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How to trade Currency

MT: Fundamentals of currency trading in Nigeria explained

MD: Connect to the international currency marketplace from the comfort of your home. Discover the basics of profiting on Forex in South Africa.

How to Trade Currency

Trillions of US dollars circulate on the global currency exchange every single day. Banks and corporations derive profits from buying and selling alongside retail traders. These are individuals who connect to the marketplace through brokers. With a live trading account at one of the platforms, any resident of Nigeria can join their ranks.

In this age of pervasive technology, online trading is expanding at a rapid pace. Last year, over 15 million people were estimated to engage in currency exchange. Those shrewd enough to harness market fluctuations rake in profits. Here is how you can be part of the vibrant trader community through South Africa brokers like ForexTime.

Where Profitability Comes from

One currency may be bought or sold for another. This is why FX trades are based on pairings. These follow the formula “base currency”/”quote currency” (aka “counter currency”). For instance, 1.28 given as a price for EUR/USD combo means 1 Euro costs 1 US dollar and 28 cents.

Each pair has two prices valid simultaneously. The Ask value is applied to buying, while Bid is applied to selling. The difference between the two constitutes the spread. This is a source of profit for the broker, as well as for the trader initiating the exchange. In sales, the price for a customer is always higher than that for the supplier. Hence, the Ask value is always slightly bigger than the Bid figure.

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Spread is measured in special units known as pips. Every pip is equal to 0.0001 for all pairings except those with the Japanese yen. This is understood as the smallest increment by which currency value may change.  Therefore, if GBP/USD values are 1.35361 for sellers and 1.35371 for buyers, the spread is 1 pip. Likewise, drops or rises in currency values are also measured in pips. A surge from 1.2050 to 1.2065 constitutes a 15-pip rise.

Prerequisites for Success

A trader aims to foresee market dynamics and take the most profitable course of action. They could open a so-called Long position and focus on long-term trends, or sell quickly via a Short position to cash in on short-term changes. If you expect some base currency to gain value in the future, you could buy it to sell later, after the price has grown. ON the other hand, if you expect a downward movement, it may be best to sell off the currency. This way, you will be able to buy more of it back following its depreciation.

How to Gain Access

A registered Forex trading account is your entry pass into the market. This is always created through a broker – a company that functions as an intermediary between you and the global exchange. To obtain login credentials, you need to fill in a special form on the brokerage website. However, before diving headlong into real money trading, spend time in the demo mode.

This is a risk-free simulate environment that allows you to explore features of your trading software without any real funds at stake. This is where every newbie should begin. The platform you will be using (most commonly MetaTrader 4 or 5) includes multiple graphic aids. These charts and tables are there to facilitate decision making. Take time to grasp the logic of Forex success before venturing into the territory of live trading.

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A Word of Caution

No broker may guarantee profits. The outcome will always depend on your competence and analysis. However, there are a few ways to hedge your risks. Aside from the safe demo period, consider copy trading and portfolio diversification.

As part of the first arrangement, the funds in your account will be connected with the account of a strategy manager. This is an experienced trader who may be chosen based on performance ratings posted by the brokerage. All their subsequent actions – positions they open and close – will be replicated in your account (as long as you are satisfied with the results). The expert receives a commission, while you have the benefits of delegated decision making.

Once you feel confident trading currencies, consider adding other finance instruments, such as CFDs on stocks. The more tools you use – the more balanced the risks.