Many people are seduced by the opportunity to make money with Forex trading. They have a little idea about this market and they want to get involved in it. But not many people know how Forex trading is really done.
You have to start learning Forex trading with fundamentals such as what makes currency move in the value on the market. Usually, the main reason for this happening is if the country is taking in more money and paying it out. It is like if you see your checking account at home going down in value, it is not going very good. And if you are borrowing money, you will have to pay higher interest rate. But if your checking account’s value is growing consistently, the banks will favor you and going to lend you money at the low rate. It is very similar with the countries.
Before trading on Forex you should also decide how to get the data needed for analyzing the market movement. You can get it on Bloomberg or Reuters or buy economical magazines, which provide you with different tables. Some of these tables will tell you which countries bring in more money than spend it, or the opposite. It is similar to the current account, so if it is negative, and the country is spending more money than it is bringing in, you want to short that currency. And you want to long the currency if the country is making more money.
Let’s take the United States for an example with its 5% of GDP. This means that you might probably go short on the US dollar against other countries’ currencies, which have more cash coming in. Such currencies are the Euro, the Yen and the Swiss Franc.
It is important to follow other rules, when you are trading Forex. Attempt to reach 20 pips for a start. You should also use MACD indicator, but not as a signal generator. Use it for confirming a trend and divergence. You should also set stop losses at about 20 to 30 pips away from a pivot point. But, if you see a long hammer, this rule will not work, because you know that the price is going to change its direction.
When trading Forex, you should also concentrate on one currency pair. It is also important to keep a log. And don’t apply the scalping strategy, trade only when you see a great and reliable trading opportunity.
There are many Forex trading strategies you can apply. Many beginners as well as expert traders apply automated trading systems for using more trading opportunities and generating more profits. Using such Forex robots also allows traders save time and have more control over their trading.
In case you decided to participate in forex trading must start from learning the basics of currency exchange market to make sure you do not experience problems with this industry.