If you are a person that doesn’t like risks, then stay off the forex market. If you are having financial
If you are a person that doesn’t like risks, then stay off the forex market. If you are having financial
The best traders hone their skills through practice and discipline. They also perform self-analysis to see what drives their trades
2020 has in many ways changed the shape of foreign exchange trading (and the global economy as a whole) for years to come. It is important to know the current forecasts, upcoming trends, and the best future bets for 2021 in order to make the most effective investments.
How Has Covid-19 Affected Forex Trading?
The forex market naturally relies on worldwide trade between nations. The pandemic has led to a great deal of economic uncertainty, trade disruptions, and increased isolationism. Each country’s response to the pandemic will affect their domestic economies. This in turn will cause ripple effects across the financial world as a whole. It is one of the most complex issues faced by modern investors and it is ongoing.
There are several factors that further make forex more unpredictable than ever. One is the fact that there is no central marketplace for foreign exchange. This means there is less regulation. However, it is not always a bad thing, as several countries have used relaxed rules to help support foreign currency liquidity. Another factor is the relatively new nature of modern forex trading compared to traditional stock markets. Investors will have encountered certain problems for the very first time. The good news for forex brokers is now that they know how bad things can get, they will be better able to prepare for potential issues in 2021.
What We Can Learn From 2020
It is useful to analyze global capital flows to get a sense of just how extreme things have gotten in the past year. By July global GDP was expected to fall by 6%. This is forecast to further fall in the coming year. Popular predictions tend to range between 12% and 32%. Forex investors will need to prepare for this in advance in order to minimize potential losses.
Certain patterns seen in 2020 will continue into the next year. It is a good idea to look at graphs showing the fluctuations of a chosen currency. This will help to get a sense of when/why they lost value. If this year has taught us anything it is not to take risks. Markets are far too volatile to gamble on pairings that are too unpredictable. Instead, it is wiser to stick to ones that have remained reliably profitable even during the recent disruption. Safe-haven currencies are always a good bet when there are troubled times.
The following currencies are likely to remain the safest going into 2021:
- USD (US Dollar)
- KYD (Cayman Islands Dollar)
- GBP (British Pound Sterling)
- EUR (European Euro)
- CHF (Swiss Franc)
- CAD (Canadian Dollar)
Events That Could Affect The Market
There are several important political and trade events that will impact currency values around the world. The result and fallout of the US election will be particularly important. US-Chinese trade relations could affect the dollar. Since the Coronavirus pandemic is set to continue this will be one of the biggest factors in economic fall and growth. UK negotiations with the EU and the impacts of Brexit also play key roles.
The Rise Of Individual Investors
Across many sectors, recent developments have led to an increase in self-employed remote workers. Forex trading is no exception to this trend. It seems very likely that there will be a shift away from reliance on commercial or investment banks to conduct trading on behalf of their clients. Instead, there will be a trend for individual investments. This will lead to a growing number of self-reliant trading professionals. Such individuals can use the internet to self-teach themselves about forex brokers and the various ins and outs of the market. Armed with this knowledge they will no longer have to rely on third parties.
Speculative opportunities will remain, but people will be less inclined to trust large banks with their investments. This will be due to the aforementioned uncertainty which could lead to potential market crashes and losses. Therefore people interested in forex in 2021 will be much more likely to take trading actions into their own hands instead.
Forecast For 2021
If we look at a comparison of predictions from multiple institutions the forecast for 2021 looks particularly bleak for the GBP as it continues to recover after the UK government’s Furlough Scheme. This currency will be particularly fragile going into the start of the year. However, it is also one of the most widely speculated and as previously stated is fairly safe.
If there is a further global economic contraction, then EUR/USD trading will become vulnerable as well. Factors affecting potential rate gains will include the influence of the GBP and the overall risk of more economic disruption. If confidence in the Euro-zone continues then EUR will gain value. Investors should therefore keep an eye on upcoming political events and protective regulations within this region.
The overall consensus is that the Fed will not provide significant dollar support going into 2021. If the economy becomes more vulnerable there is a chance of bond yields being capped. Yield trends will almost certainly stay negative to an extent that goes far beyond that of recent years.
However, this consensus has been contested by a minority of banks. They believe that there will be medium-term growth for the dollar due to a lack of sustained euro support. If this becomes the case, then a euro/dollar pairing could be very lucrative. Regardless of which scenario becomes reality, the dollar will continue to be the global currency standard for investors.
