The Forex Market is the most unpredictable with a totally different behavior as compared to other financial markets. Speculative nature or volatility and speed of this market is the main reason more and more traders are eyeing to enter. But, unfortunately no there are no specified paths for success here.
Currencies change their values with respect to other in a matter of days or weeks or sometimes in a few hours and even minutes. Reasons for such volatility can be an unexpected change in currency, exchange rates, or variation in different markets.
Being unpredictable, trading in this market involves huge risks. But, not always investing in a currency pair will incur losses. Below are a few points you need to consider before investing:
Understand the Market:
Do a research and understand the market thoroughly before entering. It is all about possibilities or chances. When you are trading or investing in a currency, there are equal chances of its value to go high or low against the currency it is paired. Study the currency carefully before investing. When you are buying one, set STOP LOSS to exit the market before incurring any loss. If you are short the currency, set stop loss at value higher than its market price and if you are long the currency, stop loss should be below market price.
Develop a Solid Strategy:
Design a solid game plan that will help you through the trading journey. Depending on the amount of capital and time you have, choose whether you go for day trading or long-term.
Markets like spot, forward and future have different rationales behind their mechanism. Spot market is where most crowd is found because it is on this that forward and future markets are based on. Spot deal or a forward contract? Analyze and calculate the risk carefully before proceeding.
Choosing the Currency Pair:
It would be wise to pick a pair that is traded widely and guarantees liquidity. Stick to the pair whose movement and indicators have been examined prior. Avoid currencies with wider spread or getting involved with newer currencies without substantial knowledge. Get started with major pairs and then diversify to cross pairs and exotic pairs when you gain sufficient experience.
Price Action Strategy:
Past prices can never lie and are best to rely upon while trading. Analyzing these trends gives a better idea about the currency’s behavior. Opting for price action trading techniques helps investors study the market thoroughly and make subjective verdicts established on past price fluctuations. Many tools, trading and accounting software come handy in this situation, thereby making analysis and decision making easier and effective.
Forex market has highest trading volume and is profitable for investors in both bull and bear market trends. Well formulated game plan and patience is the success mantra.
April is a financial consultant at Reach technologies, a company Singapore. She has worked with countless business owners to help them to make better financial decisions and plan their finances better in order to build a successful business. Read more of her articles at http://www.reachtechasia.com/blog