If you are new to forex trading than you are in the right place. In this article we reveal everything you need to know about forex trading in Dubai.
The Introductory Guide to Forex Trading
The “Over the Counter” or OTC foreign exchange market is a unique trading space with no physical location or central exchange for people to attend. Because everything happens “online”, it’s possible to trade Forex 24 hours a day using a global network of individual brokers, banks, and businesses.
Forex is a fantastic trading investment for people in the day trading world, as the prices of currency can fluctuate consistently from one hour to the next, allowing people to earn money on their transactions all day long. Certain Forex trading in Dubai environments also allow people to speculate on the changing nature of currencies in the market. Once you have a good idea of where your currencyis heading, you can decide whether you want to take a long, or short-term position with your investments.
How to Trade Forex: Start with a Currency Pair
Investors trade in Forex by buying one currency and selling the money they’ve collected in another currency. The idea is to take advantage of the low price of one part of the pair, and simultaneously tap into the high selling price with another currency. To begin trading in the Forex market, the first thing you’ll need to do is decide which currency pair you want to be trading in.
There are currently over 65 different currency partners to choose from, and one of the most popular options is USD/EUR. A Forex researching website can help you to track some of the latest currency trading opportunities in the market, depending on your risk aversion and trading style. As with any other investment strategy, it’s a good idea to take the time to understand the volatility in your chosen currency pair before you begin buying and selling.
Choosing your Style of Forex Trading for Dubai
There are many different ways to trade Forex depending on your preferred strategy. The three most popular options are City Index Spread Betting, Forex Trading, or CFD.
In a spread betting strategy, the idea is to trade currency every time there’s a point movement. If you choose CFD trading, you’ll tradea specific amount of CFDs in the chosenunit of your base currency, or the currencythat you see on the left-hand sizeof the pricing when you trade. For instance, if you choosethe EUR/USD trading pair, you would stake your trades in Euros. On the other hand, if you picked JPY/USD, your stake would be in Japanese Yen.
Finally, in Forex trading, you’d buy “lots” of currency in your base currency and sell those lots in the other chosen currencyfor your pairing.
Deciding When to Buy and Sell
After you’ve successfully chosen your currency pair and the style of trading you’re going to do, you’ll need to track the price of your currencies by selecting an order ticket in your chosen trading platform. Each currency pair you look at will have a separate “base” currency, and a quote currency. For instance, in EUR/USD, the base currency would be Euros, and the quote currency would be US dollars.
The best time to buy a currency pair is when you believe that the base currency will become more expensive, or “stronger” than the quote currency. However, you should sell your pairs if you believe that your base currency is going to become cheaper, or “weaker” against your quote currency.
In a spread FX trading strategy, there will be two prices to look at. The first potential price is your “saleprice” or “bid price,”while the second price is the buy or “offer” price. The difference between both options is called the “spread”and it refers to the total cost of the trade.
Placing Orders on your Forex Trading in Dubai
Whether you’re trading in Forex, stock, or anything else, it’s importantto maintain as much control over your cash as possible. Usually, this means that it’s importantto add “orders” to your trading strategy. Orders are instructions that you give to your broker to automatically trade your currency at a specific time. For instance, you might tradea stock when it drops to a certain point,or gains value to a specificlevel. Some of the most common orders in Forex include:
- A standard stop lossorder: This is an instruction to close your trade when the price of your base currency begins to fall to a rate that is worse than the current market level. Standard stop loss orders close the tradeat it’s bestavailable price in an attempt to save you as much money as possible.
- A guaranteed stop loss order: A guaranteedstop loss order is very similar to a standard stop loss. The only difference is that you’re guaranteed to close the trade at the stoplevel that you determine. You will have to pay a premium to get this guarantee, but you can rest assured that your trade value won’t drop any lower than you dictate.
- A limit order: A limit order is an order that asks your broker to close your trade at a specific price that’s better than the current market level for your currency. The idea of a limit order is that you sell your currencyand “get out ahead” before the price has chanceto drop again. It’s easy to get greedy in the trading environment and hold onto a currency for too long. A limit order can assist in preventing this.
Monitoring and Closing Trades
When you open a forex trade, the profit and loss in your position will fluctuate whenever the market moves. You’ll be able to track the market prices consistently, look at your potential profitat a loss in real-time, and add orders to your trades according to your unique strategy. Many people can do all of this today from their smartphone, thanks to trading apps and websites.
When you think that it’s the right time to close your trade, all you need to do is sell the remaining currency that you have in your base. When you close your trade, you realize your potential profit and loss, and you can move onto another currency pair if you prefer.
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