Best Pairs To Trade
Despite the events of 2020 the best pairs to trade for forex brokers have more or less stayed the same. USD continues to reign supreme when it comes to paring it with other currencies. However, investors should also not overlook how well the Japanese Yen has fared this year.
Based on forecasts these are the best foreign currencies to exchange in 2021:
- EUR/USD (Euro/US Dollar)
- USD/JPY (US Dollar/Japanese Yen)
- GBP/USD (British Pound/US Dollar)
- USD/CAD (US Dollar/Canadian Dollar)
- AUD/USD (Australian Dollar/US Dollar)
- USD/CHF (US Dollar/Swiss Franc)
- NZD/USD (New Zealand Dollar/US Dollar)
- EUR/GBP (Euro/British Pound Sterling)
- USD/HKD (US Dollar/Hong Kong Dollar)
- USD/KRW (US Dollar/South Korean Won)
However, there is a caveat to choosing the Euro and British Pound Sterling. The pairing of these two currencies has become less lucrative since the vote to leave the EU and the pandemic. With Brexit deadlines looming investors should only bet on this pair at the right time. Knowing when to do so can ensure that they still make a tidy profit. Conversely, investing at the wrong time could prove to be disastrous.
Currencies To Be Wary Of
It is also crucial that investors are aware of the currencies that have faltered recently. Many of them are emerging market economies (EMEs) that rely on oil prices. They include RUB (Russian Rouble), BRL (Brazilian Real), TRY (Turkish lira), ZAR (South African Rand), and IDR (Indonesian Rupiah). In 2021 oil prices are likely to continue facing significant problems. It is therefore fair to say that these currencies will be risky bets.
There are exceptions to this. For instance, Bahrain’s wealth is dependent on petroleum exports, but the BHD has remained stable with the US dollar since 2005. There are similar currencies that get their value through oil yet have continued to remain strong even as the industry struggles. These include KWD (Kuwaiti Dinar) and OMR (Oman Rial). Furthermore, France is set to in 2021, potentially boosting not just its economy but that of all nations that use the EUR.
The JOD (Jordan Dinar) has been pegged with the US for two decades. However, the country is not economically developed enough to take the risk. The reduction in domestic economic activity earlier in the year suggests the JOD will be fairly weak going into 2021.
It is tempting to pair GBP with JPY based on their performances. The problem is that unresolved development due to Brexit may make this an unwise bet in 2021. Meanwhile, the CAD (Canadian dollar) and AUD (Australian dollar) are somewhat wild cards. They saw a drop at the start of the year but later rebounded. Their values have gone up and down frequently depending on different forex factors. However, their fluctuating values could be taken advantage of if investors can predict when they will rise. The Canadian dollar in particular is one of the safest bets because its economy is consistently stable.
Keeping An Eye On Ongoing Developments
The fact is there are no certainties when it comes to the forex market of 2021. Anything could happen. Perhaps a resurgence of Covid-19 could lead to even more extreme falls in the economy. This could destroy the economy of an individual nation, decimating its currency. This is a worst-case scenario, but as 2020 has already shown us, unexpected negative scenarios can occur without warning.
Luckily, we are not completely in the dark. It is possible to predict to some extent what will happen by keeping an eye on ongoing developments. This will allow investors to prepare for potential outcomes. For example, if the USA sees a surge in Covid-19 cases it is fair to say that USD will lose some value. The pandemic is not the only issue to follow in 2021. Political and border developments will also play a key role in the ongoing values of different currencies.
The definition of what the foreign exchange market is, goes something like this:
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling, and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market.
Currencies have traditionally been the domain of businesses, institutional investors, and hedge funds. The invention and recent emergence of online forex trading has made it available to individual traders, most trading in their spare time and from the comfort of their own homes.
Currency is without a doubt the fastest moving and most liquid kind of trading in recent years, and really shot up after the 2008 financial crisis. By now it far surpasses the speed and volume of equities and the usual stock trading. The simplicity of the online platforms has lead millions of small-time traders into the market, and many of them are doing really well with it.
Online Forex Trading In Numbers
The overall forex market sees average daily volumes of more than $3.2 trillion. This is four times more than all the equity and futures markets combined.
