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More recently, FX trading has been considered among the elite, big players. But times are changing: today, almost anyone can try their hand at speculating on the difference in exchange rates, and for this, it is not necessary to have impressive 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 one, making a profit on the difference. But, despite its speculative colouring, Forex is not a game of luck but a strenuous activity.
There are two main types of trading in the foreign exchange market. The first is a simple; buying and selling of currency pairs when you buy one currency at the expense of another. The second way is to buy derivative financial instruments (derivatives), the value of which changes with changes in exchange rates.
The most common option is to buy and sell currency pairs, similar to trading stocks on the stock market. In this case, you expect the exchange rate to change favourably for you. If you open a long currency position, you expect that the rate of your pair will rise. For example, you have opened a long position on the USD/CAD pair. This means that you will make a profit if the currency pair’s rate goes up and lose money if the rate falls. The rate rises if the base currency rises in price relative to the quoted one, that is, in this situation, we bet on the US dollar.
Another way to trade in the forex market is to buy derivatives, such as options and futures, to profit from changes in exchange rates. If 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 transaction imposes an obligation to buy a currency at a specified time. Usually, these types of trading are used only by experienced traders, but even for beginners, it is essential to be at least aware of such opportunities.
This reasonably young Forex trading system has gained popularity among beginners and professionals. The strategy was designed for short-term trades that last from a second to several minutes. It’s suitable for traders who do not have an impressive start capital.
When intraday trading for one transaction, you will not lose much, but be careful not to get carried away with frequent and short trades. A short-term strategy is riskier than 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 big minus. This strategy works but must be followed wisely.
If you like a more relaxed, leisurely trading, you can pay attention to such a method as “night” Forex. For example, if you trade at night starting from 00:00 Moscow time, you will find an almost complete lull in the market. At this time, virtually all the leading players (the USA and Europe) are “sleeping”. Only Japan is “awake”. Therefore, strong fluctuations in price occur only in pairs with the Yen. For other currencies, volatility during this period is insignificant. Thus, rates change slowly, which makes it possible to make good profits on “quick deals”. “Night Forex is suitable for piping, and here you can successfully work in a flat. The South Africa Forex market can be also interesting. You can check ZARUSD rates at ZA forex brokers.
Many factors influence exchange rates: from the economic situation in the country and various fundamental indicators (GDP, inflation, unemployment, and others) to statements by top state officials, natural disasters, and so on. And if you learn to understand what consequences this or that news may lead to, trading on Forex news may become the key to your success.
For Forex trading to be successful, you need to be prompt: know the quotes for currency pairs, be aware of the latest market news, analyse them and conclude relevant and profitable deals on time. It is clear that doing all this on your own is almost impossible, so most traders use mechanical trading systems, that is, special computer programmes for trading on Forex, which allow you to conduct transactions, analyse incoming market information and give a signal to action.
These programmes are called trading platforms or trading terminals. They are applications for a computer or smartphone and, as a rule, have a set of technical analysis tools, email, display news from the dealing center, and much more. There are a great many such programmes for trading on Forex, and they can be easily found and downloaded on the Web. Almost all of them are created according to the same principle, and therefore, having mastered the functionality of one of them, you will be able to work freely 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 needs constant monitoring and tracking of the parameters of its work. Remember that mechanical trading systems help the trader but do not work for him. Thus, most traders use several terminals to achieve their activities’ best technical, fundamental and computer analysis.
Forex trading is misleadingly associated with an easy way to make a profit. It takes a lot of effort to become a professional trader. This is hard work that requires serious training.
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