Currency trading offers a perfect investment opportunity for investors. If you are just getting started, the right place to begin is to familiarize yourself with the market and terms of the forex market.
Currency trading for newcomers can be especially tough, often because of the unrealistic expectations that are common among the beginners. If you are planning to succeed in this field, it’s important to bear in mind that forex trading is not, by any chance, a get-rich-quick scheme.
Forex (or foreign exchange) is the world’s most traded market – with a daily turnover of more than US$5.3 trillion. As someone who’s trying to learn currency trading, you should know that a lot of people from all corners of the globe are trading; some as large companies, while others, as part-time traders working from the comfort of their homes (thanks to the internet).
What drives currency movements?
The value of currencies keeps changing from time to time – it’s the reason why the exchange rates shift. Numerous factors influence the rates including; interest rates, inflation rates, country’s current account/balance of payments, terms of trade, government debt, recession, speculation and political stability and performance. As a forex trader, you will need to stay up-to-date with these factors as they will help you better examine the optimal time for your trading.
Short-term vs. long-term
The first stages of your trading should be more about preserving your investment, rather than growing it. Your top goal is to minimize risk, and the best approach is to focus on long-term trading. Even the most successful traders use the long-term strategy.
You’ll also need to spend some few hours looking at your computer screen and do some calculations. Luckily, there’s an easy way to compute the leverage, balance and trading volume that you require per instrument.
Keep it simple
Avoid overloading your strategy with switches or handles or charts with indicators; a complicated strategy will only make it harder for you to follow. Do some research and back-testing to establish how well a strategy performs on average across all markets (or in different ones for that matter). With an incredible selection of tools at your disposal, it may be difficult to keep it simple, but remember, it isn’t about the numerous tools, but about your ability to use a few tools well.
Learn about analysis
Technical and fundamental analysis are essential to trading and are worth knowing as you learn currency trading. They help you understand how a country’s financial policies and news events can influence the forex ecosystem. Charts come in handy for both short-term and long-term trading. The main tools include:
- Support and resistance lines
- Trend lines
- Indicators based on the above
- Trading accounts differ
You shouldn’t only focus on tight spreads and minimum deposit when getting an account, instead, look at the execution models, instrument portfolios and the leverage provided. An excellent platform for you will depend on the broker – and good broker for you will depend on the trading system.
Ensure you are legally protected
Currency trading is legally controlled. Be sure to check for secure conditions for your trading or investment. Look for segregation of client funds, efficient client inquiry and complaints procedure as well as financial service compensation scheme.
Make sure to make use of a licenced and trustworthy broker to avoid issues with brokers fraud as well as to prevent unnecessary loss of capital.