This is a post by Ellie Jo about investments.
Forex is short for “foreign exchange market” and is a decentralized market for trading currencies. These days, forex trading is popular with retail traders (i.e., individuals) and is no longer the domain of high-rolling city traders that invest their client’s money.
As you can imagine, forex trading can be risky as you speculate on whether the price of a currency pair is going up or down. The truth about forex trading is there are no secrets to having successful results all the time.
Some critics may demonize forex trading as akin to gambling, but currency trading practices are the same as what investors do with your pension fund! They also speculate on whether an asset’s value (company shares) will go up or down.
Once you understand that there will be times where the markets move against you, just like with pension investments, it’s possible to work on strategies to mitigate that risk. If you’re wondering how if a passive income like forex trading can be profitable for you, read this:
Use a Reputable Broker
When you wish to start forex trading, you must use an intermediary known as a broker. Sadly, some brokers don’t deliver what they promise and can ultimately lose clients their money.
That’s why it makes sense to thoroughly research forex brokers and choose the best one for your needs. Examples of reputable brokers include Avatrade and IG. Make sure the following applies to any broker you use:
- They have full financial regulation by the government in your jurisdiction;
- They have a physical presence (i.e., an office) in your country;
- They don’t have constant problems with liquidity or speed of execution;
- They offer a suitable trading platform, such as MetaTrader 4 or 5.
Don’t Stake More Than the Minimum
If you stick with the minimum stake size, you will mitigate potential losses if the markets move against you. The only downside, of course, is you don’t make much profit when the markets are in your favor.
Still, that doesn’t stop you from opening several positions on different currency pairs, for example. In fact, doing so is a good idea because you will potentially lessen any financial losses even further.
Be Strict With Your Trading Strategies
It doesn’t matter whether you use tens of ‘indicators’ on your charts or you just go with your gut feeling according to what you’ve seen on the news about the economy. What does matter is you remain strict with your trading strategies and don’t deviate from them.
Sticking with your strategies also makes it easy to measure your financial performance with forex trading.
Keep Up-to-Date With Economic News
Lastly, you will undoubtedly be aware that events that take place in the news, particularly economic ones, affect the direction of a market’s price. One example in the United States is the monthly NFP (non-farm payroll) government data.
Generally speaking, positive economic news relating to your currency pair will make the price go up, and negative news will cause prices to plummet.