Forex trading is a global investment market that lets you interchange your currency against other countries’ currencies, thereby earning a profit. It doesn’t restrict a trader’s activity to acquiring currencies but also allows them to speculate the price movements and bet on them. If their predictions turn out to be precise, they make a profit.
With a diverse and dynamic global market that renders endless opportunities, forex traders have plenty of golden eggs to hatch. Besides, the market shift to online forex trading has made currencies accessible digitally worldwide.
However, the stats speak otherwise. Although the forex market has an untamable potential, not every trader makes a steady profit. Let’s take an overview of the recent study based on forex traders and their profit-making patterns;
| Within a duration of 3 months | Only 33% of Forex traders earned profits |
| Traders making steady profits throughout the year | Approximately 7% of forex traders |
| Traders failing to achieve steady profits | Over 92% of forex traders |
The table positioned above is enough evidence that making steady returns for traders isn’t a piece of cake. In fact, a majority of the traders struggle when it comes to interpreting the market. In contrast, the others fail in their approach. Trading isn’t as effortless as it seems to be. And it certainly isn’t an area where one could exercise trial and error methods. But, contradictorily, most traders do learn from their mistakes.
Although there are no secrets that’ll unlock a door to significant profits, there are a few means that you can consider for a steady-going income routed through foreign exchange dealings. You can even start by creating a demo account with the best forex trading platform. This method will help build your confidence and understanding of how forex works. The first fundamental step is determining your trading preferences and style. It’s a process of evaluating whether you’re in it for the long or short run, the risks you’re willing to take, the size of your capital, and more. While a trader is at this discovery phase, assessing and establishing a risk to reward ratio is crucial. One must only invest what one can afford to lose. Trading advisors and experts worldwide suggest that traders shouldn’t over-leverage their traders or venture beyond 5% of their total capital.
Setting realistic forex trading targets is essential. Some traders maintain a journal to jot down and monitor their performance over a duration, which assists them in identifying their mistakes and other painful areas. Now that we have the basics out of the way, let’s run through some life-changing tips and tricks that you’ve been missing out on;
Appoint & Test Forex Trading Strategies For Consistency
If you want to take away consistent profits, you need to start handpicking the style and strategy to get you the desired returns. Beginners can start by researching and testing all the charts, trading methodology, tools, and techniques through a demo account. However, you can be relieved if you’ve signed up for a renowned platform since few of the best forex trading platforms have advisors, analysts, and experts onboard assisting traders with suitable strategies.
Before picking a trading method, take a moment to decipher how distinct trading styles work and run a comparative analysis between them. The only factors that differ between each trading type are the size of the positions opened and the time frame. Listed below are a few popular and extensively adopted trading styles;
- Day Trading enables traders to open and close positions within a single day.
- Scalping follows a shorter time frame as compared to day trading. It opens and closes trades in 1 to 15 mins.
- With Swing Trading, traders go on to open and hold the same positions from days to weeks on end.
- Long-term Trading: As the name goes, it allows traders the freedom to hold a position for months.
Once you’ve designated the preferential trading method, the next step is to handpick strategies that can boost your trade. While some administer a straightforward approach by keeping up with economic news, political changes, and studying past records of successful forex traders. The others pick advanced strategies such as moving averages, Bollinger bands, or take on technical indicators. Traders must test their preferred strategy before giving in to it. Learning how the adopted strategy reacts based on different circumstances will make a huge difference. Although the strategy might be the same, its outcome would shift depending on many external factors. Finally, once traders track the causes of their losses or failure, they can initiate by eliminating such moves in the future.
Conduct Fundamental Research Daily
Accomplishing your investment goals isn’t a one-time thing; it’s a constant process. Start building habits that keep you updated about the recent market and economic trends. It’s not easy to keep an eye on a bunch of currencies at a time, but with online forex trading, you can find all the top currencies listed together on a single page. Keep a tab on the price fluctuation in currencies, GDP (Gross Domestic Product), unemployment rate, CPI (Consumer Price Index), interest rates, and other significant updates. If a trader monitors factors that influence market trends daily, he/she will be able to speculate on market movement and plan their trade accordingly. For example, an abrupt spike in oil pricing can make an economy fall, resulting in a dip in the currency’s valuation.
While we discuss the core of forex trading, some aspects that have a long-term impact include the PPP, i.e., Purchasing Power Parity, which plays a fundamental part in the exchange rate fluctuations. Past analysis shows that currencies incline towards the PPP level within the long term, which indicates the exchange rate where the average pricing for goods and services will equalize among the two economies.
To conclude, any trader who is acquainted with the know-how of the forex industry as a whole is keenly prepared with a plan, and governs their trades closely is well suited to triumph through their trading journey with considerable profits. It also helps traders foresee any undervalued currency movements in the future and be equipped for them.
Follow BusinessBlogger for more!
