want to start a forex trading business entirely online, there is nothing better than choosing brokers present like Nextmarkets. In fact, you can use the many tools available in addition to the fact that it is very easy to use.

Among them you will find:

  • the ability to specify a stop loss
  • the ability to forecast profits
  • the ability to apply leverage
  • the ability to deposit small sums
  • the ability to gain access to market analyses conducted by specialists
  • the ability to trade CFDs, forex, and cryptocurrencies as well as invest in stocks
  • the ability to trade without incurring commission charges

As you are no doubt thinking, this can be costly. The real difference, however, is that nextmarkets is completely free and does not include any additional costs beyond the expected costs for buying and selling currencies and financial products.

That’s why choosing it will help you get off to a good start, especially if you’ve never had anything to do with this world!

Forex getting started! Why choose Nextmarkets

How to profit from forex trading

To make a profit in trading in the forex world, you must follow a simple but complex rule: buy at low prices and sell at high prices.

That said, of course, it all seems very simple. In reality, being a very volatile market, you can buy at a price and never see it at those levels again.

That is why, in the event of a decline in forex, the user may decide to open a short position. Going short actually allows you to make a profit by focusing on the price drop.

Consequently, if the forecast is correct, you will get a profit percentage equal to the difference between the purchase price and the sale price.

The greater the difference, the greater the profit. Obviously, the same is true if you go long, that is, bet on the price of an asset.