About 20% of those trades come from businesses that need to move money from one currency to another to conduct international business. Speculative traders, among these the online, private traders, make up a staggering 80%.
Basic Online Trading Timing
The online forex trading market has incredibly flexible hours as different markets around the globe open and close. Just look at these facts: New York opens at 1 pm GMT and closes at 10 pm. Sydney kicks off at 10 pm GMT and if you’re interested in Asia, Tokyo opens at midnight. For GBP London opens at 8 am GMT, just one hour before Tokyo closes and the cycle continues online day in and day out – 365 days a year.
The most active trading occurs when two markets overlap each others opening hours.
Example: London and New York overlap for four hours between 1-4 pm GMT. We can clearly see from analysis, that at this time the USD, EUR, GBP are the most actively traded currencies.
London and Tokyo only operate together for the last hour of Tokyo and the first of London trading. And the trading then shows the same with GBP, EUR, and JPY.
All trading strategies should include timing and opening and closing hours of the markets the online traders are interested in. Some traders choose the extra activity of multiple markets at the beginning and closing hours of the London or New York markets. Others prefer the calmer times when the markets are “open on their own”.
Why Do So Many Choose Online Forex Trading?
- Many firms don’t charge commissions – you pay only the bid/ask spreads.
- There’s 24 hour trading – you dictate when to trade and how to trade.
- You can trade on leverage, but this can magnify potential gains and losses.
- You can focus on picking from a few currencies rather than from 5000 stocks.
- Forex is accessible – you don’t need a lot of money to get started.
How is Forex traded?
The mechanics of a trade are virtually identical to those in other markets. The only difference is that you’re buying one currency and selling another at the same time. That’s why currencies are quoted in pairs, like EUR/USD or USD/JPY. The exchange rate represents the purchase price between the two currencies.
The EUR/USD rate represents the number of USD one EUR can buy. If you think the Euro will increase in value against the US Dollar, you buy Euros with US Dollars. If the exchange rate rises, you sell the Euros back, and you cash in your profit. Please keep in mind that forex trading involves a high risk of loss.
Liquidity – Why Is it Important?
Liquidity refers to how active a market is. It is determined by how many traders are actively trading and the total volume they’re trading. One reason the foreign exchange market is so liquid is that it is tradable 24 hours a day during weekdays.
And What About Volatility?
Volatility is the measure of how drastically a market’s prices change. A market’s liquidity has a big impact on how volatile the market’s prices are. Lower liquidity usually results in a more volatile market and cause prices to change drastically; higher liquidity usually creates a less volatile market in which prices don’t fluctuate as drastically.
Liquid markets such as forex tend to move in smaller increments because of their high liquidity results in lower volatility.
News And World Events Affect Forex
Currency traders keep an ear tuned to all the latest news events. Government reports, politics, even a presidential tweet can twitch the market in minutes. The last 4 years have seen much of this in relation to the USD, but since it is a safe-haven currency it always rallies back and remains a favorite for traders.
One other example that comes to mind is from 15 January 2015:
That’s when the Swiss National Bank (SNB) suddenly decoupled the Swiss franc from the euro. This caused the Swiss franc (CHF) to rally 23% in a matter of moments. It bankrupted several currency trading firms and rocked the financial world.
This is why the news is so vital to traders. And it reminds traders how speculative and risky trading can be.
On the other hand, in currency markets, there is no such thing as ‘insider trading’. Any news is legal news. Hear a tip from your golf buddy who works in the central bank? You are free to use it. Traders who focus on news and fundamentals more often stick to a few currency pairs so they can keep up with all the information.
With 50% month-to-month growth in trading volumes, forex trading seems to be on a roll. Can we predict what will happen when we’re back to normal?
The coronavirus pandemic has thrown the whole world into a tailspin. Six months after Covid-19 came into our lives, the international community is still dealing with substantial uncertainty. Millions of workers around the globe have lost their income, and the future remains undecided for people and businesses of all sizes around the world. Tourism and travel have taken a huge hit already and it doesn’t appear to be easing up for them any time soon. Business travel has been replaced by video conferences and companies like Zoom have raked in the profits from this pandemic.
In this context, the current boom in forex seems even more remarkable. As those familiar with what is forex trading surely know, the past few months saw massive growth across a variety of trading platforms and commodities. For example, trading broker IronFX reported a month-to-month growth of 25-50% in forex accounts. These percentages represent 220,000 new client accounts over the period of March through June. According to their report, trading volumes also rose sharply between March and June, increasing by approximately 300% over those three months.
