Most of us want to trade forex online. It could be for many
reasons. Some like to trade forex simply because love to play with the
financial markets. Others see forex as a way of alternative investment. Whatever
your reasons may be, here are some important tips to bear in mind even before
you start trading or investing in forex.
Currency markets and the movers and shakers
Ask a seasoned forex trader on how they divide their time
trading forex and the most obvious answer you get is the amount of time they
use in order to analyze the markets and looking out for economic news and
developments. These are two of the most important factors that tend to directly
influence the economy of country and thus impact the currency’s value as well.
When you have a good understanding of the market movers and
the news that you need to follow, it would be as obvious as looking into the
various signs that forecast how the currency prices will move.
Because the value of a currency is directly tied to a
country’s economy, factors such as political stability, economic strength and
to some extent even the geographical factors such as weather tend to influence
the prices. It is little wonder why, that so many experienced forex traders
tend to spend more time into analyzing and reading the charts. This basically
prepares them for upcoming trends or price falls and thus such traders manage
to fare better than those who just trade blindly on gut feel.
Tools and tips for analyzing forex markets
There are many ways for traders to get started in analyzing
the forex markets. One specific tool that is a ‘must have’ in every forex
trader’s arsenal is the forex economic calendar. The economic calendar is
nothing but a list of events scheduled for the day or the week or month,
depending on how you wish to see it. Traders usually prefer the weekly charts,
if they are weekend strategy planners or perhaps the daily chart which gives
details on the day’s upcoming economic events.
Most of the events usually carry the currency that will be
affected, time of the release and the release website. Other critical
information also includes previous performance and the market expected data.
Traders, especially forex scalpers find it very beneficial to use the economic
calendar as it can help them to prepare their forex scalping strategy.
Risk management is another important factor that we will
touch upon. A wise trader usually places their traders in a way that they limit
their risks. This can include, using only a small part of their invested
capital to using trailing stops and setting up the stop loss and take profit
levels. All of these combined basically are targeted towards building a safety
net for the trader in the event the markets do a reversal and the prices go
against your trades.
It is always good to focus on a single currency pair instead
of trading 3 or 4 pairs at a time. This helps you to retain your focus and also
pick any signals you might see from the market events. Looking at charts for a
currency pair and how it has been performing in the past few days is a good
indicator on how things stand and can help the trader to gain context in this
aspect.
The above tips are just tip of the iceberg and indeed
volumes can be written about the many important tips for forex traders.
However, the key is to start slow and steady and always look for long term
gains instead of chasing the short term profits, which might seem big enough to
give it a chase. In forex, people fail because either they are too greedy or do
not follow a trading strategy, let alone having a goal.
This article is aimed towards beginners in forex who want to
make the right start.
