Thanks to the rise of online trading, everyone now has the potential to enjoy the benefits of Forex trading. To become good at it, though, you will need to do much more than simply setting up an account and loading it with cash. This is a truth few people realize until it’s too late and they’ve lost every penny which is why this article will focus on a few suggestions that will help improve your Forex trading.
There are seven different currency pairs that are referred to as major pairs and a lot of secondary ones. While the diversity offers veteran traders a multitude of trading opportunities, it can be a serious drawback for the novice. Any experienced trader will tell you that you need to learn how to trade one currency pair properly before you move on to another. It might seem ridiculous to give up so many trading opportunities but by focusing on one pair you will soon find it easier to predict its movements because you learn all its quirks. Your ability to accurately predict price movement will also strengthen since your economic understanding of the currencies in question will increase. Focusing on a single pair will translate into greater profits.
When trading, most people think of fundamental and technical analysis. Before entering a trade, however, there is another component that must be studied and that is trader sentiment. Since the market consists of humans who are trading, it is subject to how they feel regarding various issues, including such things as the economy of a country, which will impact price. For example, let’s assume that EUR/USD price charts are showing there’s an opportunity for a profitable trade. The Euro is becoming stronger and the strong trend revealed by your charts makes it clear it’s time to buy. Suddenly, you find yourself fifty pips in the red because the market has slammed the breaks on and changed direction. What you didn’t know was that a major economy in the EU was denied help, for example, which means they will default on their loans. Thus, traders lost faith in the Euro and began to sell like there’s no tomorrow, weakening the Euro. For this reason, understanding and analyzing market sentiment is essential alongside fundamental and technical analysis.
It’s easy to lose your way and become overwhelmed with the hundreds of indicators at your disposal. You could even overlook some excellent trading opportunities because you are attempting to utilize too many indicators at one time and the market never meets all your parameters. This is a good time to go back to the simple things, especially if your chart has so many indicators on it, you can barely see the candles. Price moves quite simply and that’s up and down. If price is making lower lows, then it’s going down, and if it’s making higher highs then it’s going up. In this situation, the trend will likely continue. If price is making a lower high or a higher low, then it’s reasonable to assume it will retrace. You’ll be surprised at how much you can deduce from simply watching the price move. Sometimes, taking the simple approach is much more effective.
When you see how many things you need to master, Forex trading can seem pretty hard. Despite this, the benefits are completely worth the effort and dedication required. You should never create a live account, though, before you are consistently profitable with a demo account. This way you are more likely to make a profit when you switch to a live account.