These massive increases in the activity and account numbers has placed substantial pressure on all forex brokers in the marketplace.
With so many working remotely, and liquidity demands mean that smaller forex brokers may not be a safe choice for the casual, private traders. As worries regarding withdrawal grow, traders naturally move towards large, reliable brokers. For smaller brokers reputation and quick trader support, withdrawal mechanisms and trader reviews are all of a sudden more important than anything.
Making Up For Lost Income
Extensive growth such as this is extremely rare for the forex industry or any industry for that matter. Especially during a global crisis. Over the past decade, average daily forex trading volume increased by no more than 40%. Of course, the staggering change is a direct result of this year’s unusual financial and economic climate, leading to a series of high-impact factors. So what exactly is going on in the forex trading world at the moment?
Working gives casual traders more time to focus on trading. Also, in the shadow of a looming financial crisis, people are actively looking for new income channels. They have time to learn about trading and may feel like global events present a unique opportunity to make a profit.
Is This A Long-Term Trend?
The circumstances leading up to this rise have been unprecedented, and thus it is impossible to say how it plays out in the long term. Since the amount of data and information available is still small, the predictions will be nothing but educated guesses by brokers, financial analysts, and central banks alike. We have not had anything like this before to compare it to. Not even the Great Depression can compare. And we do not see the same boom in the stock markets, indeed we are in brand new territory in 2020.
Further outbreak ‘waves’ are already predicted over the upcoming months, maybe even years to come, we do not know. But we can assume many of the underlying causes for this unprecedented boom in forex trading will remain in effect or re-emerge, as soon as Covid-19 cases increase yet again. At the same time, further lockdowns, higher unemployment, and social distancing mean market volatility will remain high, and remote work will keep traders focused on forex markets as well.
Covid-19 is having a profound impact on financial markets and forex trading and will continue to do so for a long period of time. One of the biggest factors is unemployment, which is skyrocketing around the world as a result of lockdowns in fear of the coronavirus. The mounting job losses are what make Covid-19 as bad as — and potentially worse than — previous crises such as the 2008 global financial crisis of the Great Depression.
Until there is an effective treatment for Covid-19, the disease is unlikely to go anywhere. Second waves are possible. Following these trading tips can help – and investing wisely now could result in substantial rewards when a fuller recovery commences.
Stock markets and forex trading
Another lead indicator of currency is the stock market.
This crisis has been marked by fear, and fear has been driving ‘risk-off’ trading patterns. Which in turn has seen demand for the dollar soar as a safe haven, because of its status as the global reserve currency.
But when we let emotion, rather than reliable data, drive these indicators we seem to forget that they are only short-term gauges. It is highly unlikely that current prices reflect the longer-term impact of Covid-19.
Online trading tips: Analyze past trends
In unstable times, analysis is more important than ever. By doing proper analysis of the markets and currency pairs you’d like to work on you will get crucial information that will aid you in your decision making.
Even though coronavirus is unprecedented, historical data can give us an indication of what an eventual recovery might look like.
Indeed, according to data from the Financial Times (pay wall), markets in the UK have managed to bounce back from every sell-off within five years. The FTSE was back in positive territory three years after the dotcom bubble burst in 2000, and three years after the great financial crisis of 2008. It was feared that the Brexit vote would be calamitous for the markets. Even though they suffered a nasty fall in the immediate aftermath of the referendum result, they managed to recover one month later.
The best trading tips right now include looking for shares that are undervalued. Several companies took a beating as coronavirus uncertainty set in – some of them unjustifiably given their earnings potential.
Having a positive mentality is crucial and it’s important to be pragmatic.
Example: If you bought 200 shares in a company at €10 each, and now they’re currently worth €5 – it’s natural if you feel worried because your investment has lost €1,000 in value. But this isn’t the best way to think about it at this point in time. Remember that any losses will only become real if you decide to sell the stock, meaning that holding onto them is the best course of action.
“Cash is king when the world is unstable” is advice you may hear a lot right now. Just remember that interest rates are low, meaning that the money sitting in your savings account will provide very tepid returns. So if you can, keep your cool and leave your shares and see where the markets go as we come out of the Covid-19 era.
