We have begun our introduction to forex series with previous posts on why you should become a forex trader and key fundamentals to becoming a forex trader. Today we discuss some of the things that new traders need to be aware off before venturing into the Forex trading world.
Volatility Equals Opportunities
Foreign exchange and making profits on it can only be achieved because the market isn’t stable. There are bound to be price swings that could lead to massive gains as well as massive Losses. This is volatility. When trading on Forex, do well to acquaint yourself with charts and indicators that you can use to observe patterns and make future price predictions so that you can build a strategy and choose when to trade.
In addition, keep an eye out for economic policies that may have an effect on currencies. Remember the Plaza Accords. These policies may include fiscal spending, policy updates, announcements pertaining to interest rates or even political issues. These factors tend to create shocks as well as introduce a short term exchange rate volatility. Have a general awareness of news about the country’s you’re trading on and be prepared for them. If you are not so sure about what the effect would be, it is advisable to stay out of trading until the dust settles down.
Information is Power
Before entering the foreign exchange market, try your best to acquaint yourself with all the facts and knowledge there is about Forex. Don’t be so quick to trade with real cash. Most of the time in Forex, traders learn on the go, picking up knowledge and observing trends as they trade in the market.
Nowadays, there are so many applications as well as websites that will give you the chance to practice with a demo account. That way, you get the opportunity to get a feel of the market without the risk of making any loss.
Also, if you’re already trading, make sure to study weekly charts during the weekends when trading officially stops. Look out for patterns and include objectivity in making your plans. Try to familiarize yourself with the currency pairs you wish to trade on. Different pairs have different behaviors, so be diverse in the strategies you use to trade on different currency pairs.
The Right Attitude Pays
Foreign Exchange is a market that requires a lot of time and concentration. As a beginner, it is advisable that you trade with your mind and not your heart. Most times, beginners fail to realize that as much as the understanding of fundamental or technical studies as well as an accurate application is essential to success in the market, having good money management and emotional control will only bolster the effects that having strong analysis skills will bring to the table.
Money management is all about how we can cut down our losses and increase our profits. If we don’t have emotional control, we might be tempted to risk it all on our hard earned gains. Trading with the proper attitude alongside the concept of money management at the back of your minds will lead to increased gains.
Leverage Cuts Both Ways
We have seen in the previous article what Leverage is. It’s simply trading with borrowed funds from your broker in order to maximize your gains. However, it also maximizes your loss and that’s why as a trader you need to handle this curate’s egg very carefully. Excessive leverage can cause so much damage to a wonderful trading strategy. You stand to gain more or lose more based on the amount of leverage you place on the amount of capital you have.
Be strategic in the way you place your leverages. Make sure you understand the power leverage has on the magnitude of gains or losses you might accrue and let it guide your decision even as you trade so you don’t end up running your account into the red.
This article is just to make us understand the concept of Forex Trading does not have to do with multiplication of funds and possibly just making profits. It’s more about strategy and understanding the trading gimmicks. Stay with us on fxcryptonews to understand everything there is to know about FOREX Trading.