The so-called backtesting, or testing of your trading strategy, is the alpha and omega of the entire trading business. Only at this final stage will you find out if your…
Forex and CFD Trading
We receive a lot of questions, such as: “Where can I trade Forex (CFD)?” or “What is the difference between binary options and forex?” To help you answer these questions, we have set up this category to share the most relevant information with you.
Although you are on a page dedicated to binary options, I assume that you have heard the term forex, too. What exactly does it mean and what opportunities and options forex offers is something you can read on this page dedicated primarily to beginners. Don’t be afraid; everything will be explained, no previous knowledge is necessary.
|Read our articles about forex
|Where to trade Forex?
What is Forex
Forex (sometimes abbreviated as FX) is a market where currencies are traded. The need to exchange currencies is the primary reason for the establishment of a global foreign exchange market. The word Forex stands for two words: foreign and exchange. So the market is characteristic with the trading of foreign currencies (such as EURO or US dollar).
To keep things simple, imagine that you come to a foreign exchange bureau to buy 20 EUR for 18 GBP. Shortly, the value of EUR falls (meaning that the exchange rate declines to, let’s say, 1 EUR per pound). You go back to the foreign exchange bureau and sell the euro to cash in the 20 EUR for 20 GBP. You in fact made money.
If you had exchanged one million euros, your profit would have bene one million pounds. This is the principle of Forex trading. To keep things simple, we excluded fees paid to the exchange bureau and the difference between sell and buy exchange rate (called spread)
Sometimes the word Forex is (incorrectly) used as a global term for the whole world of CFD trading . What is then the difference between CFD and Forex? It’s simple: Trading CFD may include shares, futures, commodities and currency pairs. This is just a type of trading. As opposed to Forex, which denotes currency pairs only.
For more information read: What is CFD
Basic information about Forex:
- Each day, more than 5 trillion US dollars is traded on the Forex market, which is why the market is so liquid (There is enough people who sell and buy, making the prices move every single second).
- Forex is completely constructed on the principle of supply and demand. This means that while you are selling, someone else is buying
- Forex is open for 24 hours a day 5 days a week, i.e. on business days usually non-stop
- The most popular currency pair traded globally is EUR/USD
- Forex enables you to start trading with a few dollars in your pocket via a program or trading platform installed in your PC. So, all you need is a couple of dollars, PC and internet access.
- Profit (same as loss) is not limited (…or limited by a trading account in case of loss) . This is the biggest strength (as well as weakness) compared with binary options (more about binary options in the article below).
Where to trade Forex
When choosing the right Forex broker, same as when looking for the binary options broker, you should concentrate on a few aspects such as …:
- Spread (the bigger, the least profitable)
- Leverage: For more information read: What is leverage? (article coming soon)
- Minimum deposit, minimum size of trade
- Language/s offered by the broker’s platform and customer support
Our proven Forex brokers:
|Forex, CFD, Crypto, Shares, Commodities, Indices
|Up to 1:30
|From 2 pips (depends on asset)
How much can I earn on Forex
Average earnings generated on Forex depend on the invested capital and the risk you are willing to take for each won position. Once you learn how to invest and trade, you should be able to increase your initial capital by around 10-20% on a monthly basis. Translated into concrete numbers, if you start with 100 000 USD, you should be able to make 15 000 per month.
All the figures vary significantly depending on your time and experience. Honestly, 20% on a monthly basis is an aggressive target. Conservative traders will be happy if they earn much lower amounts.
Forex trading can become a serious resource of your second income next to your full-time job. As a Forex trader, you are speculating on the changing prices of foreign currencies or, better foreign currency pairs. In the USA, tens of thousands of ordinary Americans use this method for increasing their living standard.
If this article about Forex attracted your attention, don’t hesitate to continue reading our series about Forex to get a more in-depth understanding.
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