Forex trading tips
When it comes to trading foreign currencies, it’s essential to make full use of protective stop-loss orders. Although the volatility can result in considerable gains being realized quickly, it’s good risk management to preserve them by using a trailing stop.
You may want to consider liquidating your positions at the end of each day, preventing exposure overnight and into the weekend if things are moving too quickly for your liking.
It’s also worth taking the time to understand the factors that drive a currency’s performance.
While the likes of the US dollar and the Swiss franc are regarded as safe-haven assets, for example, currencies such as the Canadian dollar, Norwegian Krone, and Saudi Riyal feel the heat whenever there is a decline in demand for oil. They will however bounce back with a vengeance when the oil price goes back up, and this has been proven again and again.
Any trade requires a market, and the Forex trade also needs one. However the Forex trade is not like other trades because it is based on the currency of countries rather than commodities. Therefore there are specific types of markets developed especially for Forex trading. There are three main types of markets explained below.
Spot markets are, like their name, used for spot trading. Exchange of currency takes place on the spot, and both traders agree on each other’s terms in real time. Even though the exchange of currency takes a certain amount of time for transaction, both the buyer and seller decide to trade together on a “right now” basis. The spot price of the currency pair however, may change drastically. The spot price is the price set when the buyer and seller decide on it. Since millions of transactions are being done every second, the price of the currency on the spot market fluctuates every few seconds. In the forex trade, this rate is called the forex spot rate.
In the forex trade, the forward exchange market is a financial market that conducts trade based on the expected value of a currency in the future. It is determined by a specific rate known as the forward rate. The forward rate is determined by the slide or rise of one currency against another in a currency pair. So, a currency that is sold on the expectation that the value of the currency pair might decline is called selling at a discount; whereas the currency pair that is sold on the expectation that the expected price might increase is considered to be ‘sold at a premium’. Usually, the spot rate of the particular currency pair that is to be sold is taken, and is set to mature. The maturity time is set by the buyer and seller and is usually between a few weeks to a few months, after which the currency pair is sold or bought.
The futures market, as the name suggests, is a market where the exchange is done based on the assumption that the value of the currency might appreciate or depreciate based on the market, and trade on it accordingly. The key difference between forward market and futures market is that in the forward market, the participants (buyer and seller) can negotiate their terms, while in the futures market, the price is not at all negotiable.
Forex trading is the exchange of one foreign currency against another. It is the most active market in the world and is one of the biggest markets also. In 2019 alone, the forex market had an average daily turnover of 5.1 trillion USD. This makes it an ideal source of investment for budding business people.
There are different ways to invest in the forex market. It can be said that there are four types of forex traders, which are listed below.
Scalping is, in the simplest terms, holding onto a currency for not more than a few minutes. They try to attain small pips as much as they can during the busiest times of the day and sell it at slightly higher prices when the activity reduces. It requires extreme focus since the scalpers are necessary to keep their attention undivided on the charts. This is a fast-paced method, and you need to have excellent decision-making skills to be a good scalper. This method does not guarantee you instant money; instead, it provides a small of profits that number increases to a large amount over a period of time. If you are easily stressed and do not like fast-moving markets, this method might not be for you.
If you think scalping is too fast, but you do not want to hold your trade for more than a day, day trading might be your thing. What these traders do is, they choose a side and act on their biases. They may walk away with a profit or a loss at the end of the day, but they walk away at the end of the day, whatever happens, not holding their trade overnight. It takes a good analyst and a better competitive mind to keep up in this type of trading.
This is mainly for traders who cannot pay full attention to trading but can devote some part of their time for trading. It is done by identifying swings in the market, i.e. a swing low or a swing high. At a swing low, the currency price decreases, and it is better to buy more, while it is better to sell at a swing high to maximize profit.
Position trading, just like scalp trading is not for everyone. It takes an immense amount of patience to do this type of trading, and the trades can last between a few weeks to a few years. Position traders are usually very well versed in the trade and therefore have a grasp of the fundamentals of forex trading. This is a hazardous type of trading and should be done by people who have been in the business for years.
Forex trading is a vast sector, where anyone can easily get lost, let alone the newbies. With the 24-hour market place and endless options to exchange or invest money, it can be a daunting experience even for the professionals.
