Here are 5 Forex Basics for Beginners

Forex has become one of the fastest growing businesses, because it can be run from anywhere, even with a small initial capital. It's just that this seemingly simple thing can be disastrous if we don't understand the basics of forex trading.

What is Forex?

Forex stands for foreign exchange, or foreign currency in Indonesian. Technically, forex is foreign exchange trading that takes place over-the-counter or off an exchange. Forex trading is quite a lot, which makes it the most liquid and largest financial market with daily trades of more than $ 5 trillion. With such a large turnover of money, of course, more and more people are tempted to trade forex in the hope of achieving fantastic profits as well.

Learn Foreign Exchange Trading

One of the basic things about forex for beginners that you need to know is to make sure you know the rules for trading foreign exchange. As a beginner trader, sometimes you are tempted by the success stories of other traders who can get high profits from forex trading. This must be watched out for, because success in forex trading must be balanced with learning.

Forex is different from money changers. The money being traded is usually pairs, such as EUR/USD. So in forex trading, you will sell and buy at the same time. This is where traders benefit from when the currency strengthens or weakens. So, from here you have to start studying the factors that influence changes in currency values, and the dynamics of the downward and upward movements of these currency pairs.

Technical Analysis of Foreign Exchange

In learning forex, you have to learn how to analyze forex. There are three techniques that can be applied, namely technical, fundamental, as well as market sentiment analysis. All three have a different focus. Technical analysis will focus on market predictions and calculations. Meanwhile, fundamental analysis techniques are based on factors that have an impact on currency value fluctuations. The latter is an analysis of market sentiment which helps traders understand the tendencies of the majority of market participants.

Trend Based Trade

For beginner traders, following the trend will be a safe step for trading. Usually there are those who go against the trend, it's just that this is more risky. Following the trend makes it easier for traders to harvest profits. This means, when the trend is up, traders should only open buy positions. Meanwhile, when the trend is down, or downtrend, traders should only open short positions.
As one of the basics of forex for beginners, traders must also understand how to trade between the three trends in forex such as ranging/sideways, namely when prices move up and down in a narrow time; bearish, namely when the price of the pair falls; and bullish, when the price of the pair rises.

"Sell at Resistance" and "Buy at Support"

In the first condition, "sell at resistance", means that the trader should open a "sell" position when the price is at the "resistance" level, or at the peak. Also do a "sell" position when the bearish trend is corrected up. When the forex pair goes down, for some time it seems that the price will continue to fall. However, there are moments when the price reverses upward. So, at this moment, good traders try to take advantage of opportunities to "sell".

In the second condition, "buy at support", means the trader should open a "buy" position when the price is below. The expectation, of course, is to hope that the price will turn around and make a profit. From these two conditions, so that traders play forex safely, make sure to study the theory of "support" and "resistance" well.

Yes, playing forex sounds easy. But to test your skills, make sure to try every basic you learn and strategies you have through demo account. In a demo account, you don't need to invest real capital, just with virtual money you can check your understanding of the basics of forex for beginners and other supporting techniques.

After doing a demo several times and feeling ready to jump right into trading, start investing in one product first. Focus on honing skills on one "currency pair" first. For starters, you don't need to take multiple pairs, because the focus is not on trading multiple currency pairs, but on how to earn a sustainable profit from one currency pair.

If you are already proficient at playing with one currency pair, try expanding your wings to trade with several other currency pairs. Of course to make your potential profits bigger.