One of the avenues of investing that the internet has made accessible to the general public is forex trading. Now, I’m sure many of you have at least seen the advertisements about forex trading online, but have been hesitant to get into this area of investing. However, once you begin to learn what Forex Trading is about, you’ll realize that this is an investment that has merit. The key, as in any investment, is to learn and do your research before you jump in with your money.
What is Forex?
First off, you need to learn about forex. Forex is the foreign exchange market. What does this mean?
At it’s most basic, Forex is a currency market, where investors buy and sell currency. Different currencies are used all around the world. Depending on the strength of the economy in each particular country, the currency’s value will fluctuate.
If you’ve ever travelled international, then you’ve already done some currency trading. When you exchanged your money at your local bank for foreign currency, you are basically trading on the foreign exchange market. You probably recall that there was some kind of exchange rate. That exchange rate may even have changed during the time that you were traveling. When you came back to your country of origin and changed your money back, you may have gained or lost a small amount. In essence, you invested in the other country’s currency.
Forex Trading takes the same concept on a bigger scale. With Forex Trading, you are actively trading currencies as and investment.
How Does Forex Pricing Work?
Once you learn that Forex is simply a market that trades currencies based on existing exchange rates, you can start to understand why there may be a market for this kind of investment.
Forex at it’s most basic is no different than the stock market. You are investing in the economy of a foreign country, just as you would invest in the economy of a company.
Just as the stock price in a company is based on the performance of the company, a country’s currency value is based on the economic performance of that country. We all know this at it’s core. Take the US Dollar for example.
When the American economy is doing well, the dollar will be worth more against other currencies and vice versa. You’ve likely seen the effects of this if you’ve cross the border from the US to Canada or Mexico. The exchange rate of the US dollar to the other currencies have changed quite a bit in the last 5-10 years.
So, what the investors are doing with forex trading is keeping up with the world economic news and investing in currencies that they feel will do well.
Learn How to Trade Forex with eToro
There’s only so much you can learn in a short article about Forex. At some point, you want to do some in depth research and figure out if this is the right kind of investment for you. While forex trading is one of the largest investment platforms in the world, it is a high risk investment.
Frankly, I wouldn’t jump in and put my money at risk without a lot of research and study even though this is an investment that may peak my interest.
So, I have some interest, but I want to learn how to trade forex and I want to be able to realistically practice before I put real money into this kind of investment.
However, what I would recommend, if you are interested in learning about forex, is to start doing your research. Get some reading materials, participate in some seminars, and start studying the market. Fortunately, I found a trading company that provides all of these services free, the eToro – Forex Platform . This is an awesome service because the best way to learn how to trade forex is with a combination of learning and hands on experience.
eToro is a global market place that allows people to invest and manage their forex trading simply and transparently. They have over 1.5 million users in over 130 countries worldwide.
Like I said, the beauty of eToro, is that you can simply start an unlimited practice account and participate in all their services free. Included in these services is a complete education center that provides the following services:
- Live Webinars
- Trading Guide
- Trading Tips
- Practice trading with $10,000 in virtual currency
They provide a ton of training materials and will answer all your questions in the education center. But beyond that, they even give you an unlimited practice account where you can practice trading with virtual currency. This way you can gain hands on experience to learn how to trade forex without risking real money. Practice makes perfect.
I thought this was an ideal program for learning how to trade forex primarily due to the practice account. You can find tons of information and research everywhere, but giving you the ability for unlimited practicing gives you some actual experience with what it would really be like to trade forex. Beyond that, it gives you the ability to put your learning to the test and really see if this is the kind of investment for you before you invest real money.
I started my own practice account to learn how to trade forex on eToro and I am really impressed with their service.
First off, their practice account is fully features. That means you can use all of etoro’s trading features using virtual currency. I really get the sense of how trading forex works without having to risk my own money.
One feature that I really liked is their new copy trader service. This is a service that gives you the ability to allot a portion of your funds to copy another trader. That way you can follow other successful traders and copy their investments. You simply assign how much money you want to invest using copy trader for any particular trader and you will begin making the same investments in the same proportions as that other trader. This way, you can pick several traders that have a strong history and invest a portion of your money in their investments as well.
I thought this was a brilliant feature. Think of it in a stock market context. Wouldn’t it be awesome if you could simply start following Warren Buffet and invest your money exactly the same way that he does in real time? This is exactly what etoro’s copy trader service does. It gives you the ability to learn how to trade forex like a professional.
This way, you can spread out your investments by copying several traders with some portion of your funds as well as managing your own investments. It seems like a good way to diversify and at the same time take advantage of the knowledge and success of more experience traders. I think this is a feature that even the experience Forex Traders might enjoy.
Start by Practicing
Currently, I’ve started to learn how to trade forex with my own practice account at eToro.
As I stated earlier, don’t just jump in with your own money. Invest responsibly. Learn the system first. But the best way to learn how to trade forex is with practice. So, I would suggest opening a practice account with eToro. It’s completely free. You can participate in all their free features and use their practice trading with virtual money.
Stick with a practice account until you feel comfortable. When you feel comfortable enough to start using real money, you can use any service that you feel comfortable with for doing your actual trades. However, you’ll find that eToro does also give a deposit bonus for the first deposit that is worth considering:
So, while you don’t have to stick with eToro when it comes time for you to invest real money. You might consider it as they do have some great features and you’ll get a deposit bonus as well.