If you are planning to venture into forex trading or are a beginner seeking to attract massive gains from forex trading, this article is for you.
Here, you will learn the three core steps and related tricks to have successful forex trading.
First, it would be best to identify a typical forex pair. You will understand the seemingly strange numbers and the best picks from the market.
Secondly, it should be comfortable to knowwhen to sell or buythechosen currency pair. Lastly, you should effortlessly enter a trading position, as explained below.
1. Choose a Currency Pair
Forex trading entails exchanging currency pairs. The currency pairs are six-letter words in capital letters. For example, GBP/USD or GBPUSD, where GBP stands for British Sterling Pound to US Dollar.
In the example, GBP is the base currency, while USD is the quote currency. During forex trading, you compare the value of one currency pair to another.
For example, you determine how much GBP (base currency) you should buy compared to the USD (the quote currency). Other currency pairs are EUR/USD, USD/JPY, USD/HKD, AUD/USD, and USD/CAD.
Your forex broker presents you with a list of typical currency pairs.But, how do you know if the currency pair will generate your target income? The solution is simple:
2. Understand the Market
Forex analysis entails knowing why, when, and how the forex prices change.
You should understand how economic, social, and political factors affect the price data of the currency pairs. This type of analysis is called fundamental analysis. It is closely related to sentiment analysis.
In sentiment analysis, you pay attention to the general attitude of key market players. Then, you can determine the possibility or direction of price change because the decision of several market participants affects the market demand and supply of your target currency pair.
The last part of forex analysis is technical analysis. In technical analysis, you analyze charts and curves to determine when currency pair prices will fall or rise. You track technical indicators and oscillators signals.
The four main types of technical forex indicators are the trend, volume, momentum, and volatility indicators.
Examples of trend indicators as Relative Strength Index (RSI), Bolinger Bands, Moving Averages, Moving Average Convergence Divergence (MACD), and average directional index (ADX). They tell you the impact of historical changes on future price changes.
Volume indicators, such as On-Balance-Volume (OBV), Klinger Oscillator, and Chaikin Money Flow, tell you the number of currency pairs traded over a duration. Knowing volume is crucial because it directly affects price changes.
Momentum indicators echo the rate of price change. Through their 0-100 scale, you can predict the market overbuying or overselling.
For example, an ADX below 20 signals an oversold market. On the other hand, an ADX above 50 shows that buyers control the market. An RSI below 30 symbolizes market overselling while reading over 70 means the market is overbought.
The last category of technical indicators is volatility indicators. Examples are Bolinger Bands. They tell you price quantity drifting in a direction.
Apart from analyzing the market, you can copy trades. For instance, you can instruct your broker to identify the successful forex traders and synchronize your trading activity as theirs.
Here, you ignore technical analysis and rely on the expert’s actions. Typical categories of non-analytical trading are copy trading, mirror trading, or social trading.
In mirror trading, the broker decides whose trading strategies to mimic. In copy trading, you have a voice to pick actual trades and automate activities.In social trading, you interact with experts through a social platform, sharing strategies and trades.
You can use a typical 21st-century platform, such as MetaTrader4 to track market news and automate trades.
3. Enter Positions
Now that you have settled with a typical currency pair(s), it would help to buy, sell, or halt trading.
Here, you should determine the spread (difference between selling and buying price), bulls and bears, take- and trading phases. Next, you can enter buy/sell, take-profit, or stop-loss positions.
The three crucial trading steps are choosing a currency pair, analyzing it, and entering a position. Follow the above-outlined procedure and experience a successful forex trading journey.