• About
  • Advertise
  • Write For Us
  • Privacy Policy
  • Contact Us
Subscribe
Smart Investor Malaysia
Advertisement
  • Start Here
    • Guides
    • How-Tos
    • Analysis
  • Investments
    • Asset Management
    • Stocks
    • Islamic Finance
      • Islamic Personal Finance
    • Alternative Investments
  • Personal Finance
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Feature
    • Regional / Global
  • ESG
  • News & Events
  • What’s News Asia
No Result
View All Result
  • Start Here
    • Guides
    • How-Tos
    • Analysis
  • Investments
    • Asset Management
    • Stocks
    • Islamic Finance
      • Islamic Personal Finance
    • Alternative Investments
  • Personal Finance
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Feature
    • Regional / Global
  • ESG
  • News & Events
  • What’s News Asia
No Result
View All Result
Smart Investor Malaysia
No Result
View All Result
Advertise with Smart Investor Advertise with Smart Investor Advertise with Smart Investor
Home Investments

The Basics of Forex Trading

3 years ago
0
forex foreign exchange trading
84
SHARES
165
VIEWS
Share on FacebookShare on Twitter

The foreign exchange market, also known as the forex market, refers to a set of markets that facilitate the exchange of international currencies. According to Britannica Encyclopedia’s overview, the forex market is one of the oldest, biggest, and most liquid markets in the world. Today, most markets operate as over-the-counter (OTC) dealer’s markets, where two participants exchange assets over telecommunications channels.

There are many reasons one might want to swap one currency for another: tourists, for instance, may buy local currencies while travelling, while international businesses may purchase foreign currencies to pay offshore employees. However, in the world of trading, investors exchange currencies with the goal of making a profit.

If you’re interested in learning more about the complex world of foreign exchange trading, here are a few basic facts.

How do traders profit from forex?

Exchange rates can rise or fall by the minute. Traders profit from such changes by buying currencies while they’re undervalued, then selling them when their prices rise against other currencies.

To illustrate: let’s say a trader predicts that the Great British Pound would become stronger than the US Dollar. Let’s also say that £1 was worth US$1.55. The trader then buys £1,000 for US$1,550. Later, his prediction comes true, and the GBP grows, with £1 becoming worth US$1.75. This time, when he sells his £1,000, he gets US$1,750, thus turning a profit of US$200.

What is leverage?

Traders can also increase their profits by making use of widely available leverage trading options. According to The Balance, leverage allows traders to invest a small amount of capital to use borrowed funds in large trades. Though the trader will still have to return the borrowed capital after the trade has been executed, they will receive the majority of the trade’s profits.

Let’s say that the trader from the previous example wants to stake 15,500 USD in a trade. However, he only has 1,500 USD. Through leverage trading, he can use his 1,500 USD to borrow 14,000 USD, allowing him to purchase 10,000 GBP at 15,500 USD. If the exchange rate again shifts from 1 GBP for 1.55 USD to 1 GBP for 1.75, the trader can sell his 10,000 GBP for 17,500 USD. Returning the 14,000 USD he borrowed leaves him with a profit of 2000 USD.

Of course, it goes both ways. If the trader’s prediction were incorrect, using borrowed funds would also amplify his losses. Thus, when trading on leverage, it’s important to only stake money you can risk losing.

Where can I trade forex?

To get started, traders must first create a trading account at a brokerage. These days, most transactions occur on forex trading platforms online, through websites, software, and mobile apps. According to an overview of trading platforms by FXCM, some of today’s most popular trading platforms include MetaTrader4, Ninja Trader, and FXCM’s Trading Station. These platforms are widely used because they offer resources that can help traders make smarter decisions. For example, some notable tools these platforms provide include access to advanced analytics, charting tools, and risk management applications.

A note for beginners

As with any financial endeavour, it’s best to enter forex trading with a plan in mind. As mentioned in our previous article The Importance of Financial Planning, a lack of understanding of financial risks and returns will make you vulnerable to errors of judgment, which can lead to bad trading decisions. Consequently, it’s important to take time to study the markets thoroughly before starting your trading journey. If you want some hands-on experience without putting your capital at risk, you can practice trading using virtual money on one of the many demo accounts available.

