Trading With Forex – Where To Start
Have you dabbled in indices and shares, but feel it’s time to try something new? What about the Forex markets? Many have considered testing out the Forex markets to see how it works for them, but hesitate. Why is this?
This is due to Forex often being talked up by traders as somewhere that requires you to have deep pockets as well as a vast level of expertise and nerves of steel. Yet, this is not an accurate description – let us tell you why…
Forex markets do in fact provide some of the best profit opportunities within the trading industry, which may explain why people are left feeling a little overwhelmed – but there’s no reason to feel this way. Others may have had a bad experience trading Forex and just don’t want to deal with them again.
This is why we want to look at the Forex market and explain to you how it can be tackled with the use of a few simple tools.
Reasons Why People Choose Not To Trade With Forex
Forex Is Far Too Big And Fast For My Liking…
This is a commonly occurring reason for not choosing Forex. The reason itself is understandable as the Forex market is enormous. It also never stops, on a global scale, as one market closes, another opens. Some Forex traders do compare Forex to something as terrifying as swimming with sharks. Truthfully, Forex trading is a lot less exciting than this, but a lot less terrifying too.
Despite the size and success of Forex, is in fact one of the better and safer places to trade, whilst the Forex market is extremely well organised. This means, you will never struggle to find a buyer or a seller, whilst the trading gaps you see in share prices are unlike other markets. The size of Forex also allows for there to be a much larger choice of currencies, which include:
- CAD / Canadian dollar (“loonie”)
- AUD / Australian dollar (“ausie”)
- USD / United States Dollar (“buck”)
- GBP / Great Britain Pound (“sterling”)
- EUR / European members Euro (“fiber”)
- JPY / Japanese Yen
- CHF / Swiss Franc (“swissy”)
- NZD / New Zealand dollar (“kiwi”)
The major pairings are:
The minor pairs are:
With this in mind, where do you begin?
We suggest that you choose 1 pair to begin with. As you start to gain more experience, you can take on more pairs.
So which pair should you choose?
To start off, we recommend that you choose EUR/USD or GBP/USD. This is due to them being cheaper to trade as well as larger. If you were to trade using obscure pairings, this is a more expensive option, which means your trading profits won’t stand a chance.
How Do I Keep Track Of The Markets All The Time?
Many compare Forex to a 24 hour cashpoint, where money can be picked up all day and all night. This unfortunately is not reality, as at specific times of day, or night they can be incredibly quiet.
If you want to increase your chances of making money, it’s essential that you trade at the most active times, as there are more profits on offer at this time. We suggest trading between 6am and 10am for the London session.
But I don’t understand global economics…
You may feel that you don’t have enough experience, but acknowledging that you don’t understand global economics, is better than ‘thinking’ that you do. Those who watch the business channels and read the financial newspapers are more inclined to be easily misled.
Following the media won’t help because by the time you see the news reports, the markets will have changed and the price move will have already taken place. If you want to stay up-to-date with announcements, you can do this via the Forex Factory.
I Find It Difficult Calculating My Risk And Profits In Currencies…
Many have made the mistake of applying the decimal point in the incorrect position. This is a fairly common mistake, currently JPMorgan are being sued 580,000 by a currency trader for this very reason. This is why trading just 1 currency pair at a time is recommended to lessen the chance of errors such as these being made.
Currencies trade using percentage in points or ‘pips’. This is the lowest increase in currency trading. For the majority of currencies, a pip is 0.0001. The Japanese Yen is one of the exceptions to this rule, as a pip to them is 0.01.
Reliable Rules To Pay Attention To When Trading
- Be sure to start small. Acknowledge that you’re likely to make some mistakes to begin with. Start out with either very low stakes or with a demo account. This means, if mistakes are made, you won’t lose out on much.
- Be realistic with your expectations. You cannot expect to double your money within a month. If you begin with low stakes and are gaining 10-30 points, you are doing incredibly well.
- Remember: the sensible approach when trading Forex, is the more rewarding approach.