The foreign exchange markets (also known as Forex, FX, Currency Trading) provide ways for institutions and retail investors to take financial advantage of price fluctuations between currency pairs. If you are interested in expanding your investment options and learning more about how you can make money in the financial markets, Forex should be a serious consideration for you. It should be noted that Forex trading is considered a high risk form of investment as the FX brokers would often give you high leverage (i.e for every Pound Sterling in your trading account, you are able to trade £10, £50 or £100) and this exposes you to much greater return on your investment but with the risk of equally large losses. Due to the level of risk involved in Forex trading, it would be extremely wise to practice using a demo account and spend a great deal of time understand what factors influence the Forex Exchange markets. For instance, the vote by the British people in a referendum to exit the European Union was seem by the big players in the financial markets as bad. This resulted in the sale or weakening of the British Pound again other currencies. Other news events that influence the Forex markets are interest rate decisions, employment figures, major disasters, change in governments etc. Below are the different groups of traders: Fundamental traders; these traders only trade news events and economic figures They carry out fundamental analysis and make decisions on what direction a currency pair is headed. The other kind of traders in the market are Technical traders. They create indicators based on mathematical formulae and make decisions based on the levels or chart patterns thrown up by these indicators. Most indicators are lagging indications because they present a graphical representation of what has happened already. You also have predictive indicators which use past price action to predict levels at which price reversals may likely occur. The most common amongst predictive indicators is Fibonacci retracement levels. The third type of trader is one that combines both Fundamental and Technical analysis. This approach aims to pull together the best of both Fundamental and Technical analysis. A news event might indicator the direction of movement for a currency pair (e.g. GBPUSD) whilst a collection of technical indicators actually give alerts on when to enter the trade and at what levels to set the take profit and stop loss. You can also learn to stand on the shoulders of giants. By the this, I mean you could subscribe to the trading signals of well established and successful traders. You would get price levels at which to enter trades (buy or sell), take profit and stop loss levels. More importantly, you would learn the rationale behind each trade that is called out by the person or company you're subscribed to. This way, you would be making money whilst you are learning. Eventually, you would be able to make your own trade predictions and you will find that they will be in line with that of the more established trader. In conclusion, Forex trading can be very lucrative regardless of which style one adopts once the knowledge of what factors move the market is acquired and behaviours of trading indicators are learnt. Combining this knowledge with a very disciplined trading style could be the start of a very lucrative venture in the Forex markets. Do not trade until you have got at least one system that has been proven to work in your demo account. When you transition to Live account, be sure to remain disciplined and start of with a small deposit. Best wishes!
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AuthorMy name is Catherine and I am new to forex trading. Archives
August 2017
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