Forex Trading Review

Is Forex trading right for you?

If you’re looking to begin trading commodities, you’ve probably already heard about the advantages we at CMTrading offer our clients.

In this Forex Review, we sum up the Forex industry’s main strategies, how to improve your investment portfolio and how to maximize your trading platform’s abilities.

Here’s our Forex review:

More about Forex trading

The idea of Forex is very simple. Different currencies fluctuate in relation to each other. Money can be made off of buying a quantity of the right currency in time to sell it off higher than the buy price. Because there’s always need of a currency somewhere, the Forex market runs almost 24/7. It can be tricky to navigate if you’re a beginner though, which is why most social traders turn to a Forex trading platform to help them make the best they can of the market and trade safely.

What are Currency Pairs

All transactions made on the forex market involve buying and selling two currencies. This ‘currency pair’ is made up of a base currency and a quote currency, whereby you sell one to purchase another. The price for a pair is how much of the “quote currency” it costs to buy one unit of the base currency. Traders make a profit by correctly forecasting the price move of a currency pair. For example, US Federal Reserve hikes interest rates causing the USD to drop in value. If you were trading the EUR/USD, the Euro would be much stronger in this scenario. 

CMTrading offers dozens of combinations of currency pairs to trade including the majors which are the most popular traded pairs in the forex market such as the Euro against the US Dollar, the US Dollar against the Japanese Yen and the British Pound against the US Dollar. 

 For most currency pairs, a pip is the fourth decimal place, the main exception being the Japanese Yen where a pip is the second decimal place. 

HOW TO TRADE FOREX

Forex trading instruments are comprised of Trading Pairs. The most commonly traded Forex pair is the EUR/USD EUR is the Euro, & USD is the US Dollar). When trading Forex, you trade the change in value of one currency versus another. 

In our example of the EUR/USD if the price is 1.30, that means that the value of €1 = $1.30 (this is also known as the exchange rate). If the rate rises to 1.3100, than the Euro has strengthened against the Dollar as €1 is now worth $1.31. Traders who bought the EURUSD when the price was 1.30 will have profited as the price rose to 1.31. 

If a trader believes that the Dollar will strengthen against the Euro, than they believe that the EURUSD exchange rate will drop. Such a trader would sell the EURUSD and profit when the EURUSD drops to 1.29. 

Prices of the exchange rate will rise and fall based on supply and demand for each currency. To measure supply and demand, Forex traders can use Fundamental and Technical analysis. Fundamental analysis includes economic reports like employment figures, central bank policies, and inflation data (more on Fundamental analysis). These news releases reveal the health of a country’s economy and can determine whether demand will rise for its currency. Technical analysis includes indicators and mathematical formulas that measure when a Forex pair is experiencing an increase of demand or supply (more on Technical analysis). 

BASIC FOREX TERMS

Listed below are some of the key terms used in Forex and CFD/Share trading 

PIP 

A Pip is the “Percentage in Point” (PIP), sometimes also referred to as “Point”. It is equal to the minimum price increase of a Forex trading rate. The most common Pip is 0.0001. 

ASK RATE 

The ask rate is the price you can buy a currency at. It is also the lowest price at which a seller agrees to sell a financial asset. 

BID PRICE 

The bid price is the price you can sell a currency at. The market is willing to pay you this price for this particular currency. 

SPREADS 

Spread are the difference between bid price and ask price. 

CURRENCY RATE 

A currency rate against another currency rate. 

Why trade Forex with CMTrading?

We use MetaTrader 4, the best forex trading platform, to offer our clients a simple yet efficient way to trade forex. We are based out of the financial capital of South Africa, Johannesburg, in a highly regulated financial environment that offers considerable similarity to both US and UK arenas, which offers a distinct benefit to traders. Strict financial regulation in the county ensures that deposits made are always safe and distinct from operational capital. CMTrading was founded ‘by traders for traders’, meaning we are an online, dedicated broker that will make your adventures in Forex trading considerably easier.

How can I be a smarter Forex trader?

As with all investment instruments, it is critical to trade smart and not hard if you want to truly make a profit on your investments.

Here are a few top tips from our Forex review:

  • Trade how you are comfortable, not how you are pushed 
  • Don’t make hasty decisions on bad data 
  • A good Forex trading platform will provide data feeds to help you make the right decisions 
  • Choose your broker carefully 
  • Don’t trade all over- make a (good) plan and stick to it 
  • Start small- don’t risk all your eggs in one basket 
  • Focus on a single currency pair to start with 
  • Track success and failure and learn from it 
  • Study the markets you want to trade in and understand them fully 
  • Automated trading helps take temptation to make risky judgments off the table 
  • Avoid snake-oil style promises and pick trusted providers 
  • Never give up! There will be ups and downs- ride them 

Forex reviews show that it’s a market that can yield an incredible return on investment if you pick and choose wisely. We at CMTrading provide top trusted forex trading platforms to ensure that you always have the power of good advice on your side. To learn more about Forex trading with CMTrading’s eBook clicke here!