The foreign exchange market is one of the richest investment instruments. This is because it is also among the oldest, which means that it has undergone lots of developments and innovations through time. Aside from that, it is also the most popular all over the world since it can be a great source of additional or main income. As a matter of fact, this market is trading more than $5 trillion in a day. Some people would contest this by saying that the securities market is the most popular. However, the securities market only trades around $22.4 billion in a day, which is just a mere 0.4% of the former. So, this is the reason why there are also so many people who are enticed to learn to trade online in forex market.
With the foregoing, for people who are just beginning their journey in this market, what are the most essential things or steps that they need to do. In this regard, there are only three (3) steps that people should be pondering on as their initial stage in penetrating this market. These are about understanding the jargons, as well as reading quotes and deciding the currency to invest into.
What are the jargons?
In order for people to learn to trade online in forex market, they need to be familiarized with the terminologies being used, most especially in CFD forums, for example. Among these jargons are the following:
1. Base currency, which refers to the type of currency that a trader will be using to spend.
2. Quote currency is the one that is going to be purchased.
3. Exchange rate is the relative weight or indicator telling the trader how much base currency he or she needs in order to have the quote currency.
4. Long Position is when a trader wants to buy a base currency and then sell the quote currency.
5. Short Position is the opposite of the previous one. This means that the trader wants to buy quote currency while he or she wants to sell base currency.
6. Bid Price is the amount that a trader's broker is willing to purchase the base currency, in exchange, for the quote currency.
7. Ask or Offer Price is the amount of money at which a broker will be willing sell the base currency for a particular amount of quote currency.
8. Spread is simply the difference between the ask and bid prices.
How to read forex quotes?
In a forex quote, you will see two numbers, which are the bid price (on the left) while the other one is the ask price (on the right). It is as simple as that.
Which currency should you choose?
Thirdly and lastly, when you already know the grip of it, you should start to trade online by choosing the currency you want to invest into. Of course, there are some considerations before you can come up with your decision like the health of the economy, stability and many more.