Simple Forex Trading GuideForex, Highlight May 11, 2015 - 11:48 am No Comment
It is undeniable that forex market is the largest and the most liquid market in the world with over $3 trillion in daily turnover. Yet, it is no need to have large initial capital in forex trading. It allows people to trade with low initial capital. The market offers opportunity in profits as much as the losses. The profit is gained at the volatility of the market’s price. In simple words, you earn profits when buying a pair of currency then sell it at high price or the other way around.
What you need to know is the trend. Being able to identify the trend is very crucial in forex trading since the trend can give the traders insight of the direction of the rate of a pair of currency. Identifying trend can be done through the distinct pattern made by the price. If it is uptrend, the chart will form higher peaks and valley. At this situation, traders should buy the pairs. When it is downtrend which means that the rates are decreasing, it is better to sell the pairs to make profit. You should monitor the trading trends in order to know how the market movements based on the time frame that you chose whether it is short-term or long-term trading. But you have to remember that no one can predict the future even for the professional traders.
The following thing you should know is leverage. It is used to refer the ratio of invested amount related to the trade’s actual value. Forex brokers often offer different leverage to their traders. For example when you trade at leverage 1:100 it means for every $1 that you invest, the brokers invest $100. It means that you can control $10000 for $100 that you invested. The higher leverage offered the higher opportunity to profit and higher risk losing your money.
Last but not least you have to know about the Stop Loss and Take Profit. Since forex market is very risky, traders can use these strategies in order to prevent from a great loss and realize the profit made. By using stop loss, traders can control the maximum amount that they can lose on the trading. Stop loss will automatically close your trade when it reaches the maximum amount you have decided; meanwhile Take Profit is similar to the stop loss yet it works on the profit. When you reach certain level of profit, Take Profit will close your trade. Finally, a trader should make a good money management to become a successful trader. Aiming at a big return most likely sounds a big loss. Being consistent to your plan and always learning will result in long term success.