Newbies often make the mistake of considering the foreign market as an instrument to increase their monetary income. Whereas in reality, it is hardly so. You can scarcely make a substantial profit if you’re not good at the game. Hence it is essential to keep in mind the five golden tips that we’re going to present to you, stay with us!
Often you end up losing money, in your initial trading experience. This happens due to insuffiecient knowledge and expertise. Hence, one solution for this problem is to open a dummy account and trade using virtual money that has no value. It is usually called a ‘Demo account’ and is very important for beginners. It lets you decide the strategies to employ what works the best for you before you start real deal. Most of the online brokers allow the users to create a demo account with some virtual money that can be used to trade virtually.
The best trick is to focus on substantially reducing your losses, rather than increasing your profits- they go hand-in-hand. Forex trading can be a very emotional road filled with grief, anger, greed, and the need to make more money. Hence, before you start a trade, fix a limit for yourself. Irrespective of the stakes, exit from the trade when you reach your limit. An Exit strategy is equally important as the entering one. Many professional trades even carve out excellent exit strategies to avoid losses.
Employ trading strategies
Aspiring traders always need to employ good trading strategies that suit your trading style and goals. Most of the newbies just jump into forex trading, buying random currencies and waiting to become rich. It does not work that way. Planning trade is more time consuming than actually doing it. So, study the trading industry first and research about different strategies that best suit your needs.
Once you dive into trading, there is no hard and fast rule that you will go back rich! Although it happens in some cases, it is backed by a lot of patience and persistence. You can’t get rich without having work done, unless you’re gambling or you’re extremely lucky. It is imperative to be diligent with your plan.
Focus on losses
It is better to focus on losses than focusing on profits. Profits might come and go, but what is important is to prevent you from losing money than winning a little. As discussed, set a limit for yourself, even in terms of how much of it you can afford to lose. Once that’s in place, you’re good to trade and become rich.
Forex is a liquid market trading where there is consistent inflow and outflow of money. Many a time you might have come across websites or people ranting about how overwhelming it can be to trade in the foreign market. Well, if you have consistency, patience and awareness of what you’re doing, then it is a cakewalk. Here is a list of 7 essential tips to keep in mind while trading in the foreign market.
Use demo account
You might hear this a lot if you’re researching about the tips for trading. You cannot fly an aeroplane if you’re not trained. A beginner needs to understand how important a dummy account is. If you’re in for a long run, then you’ll have to analyse and chart out the possibilities. Definitely, you cannot do this whilst losing money. So a demo account is a must!
Invest in Education
Educate yourself about anything and everything about the market. Whether you wish to learn from a professional, or indulge in reading books and magazines, that’s your call. It is a wise decision to invest money in learning than to lose it in the market.
Create a trading plan
Once you’re ready to set your foot on the market, and invest your first dollar in the business, create a plan. From day one, till forever, you need to stick to the plans you make. It could include, do’s and don’ts, your wins and losses and also how you plan on saving or spending your investments. Maintain a book or a journal to note it down.
Avoid smaller time frames
Even though smaller timeframes are beneficial at times, it is always better to invest in longer ones, as it is helpful in the long run. For starters, you can start with four to five hours a day. This timeframe can also increase in time and can create room for mistakes. In the long run, you avoid making the same mistakes, and within no time, you shape up to be a better trader than you were previously.
Chase the trends, not the market
Trading trends keep changing every week, and it is important to follow these changes if you’re going for the big win. But having said that, it is also important not to chase the market, i.e. don’t do something because other traders are doing it. As a beginner, it might not be the best for you, but eventually, it will fall in place.
Trade like a machine, think like a human
Thus statement holds when you’re controlling your emotions to overcome the losses. A study shows that a person’s emotions are higher when he loses than when he wins. You need to be prepared to lose big if you’re expecting to win big. This applies to the case of winning as well. Once you win large amounts, it is human tendency to fall for greed, only to lose more money. Get good control of your emotions and stick to your plan.
You never know how luck can favour you on a particular day. So, it is better to start with smaller amounts. Even in case, you’re losing money, and you’ll have your exit strategy in hand and can back out without much loss on your pockets
Even the most seasoned foreign exchange traders struggle at least once at some point in their trading business. The setback can be due to various underlying reasons. But here, we’ve listed down a few things to avoid, that can enhance your next trading experience.
