Forex comes from the phrase foreign exchange, and it is mainly associated with currency trading. Through the foreign exchange, we change the currency of one country into currency of another for different purposes. People need such kind of services for tourism, commerce or business, due to the fact that the world had turned into a global network. With the use of the Internet, the currency transactions became available for average people. In this article you could find out some basic principles of Forex and useful information about Forex trading for beginners.
The main and most important thing about trading in the Forex market is the exchange rate of two currencies. We have currency pairs and exchange rate, for example – EURUSD 1.4515 or GBPUSD 1.6430. The exchange rate is continuously changing, that is why trading is very dynamic and it is active 24 hours a day. Generally speaking, the exchange rate reflects the state of a particular economy.
Along with the immense potential that the Forex market offers, currency trading could hide a lot of risks that may be fatal for a trader with modest experience and knowledge. Beginners could encounter to a number of problems, because oftentimes Forex trading is a tricky matter. So, if you want to be a successful trader you should follow a couple of rules and have a precise and clear strategy. In Forex trading for beginners, we are going to point out six main steps that you should follow, in order to restrict eventual losses.
1. Examine your personal way of thinking – observe your reactions during some tense moments, see what are your mistakes. Adjust your personality to the nature of trading, be prepare for any kind of diversions of your plan, stay always calm, be objective and do not let your negative emotions stand in your way.
2. Define your goals – you should have real expectations. Specify the exact profit that you expect.
3. Ensure enough budget – your available funds are basic requirement to start trading safely.
4. Chose a harmonic market – test a particular currency pair, chose levels of support and resistance, start with weekly chart, then gradually continue with daily and hourly one. Then you can test different pairs until you find the most suitable one.
5. Test your trading strategy – trade for a while, strictly record your actions and follow your results.
6. Measure the level of risk and profitability, than set your limits – you should define the exact moment to stop if the market turns against you. It is essential to count the likelihood for profit, as well as the risk of loss.
Finding a balance is crucial for successful currency trading. None of the rules is absolute, trading could be defined as art, it is not an exact science, it depends on your personal skills and knowledge.