More recently, forex trading has been ranked among the elite big players. But times are changing: almost anyone can now try their hand at speculating on exchange rate differentials, and it doesn’t require an impressive amount of capital.
What do you need for successful forex trading?
The main principle of forex trading is to buy a currency at a lower price and sell it at a higher price to make a profit on the difference. However, despite its speculative tinge, Forex is not a game of chance, but a strenuous activity.
How to trade in the forex market
There are two main types of trading in the forex market. The first is easy; Buying and selling currency pairs when you buy one currency at the expense of another. The second option is to buy derivative financial instruments (derivatives), the value of which changes with changes in exchange rates.
The most common option is buying and selling currency pairs, similar to trading stocks on the stock exchange. In this case, you expect the exchange rate to change favorably for you. When you open a long currency position, expect the price of your pair to rise. For example, you opened a long position on the USD/CAD pair. This means that you make a profit when the currency pair goes up and lose money when it goes down. The rate goes up when the base currency goes up in price against the quoted currency, so in this situation we bet on the US dollar.
Another way to trade the forex market is to buy derivatives such as options and futures to take advantage of changes in exchange rates. When you buy an option on a currency pair, you get the right to buy that pair at a set price before the expiration date. On the other hand, a futures contract commits you to buy a currency at a specific point in time. Usually these types of trading are only used by experienced traders, but even for beginners it is important to at least be aware of these opportunities.
Forex intraday trading or scalping
This fairly recent Forex trading system has gained popularity among both beginners and professionals. The strategy is designed for short-term trades, lasting from one second to several minutes. It is suitable for traders who do not have an impressive starting capital.
You don’t lose much by trading one transaction intraday, but be careful not to get carried away with frequent and short trades. A short-term strategy is riskier than a medium-term forex trading, and a long-term one, according to statistics, brings more profit. Do not forget that frequent and insignificant losses can lead to a large minus. This strategy works, but must be used with care.
If you like more relaxed, leisurely trading, you can pay attention to such a method as “night” forex. For example, if you trade at night from 00:00 Moscow time, you will see an almost complete lull in the market. Almost all leading players (USA and Europe) are currently “asleep”. Only Japan is “awake”. Therefore, strong exchange rate fluctuations only occur in pairs with the yen. For other currencies, volatility during this period is insignificant. Therefore, prices change slowly, which makes it possible to make good profits on “quick trades”. “Night forex is suitable for piping, and here you can successfully work in an apartment. The South African forex market can also be interesting. You can check ZARUSD rates at ZA forex brokers.
Forex news trading
Many factors influence exchange rates: from the country’s economic situation and various fundamental indicators (GDP, inflation, unemployment and others) to statements by top officials, natural disasters and so on. And if you learn to understand what consequences this or that news can have, trading on forex news can become the key to your success.
Forex trading programs
In order for Forex trading to be successful, you need to be quick: know the quotes for currency pairs, pay attention to the latest market news, analyze them and make relevant and profitable deals in a timely manner. It is clear that it is almost impossible to do all this on your own, so most traders use mechanical trading systems, that is, special computer programs for forex trading, which allow you to make transactions, analyze incoming market information and give a signal to trade .
These programs are called trading platforms or trading terminals. They are applications for a computer or smartphone and usually come with a set of technical analysis tools, email, display trading center news and much more. There are many such programs for forex trading and they can be easily found and downloaded on the Internet. Almost all of them are created on the same principle, and therefore, having mastered the functionality of one of them, you can freely collaborate with others. The most popular forex trading programs are Meta Trader 4 and Meta Trader 5.
These products are designed to make trading more accessible, but don’t expect them to make the right decisions for you. The platform must constantly monitor and track the parameters of its work. Remember that mechanical trading systems help the trader, but they don’t work for them. Therefore, most traders use multiple terminals to get the best technical, fundamental and computer analysis of their activity.
Forex trading is mistakenly associated with an easy way to make a profit. It takes a lot of effort to become a professional trader. It’s hard work that requires serious training.