Trading stocks on the foreign exchange market is a great way to be successful in the financial sector nowadays. Even though values fluctuate, and investments sometimes go south, overall this field is a relatively risk-free one if you know what you’re doing. Therefore, before getting started, you need to possess a certain degree of expertise on the topic.
How to Start
Finding the right approach seems tough in the beginning, which is why being clever and doing your research beforehand is essential for success in any field, not just international currency exchange. So, here are three helpful tips that will provide a head start in forex trading when applied correctly.
1. Learn the Basics of the Market
Just like any field of activity, the forex market has its basics that need to be mastered before attempting to do anything else. A good first step for beginners would be to get accustomed to the various currencies, their values and the best trading pairs that form among them. Depending on how you wish to proceed, strategies may vary.
Dipping your toes in the water is always a good idea before jumping in. Most platforms offer a risk-free trial period once you open a Forex account with them, so you need to take advantage of this perk and see how it goes. By performing simulated trades based on real data, you will get the hang of some of the major motions involved.
There are eight essential players you need to know right off the bat. These are, in no particular order, the European Euro (EUR), the U.S. Dollar (USD), the British Pound (GBP), the Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD), the Japanese Yen (JPY), and the Swiss Franc (CHF).
One coupling that has been popular for a long time and will most likely continue on this trend is the European Euro plus U.S. Dollar, or EUR/USD for short. Although the beginning of 2018 was an eventful one for them, things seem to be in neutral position at the moment, according to live market data. But they could change at any moment.
2. Assimilate Analysis Methods
The trading platform of choice will undoubtedly provide you with all the information you need, but not everything can be left up to the software. Being knowledgeable on the subject is a must if you want to make a profit early on. There are three main types of market analysis any good trader knows, namely sentiment analysis, technical analysis and fundamental analysis.
• Sentiment analysis. Although this particular type is seldom used by rookie traders, it’s nevertheless important to acknowledge it from the get-go. Once you’ve been in the game for long enough, you will be able to get a feel for the market and establish the direction to follow according to what others are doing.
• Technical analysis. The first essential method you must be familiar with upon entering the trade is that of technical analysis. By looking back at a certain stock’s history and analyzing the context surrounding it, you will be able to make predictions regarding its future and invest proportionately.
• Fundamental analysis. The basis of this approach lies in its name. It uses fundamental economic factors that a stock depends on, out of which the most important is the gross domestic product of the country of origin. Other influencing aspects include revenues, expenses, and equities, to name but a few.
3. Keep Detailed Activity Reports
The final step in this brief guide to learning the basics of forex trading would be keeping a diary with detailed activity reports on each investment you make. The information it should ideally contain relates to the date and time at which certain position was entered, as well as its rate and the strategy that was applied.
Then, once the position is exited, make a note of the date, time and rate for it as well. Additional useful facts would be the reasons for entering and exiting a position in a certain way at a particular moment, as well as a total profit and loss count. It might seem tedious at first, but it will allow you to look back at past mistakes and avoid repeating them.
These three tips are a good way to start a career in the field of foreign exchange. Having enough information to rely on once you start making the initial moves is essential in the field, so use them as you please. Remember to always account for any risks and learn from failures as much as you do from victories, and you’ll have a bright future ahead.