Forex trading is one of the most user-friendly ways to break into the investing world. It involves the exchange of two different currencies, in which one is more profitable than the other, allowing the seller to make a profit on the transaction. Unlike other types of trading and investing, Forex trading does not require knowledge on any micro-economic factors, making it easy to get into for beginners.
As Pakistan continues to become a strong player in the global market, there’s a great deal of opportunity for Pakistani investors to get involved in Forex trading. It’s a completely legal activity, although recent crackdowns on illegal crypto trading within the country has meant that investors need to choose a licensed broker carefully for this activity.
There’s a few steps you’ll need to take in order to prepare for Forex trading, however once you get going it’s an incredibly easy activity to participate in. Below is a walk-through guide on how to start Forex trading in Pakistan.
How to start Forex trading in Pakistan
There’s a few steps you’ll need to take to begin Forex trading in Pakistan, although these are quite simple to do. One of the most basic steps is to ensure you have a stable and fast internet connection that will support your activity. While this is basic, it’s often a factor that is overlooked. The next steps are as follows:
Choose a broker
Due to recent tightening of restrictions by the Securities and Exchange Commission of Pakistan (SECP) in order to reduce money laundering, many brokers within Pakistan are not registered with SECP. As a result, it is advisable that you find an international broker.
Many international brokers offer legal accounts to Pakistani traders, with the UK, US and Australia being some of the best countries to find a broker in as these countries are heavily regulated and provide the most security. Once you’ve found a suitable broker online, simply apply and open an account.
Select a platform
Many brokers offer their own trading platform so it is worth enquiring with your international broker before investing in another platform. However, it’s always wise to do your research to ensure you are cooperating with Forex trading regulations in Pakistan. Some of the best Forex trading platforms include MetaTrader 4 or 5.
Funding your account
To get started with Forex trading, you will need around at least $100 US dollars, although trading with around $500 US dollars will offer you more flexibility. If you are able to, the best amount to start Forex trading with is around $5,000 US dollars as this will offer the most profit for the amount of time you are investing in the activity.
What are the best strategies for Forex trading?
There are a few simple strategies and tips you can take on board to get off to a smooth start with your Forex trading journey. Like any type of investing as suggested in books, Forex trading carries with it a small amount of risk as there are fluctuations in the market, however by adhering to the below strategies, you’ll be sure to get off to a good start.
Selecting a currency
To get started, it’s best to choose two popular and stable currencies. Currencies are always traded in a pair as you are buying one currency and selling another. While you can trade any Forex currency available on your platform, the most recommended currencies include EUR/USD.
Be aware of your position in the market
If you’ve previously invested in stocks, bonds or shares, you will most likely have a good knowledge about how to watch market trends and will have identified that the market usually only moves one way; up.
However, as you are trading in a pair, the market can move both ways because you are selling another currency at the same time. You need to be aware of whether you’re entering a buyer position or a seller position.
A buyer position
A buyer position is where the value of your base currency will rise compared to the quote currency. For example, you’re buying and selling EUR/USD and you believe the euro will strengthen against the dollar.
A seller position
A seller position is where you believe your base currency will fall compared to the quote currency. If you’re selling EUR/USD, this means you believe the euro will weaken against the US dollar.
Key terminology to understand
There are some popular terms used in the Forex trading market, which it’s really important to understand if you’re serious about the activity. These include:
Pip – Pips are used to measure movement in a forex pair. A pip price is subject to change and can differ depending on the time of the trade and the amount being traded.
Bid – The price at which the broker is willing to buy the currency pair.
Ask – The price at which the broker is willing to sell the currency pair.
Spread – The difference between the buy and sell prices.
Base – The first currency in a currency pair.
Quote – The second currency in a currency pair.
Overall, Forex trading is a relatively easy activity to get into within Pakistan, and as long as you choose a reputable international broker, you are sure to be successful. As we’ve seen above, understanding which currencies to start trading in and deploying a few simple strategies, as well as understanding basic currencies, will get you far within the Forex trading world.
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