Forex trading is the act of buying one currency while simultaneously selling another currency, with the aim of profiting from the changes in the values of these two currencies over time. Of course forex trading can also lead to losses, which makes it a risky venture and one that should be examined closely before committing any actual trading capital. One benefit of forex trading is the huge volumes traded in forex markets each day, which eliminates any liquidity issues, at least for the currencies of the largest economies.
Another benefit to forex trading is that anyone can participate with just a small initial investment. There is a tradeoff however. The small capital requirements in trading forex are due to the use of leverage when trading forex. For example, if the leverage used is 1:400, this means that an investor can control $10,000 worth of currencies with an investment of as little as $25. While this can generate profits more rapidly, it can also lead to losses more rapidly and if the traders account is small they may soon find themselves the victim of a margin call and the loss of all their trading capital.
The knowledge and skill required to successfully trade forex makes it anything but simple. Those considering forex trading should be sure that they have sufficient capital and that they are able to withstand the risks presented by forex trading, which include the potential loss of all your trading capital.
Forex market is the largest and the most liquid financial market where the global currencies are traded. Forex traders purchase currencies with the intent to make money off the difference between the buying and the selling prices.
The forex market has an average daily turnover of $5 trillion as traders strive to turn a profit by speculating on the value of one currency compared to another. Ready to be part of the market moves with a global leader in online currency trading?
There are many things to consider when trading forex. These choices become even more important for many individual traders because they aren’t trading forex for a living, but are rather part-time traders, with other jobs and commitments. This can make things extremely difficult in a fast moving market like the currency markets, but there are some strategies you can follow to help you have a better chance at success when trading forex, even if you’re a part-time trader.
Choose a time frame to trade and focus on the most active currency pairs during that time frame. If you’re trading full time it makes sense to trade during the U.S. session, because most USD currency pairs will be most active during this time. Many traders won’t have this luxury however, so they need to make a plan that takes into account what currencies are most active during the times that they are trading. Those in the U.S. who trade in the evenings may want to focus on AUD pairs. If you’re trading later in the night (after 9pm EST or 2am GMT) you can also look at other Asian currency pairs such as the Japanese Yen, Hong Kong dollar and Singapore dollar. If you’re a morning person and want to trade at say 4am or 5am EST your best bet is to look into the Euro and Great Britain’s Pound. The point is, no matter when you choose to trade, your best strategy is to focus on the most active currencies during that time frame.
Consider trading longer time frames. Some forex traders focus exclusively on daily and weekly charts and place trades that can last for days and weeks as well. They claim that the market is more predictable when trading these longer time frames. If you’re a part-time trader this may be a good strategy for you to use since you can’t always have your eye on the markets. Even if you’re trading full-time you may want to use this strategy as it gives you the chance to analyze the markets more completely before making a trade. It may not sound as exciting as the fast-paced world of day trading, but it can be just as successful in the long run.
Always have a plan when trading. This is a strategy that applies to everyone. It doesn’t matter if you’re a new or experienced trader, if you’re trading short or long time frames, or if you’re trading based on technical or fundamental analysis. You will always need a plan that includes an entry and exit point, what direction you’ll trade, why you believe the market will move in the direction you choose, and a stop loss level that will take you out of the trade if it doesn’t go as planned. This single strategy should be the backbone of your trading throughout your career.
By using strategies that increase the chance of success and decrease the chance of failure you can survive in the market long enough to gain the experience necessary to become a successful full-time trader. Even when following these strategies you’ll find that the forex markets are risky however, so always be prepared for losses, and have a strategy to deal with those as well as the hope for succesful trades.