Thanks to resources like leverage and helpful tools on trading platforms, forex trading has become more accessible. Beginners who want to try their hand at foreign exchange trading should study the market, its movements, and different trading strategies in order to safely engage in trading.

This article was contributed by Alex Palmer.

Tags: Investingforextrading
Previous Post

Financial Planning: Things to Do After a Flood

Next Post

Malaysia: Investment For Expatriates In A Global Context

Next Post
3D rendered Illustration. Highway Sign next exit to expatriation.

Malaysia: Investment For Expatriates In A Global Context

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Morningstar Awards 2024 Morningstar Awards 2024 Morningstar Awards 2024
  • Trending
  • Comments
  • Latest

Robo Advisor In Malaysia, 8 Robo Advisor Platforms To Choose From

17/08/2022

MRTT VS MRTA, What’s The Difference?

11/10/2023
A calculator on financial chart, financial concept

Tax For The 6 Common Investments In Malaysia

19/09/2023

How To Open A CDS And Share Trading Account?

02/05/2023

Digital Fundraising Platforms in Malaysia

Retirement Plans for the Self-Employed

SC Guidelines On Digital Assets

Retirement planning advise from the experts

Retirement Planning: Best Practices and Advice From Experts

[Đính chính và Thay Thế]: Visa ra mắt Flex Credential tại Việt Nam, bước tiến mới trong thanh toán linh hoạt và quản lý tài chính tối ưu cho người dùng

17/06/2025

Correcting and Replacing: Visa unveils Flex Credential in Vietnam, ushering in a new era of payment flexibility and financial empowerment for consumers

17/06/2025

HKSTP Teams Up with HKU and CUHK Medical Schools to Showcase Hong Kong’s Life & Health Innovations at BIO International Convention

17/06/2025

Hong Kong Baptist University and Elsevier Report Charts Global Growth of Chinese Medicine Research, Calls for Standardised Frameworks for Broader Integration

17/06/2025

[Đính chính và Thay Thế]: Visa ra mắt Flex Credential tại Việt Nam, bước tiến mới trong thanh toán linh hoạt và quản lý tài chính tối ưu cho người dùng

8 hours ago

Correcting and Replacing: Visa unveils Flex Credential in Vietnam, ushering in a new era of payment flexibility and financial empowerment for consumers

8 hours ago

HKSTP Teams Up with HKU and CUHK Medical Schools to Showcase Hong Kong’s Life & Health Innovations at BIO International Convention

12 hours ago

Hong Kong Baptist University and Elsevier Report Charts Global Growth of Chinese Medicine Research, Calls for Standardised Frameworks for Broader Integration

13 hours ago
The Smart Investor

© 2024 The SmartInvestor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.

Category

  • About
  • Subscribe
  • Write For Us
  • Payment Policy
  • Shipping Policy
  • Privacy Policy
  • Contact Us

Sign up to read our newsletter

  • About
  • Contact Us
  • Home
  • Home (Bahasa Malayu)
  • Newsletter
  • Payment Policy
  • Privacy Policy
  • Shipping Policy
  • Subscribe
  • Write For Us

© 2024 The SmartInvestor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.

No Result
View All Result
  • Start Here
    • Guides
    • How-Tos
    • Analysis
  • Investments
    • Asset Management
    • Stocks
    • Islamic Finance
      • Islamic Personal Finance
    • Alternative Investments
  • Personal Finance
    • Cash Management
    • Grow Your Wealth
    • Protect Your Wealth
    • Distribute Your Wealth
    • Behavioural Finance
  • Enterprise
    • Startups
    • Entrepreneurs
    • SMEs
    • Leadership
    • Business Planning
    • Fintech
  • Property
    • First Time Home Buyers
    • Central
    • Northern
    • Southern
    • Sabah & Sarawak
    • Feature
    • Regional / Global
  • ESG
  • News & Events
  • What’s News Asia

© 2024 The SmartInvestor Malaysia | The contents on this website are for educational purposes only. You should always seek your own professional advice from the appropriate financial advisor or institution.