Don’t hop from one strategy to another
This is a common blunder that is employed by almost all traders. There is a number of books, magazines, videos and tutorials out there in online as well as offline markets that can get you off the hook. But, you need to bear in mind that those tactics and strategies are not personalized for you. They’re jotted down to help people in general. But if you want to make something out of it, it is your responsibility to be consistent throughout your strategy. Stick to one and move on. In the long run, if you don’t see a difference in your capital, then you can switch it up a little to match your goals.
Don’t expect too much
Let’s get this straight. There are hardly a couple of people out there that have turned into millionaires solely by trading. If you want to be one among them, you either have to work really, like really hard, on your strategies and game plan or consider it a hobby. Do not expect to become millionaires in just a few trades and expect money to flow into your account. Once you set foot on the track you will substantially make a profit, but got to have patience.
Choose the right broker for you
Always do your research to find the best broker for you. There are so many out there on the internet, so this part of your trading experience requires a lot of research. You need to make sure you find a broker that fulfills your needs, can deliver on the strategies you want to implement, offers good and reliable advice and most of all you want to avoid the brokers who are just there to line their own pockets and use your hard earned cash to speculate with.
Use comparioson sites, review sites and ask questions directly to the brokers to figure out if it is a good match for you. You can also spread your investments by using more than one broker snf thus not having all your eggs in one basket, so to speak. It may be a boring part of the traders life to do all this due diligence, but better to do it in advance than regret your choices in hindsight.
Focus on strategy, not on the concept
Most of them, who dive into the trading business, tend to set their focus on the strategy that they’ve to employ. This is not a bad thing. It is imperative to target the strategy, but what is more important is to know and learn the concepts. The baseline remains the same, on while people employ strategies based on their needs and goals. For instance:
- Patience is the key
- Invest in small amounts first
- Study the market
There are the concepts that ought to be followed irrespective of the strategy. However, based on your needs, whether you’ve to employ the day trade or anything else, is completely and individual choice.
Not cutting losses
Like already mentioned, trading business involves making money as well as cutting down our loses. Most newbies make the mistake of concentrating more on the winning money, than paying attention to how much they’re losing in the process. It is human tendency to ignore the situations when they’re going wrong. But when trading, it cannot let your emotions get the better of you. If you ignore the amount you’re losing, then you might end up blowing out your account, which obviously shouldn’t happen. So, pay attention to how much you’re losing. Once you reach a limit, employ your exciting strategy and back off for the day.
Foreign exchange or the Forex is a global, decentralized liquid share market where there is an exchange of foreign denominations. It requires utmost skill, patience and persistence to get everything right about this market. More often than not, it never goes fully right. Regardless, it is important for you to follow these five tips to get the best foreign trading experience:
Understanding the market
The Forex market is professionally structured by a lot of factors that interconnect the various factors with other foreign markets as well. For instance, The Canadian Dollar (CAD) and Australian dollar (AUD) are changed by their commodity prices. A massive amount of these countries’ GDP includes mining and from natural resources. Hence, it is vital to understand the relation between your home currency and the ones you’re trading for. A good amount of research can prevent you from making bad decisions and get you good at the game.
Choose a professional broker
You need to provide paramount importance to the process of choosing a broker. Due to the increase in popularity of the trade markets are foreign exchanges, there are tricksters that make it easier for you to fall prey. Make sure the broker is a professional one and is clear about what you want. For instance, if you’re going to trade off of Fibonacci numbers, then make sure your trader has the same platform.
Foreign trade markets are places where you can make the best decision and expect the best to happen. However, there is something called expectancy that determines the rate of your system’s outcome. A simple formula issued to calculate it. All you have to do is measure all your success and losses and substitute it in the formula
E= [1+( W/L)]X P-1
Where P stands the average profits from your total trades and, L stands for the average losses.
Keep track of the wins and losses
This practice will not only help you in analyzing further but also prevent you from making repeated mistakes. Chart out your wins and losses, and the reasons that caused you to do so. Mood changes and emotions also play a crucial role while trading in these foreign markets. Scrutinize these points and make sure you do not repeat it in your net trade bidding.
As we all know, foreign markets are closed during the weekends from Friday night to Sunday night. It is the best time to analyze what has happened over the week and predict its outcomes for the following week. Most of the news companies and websites who are into this business, layout strategies, analysis, and patterns to predict the outcome of the following week. Have an eagle’s eye for such patterns and sink in all the information. It could work in your favor, you never know!