For starters, trading in the Forex market is nothing but constant learning. Sometimes the learning includes the various trends, signals, and also things like; best time to make your trade etc. However, regardless of the difficulties you might face with all of these troubles coming at you, it is still possible to succeed at it once you get the hang of it. If you are a beginner then this is your guide on how/where to start and get your head in the game without falling face first.
Step 1: The First Key to Success Comes in Numbers
It is important you understand the rules and exactly what you’re playing in order to take a stand in the game. There are generally eight majors in the currency section that every trader must focus on.
- U.S Dollar (USD) or, “Greenback”.
- Canadian Dollar (CAD) or, “Loonie”.
- Austrailian/New Zealand Dollar (AUD/NZD).
- European Euro (EUR).
- Japanese Yen (JPY).
- British Pound (GBP) or, “Cable”.
- Swiss Franc (CHF)
And as everything else in the world, there is always a system in which things run by the normal way. Similarly, in this case the currencies are to be traded in pairs. As quoted by the Forex market makers; there are 18 different currency pairs that are allowed to be traded.
Step 2: The Art of Give and Take
Where there’s selling of one currency, there is buying of the other. And obviously every currency in the world is attached to an interest rate that has been set by the central bank from where the currency is originated. In this case, you must pay a certain amount of interest on the currency that you have sold, and at the same time you have the easiest access to benefit from earning interest on the currency you bought.
In terms of an example; if Australia has an interest rate of 10% (1000 basis points) and at the same time the U.S has an interest rate of 2 (200 basis points). In this process of AUD/USD, you will end up earning 1000 basis points in annualized interest; although, you will have to pay 200 basis points which will leave you with 8% or 800 basis points.
Step 3: Learn to Save Money
If you are a newbie reading this article, you must know the term “spread/spreads” often refers to the difference between the price at which a currency can be purchased and the price at which it can be sold for. Another term jumps in here; “pips” and this is what the spreads are calculated. This is basically the difference to how the Forex brokers make their money as they do not charge any commission whatsoever.
In this game, you will notice that the significance of you wandering around more before making the final decision actually benefits you at a greater level.
Step 4: Do Not Enter the Warzone Unarmed
In order to win the battle it is necessary you choose your weapons wisely. For you to act wisely in this domain, it is important to get a taste of what you might be dishing out before it comes down to the point where there are no take backs.
This means; regardless of the amount of fancy tools and platforms your Forex broker may offer you, it is necessary for you to go through the system carefully before committing to anything. Be sure to request for free trials so you can switch between different trading platforms to judge what works best for you.
Step 5: Importance of Margins
Margin/leverage is important in Forex due to price deviations; as your source of profit is merely dependent on fractions of cents.
In terms of an example, a ratio of 100:1 which means the broker tends to lend you $100 per $1 of the actual capital.
Tip: lower leverage means lower risk of a “margin call”, but this also results in a lower profit.
Step 6: Skip the Shady Ones
The shady brokers will be nothing but bad news all the time for you. It is suitable to be aware of the caniving schemes such as; prematurely buying and selling near preset points in order to increase their own profits. Some brokers will liquidate your position on a margin call at that low.
It is important for you to understand the gimmicks here. If you tend to be trading with borrowed money, your broker can buy or sell at its discretion. Regardless of the fact that you might have the cash to cover it, this may send your position into a risky dive before you even get a taste of the good life.
Step 7: Fundamental Vs. Technical
This is the part where you judge your trading style at a very critical level. As every trader varies in many different ways, usually the best trading style is to combine the fundamental and technical analysis and use it as one unit.
A smart trader will always play one step ahead of the game and take a step back to get a better view of the fundamental picture being drawn. But at the same time they will use their technical skills to pinpoint their entry and exit levels.
Step 8: What is Your Strategy?
No matter what situation you get yourself caught up in, it is necessary one weighs out the possible strengths and weaknesses, pros and cons, loss and profits etc, before heading in for the trade.
You must use a Forex strategy that suits you in every possible, considering the points mentioned above and at the same time looking in to the fundamentals and the technical analysis usage in between.
Step 9: Don’t Stop till you Drop
The only way one can possibly succeed in this domain is through constant practice. As you keep practicing and playing around with new techniques it makes you more closer to perfection. Indeed you will slowly be familiarized with the prices, the trading platforms, features of each software etc.
Step 10: Bring Your Poker-face to Work
In this world you must leave your emotions at home (if possible). The only reason it is recommended to trade with a straight face is because as humans we tend to build walls/barriers while entering such zones. We question our ability to perform a certain task and to then execute it on time. Sometimes we might make it through, but the rest of the times will just sum up in a bunch of unnecessary stressed out moments.
Do not make decisions at the spur of the moment. Once you have made a decision, brainwash yourself into thinking there is no going back.
Step 11: Keep Your Eyes Peeled for Trends
At the point you should simply befriend the trends chart and never let go! You have a higher chance of touching the sky if you play by the trends in this game.
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