Foreign Exchange, short for foreign exchange, is a worldwide market where traders are able to exchange one currency for another. Currencies in the marketplace work in pairs, with investors buying, selling and trading currencies based on their current and projected strengths. For instance, someone purchasing the USD against Japanese yen hopes that the dollar is stronger. If this hunch is played correctly, the investor will turn a handsome profit.
Choose a single currency pair and spend time studying it. If you take the time to learn all the different possible pairs, you will spend all your time learning with no hands on practice. Pick your pair, read about them, understand their volatility vs. news and forecasting and keep it simple. Research your pair, especially their volatility verses news and forecasting. Try to keep things simple for yourself.
You should never trade based on emotion. Being consumed by greed will get you nowhere fast, just as having your head clouded by euphoria or panic will prove to be unhealthy motivators in the decision making process. Emotions are a part of any trade, but do not allow them to be your main motivator.
Watching for a dominant up or down trend in the market is key in forex trading. You will have no problem selling signals in an up market. You should try to select trades based on trends.
Try not to set your positions according to what another forex trader has done in the past. All traders will emphasize their past successes, but that doesn’t mean that their decision now is a good one. Regardless of a traders’ history of successes, he or she can still make mistakes. Stick with your own trading plan and ignore other traders.
Use margin cautiously to retain your profits. Margin can potentially make your profits soar. If margin is used carelessly, however, you can lose more than any potential gains. Only use margin when you feel your position is extremely stable and the risk of shortfall is low.
Don’t trade when fueled by vengeance following a loss. You need to keep your emotions in check while trading forex, otherwise you will end up losing money.
Forex trading is very real; it’s not a game. Thrill seekers need not apply here. Gambling would be a better choice for them.
Stop Loss Markers
Many people believe that stop loss markers are somehow visible in the market, causing the value of a given currency to fall just below most of the stop loss markers before rising again. This is absolutely untrue, and trading without stop loss orders can be very dangerous to your wallet.
The foreign exchange market is the largest one in existence. Only take this challenge is your are willing to do your homework, by becoming well informed about global markets and currency rates. However, it is a risky market for the common citizen.