There are traders who make a profit and continue trading, and those who lose money and give up. While everyone hopes to become one of the traders on the path to success, many people simply don't realize the simple factors that could cause them to lose money in the forex market. First you need to start by understanding the basics of forex trading.
The term "forex" refers to the foreign exchange market, which is a global online market where people buy and sell different currencies. These include ordinary people and professional traders, as well as larger entities like banks, hedge funds, brokers, certain corporations, and other high-risk investors. The value of the currency that people buy and sell changes based on several factors, including but not limited to:
As you can see, the value of the currency of each country is mainly influenced by factors related to currency, government and economic data. In order to make informed trading decisions, traders keep abreast of events and check economic calendars for updates that tell them the value of a currency may change. Other methods used to decide which currencies to trade include technical and fundamental analysis.
What is a currency pair?
A currency pair includes two different currencies that are paired with each other. For example, EUR/USD. This means that the euro (base currency) is exchanged against the US dollar (counter currency). It is the most used pair in the world, but there are also several other major, minor and exotic pairs that can be traded.
Major currency pairs include EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, GBP/EUR, EUR/ CHF, EUR/JPY and NZD/USD.
Minor currency pairs do not include the United States dollar. The most common examples are the British pound (GBP), euro (EUR) and yen (JPY).
Exotic currency pairs are made up of one major currency, traded against a currency of a developing country. The Turkish Lira (TRY) is an example of an exotic currency.
Traders choose which currency pairs to buy or sell based on the price change with the aim of making a profit. Major currency pairs are generally considered safer to trade, while exotic currency pairs can be more volatile and riskier for traders, so be sure to choose wisely.
Essential tips for success
Now that we've covered the basics of forex trading, it's time to give you some helpful tips to help you succeed in the long run. Just knowing this information can help you get off on the right foot without falling victim to common trading mistakes.
Choose the right broker : There are many choices, but you will need to do some research to make sure you are working with a reputable forex broker . It is also important to compare account types, fees, funding methods and other important aspects before opening a trading account. Be aware that if you choose a broker with lower fees, you will make more of your profit.
Develop a good trading strategy : There are a large number of trading strategies that cater to all kinds of different traders. You'll need to pick one that fits your schedule and figure out why you'll be trading, how much money you're willing to risk, etc.
Don't open an account until you're ready : You shouldn't rush into opening a trading account until you understand the market and have a solid trading plan in place. Some brokers will even charge you an inactivity fee if you deposit funds, b