The trading of currencies by different nations globally is termed as Foreign Exchange or FOREX, as it is normally referred to. It is undoubtedly the largest financial market on the planet with approximately 1.9 billion Pounds traded everyday. The global Forex market does not have any particular location like a central exchange or headquarters and branches. It is rather a conglomeration of banks, and other financial institutions as well as individuals who trade the currency of one country with that of another. Since the trading happens between different zones and time spheres, Forex operates twenty four hours a day, 365 days a year.
Forex trading happens between banks which are mainly for speculative purposes and by companies and individuals (brokers) who make overseas payments. Currencies are bought or sold for profit and the amount traded determines the currency rates. As the supply and demand ratio fluctuates, the exchange rates vary. Various organizations like banks and foreign exchange dealers offer Forex services.
Trading example: if a trader buys a contract of 1.9300 Pounds and the Forex rises to 1.9350, he gains a profit of 191.913 GBP. At the same time, if the price lowers to 1.9250 he would lose 191.913 GBP.
The British Pound is traded in units of 62,500 with a minimum price fluctuation rate of 0.0001 against a US dollar. However, there is no limit to the maximum price fluctuation per day.
All Foreign Exchange transactions should be based on market trends and analysis. Without the proper study of this subject, it would be like playing at a casino with the risk of losing real and huge amounts of money. Rely only on the results of well researched analysts.
Preferably a novice should begin with two months training in demo trading. This will help teach you practical knowledge and also teach you a few things about market discipline.
The benefit of Forex largely depends on trends; hence it is very important to follow them. Going against the trends may prove to be more beneficial only if you are a seasoned trader and know how to manipulate the pulse of the market. You would need a lot of insight and be able to pay attention to detail along with sharp skills and nerves.
Forex trading happens every minutes, hour, day and week. Depending on the kind of trading you intend to do, keep a larger time frame in mind. This will help you get a bigger picture of the market rate movements and also help you understand the trend. If you are trading in a 15 minute time frame, study at least one hour’s trading chart to know the trends. Of course, for this you need to get the daily and weekly market price movement. There are times when the trend is not fixed and the prices may keep fluctuating over the period of the day or the week. If so watch for the dominant trend and follow that, it would be a safer bet in a risky market.
Keep the maximum percentage of your total trading account within 2.3%. Forex trading is a risky and market based business where the chances of earning huge amounts are as good as losing them. Treading carefully and calculating your moves is the mark of a successful Forex trader.
Always indulge in Forex trading with practicality and be emotionless. Trying to earn back a lost trade or investing too much in a winning trade, can result in huge losses. Emotions block clear thinking, overloading can dramatically increase the risk in trading.
The success of Forex trading does not begin or stop with a single trade. Successful traders do not necessarily win all the trades nor is it a get rich quick scheme where the trader can earn loads of money in a single day or single trade. Success in Forex is built over years or study and practical trading.
No comments:
Post a Comment