Trading currencies seems to be extremely popular among people who wish to replace or supplement their existing income. Most people end up losing all their money, though, because they have a tendency of being extremely impatient and trying to run before they can crawl. You’ll be glad to know that if done correctly, Forex trading can be lucrative. This article will cover a few suggestions that should help you improve your Forex trading.
The biggest problem most new Forex traders have is that they throw themselves into the market before they learn how to trade properly. They think they can start making a profit right away, with just a few courses and books under their belt. After, they aren’t sure why and how they lost their whole account. Forex trading is not a way to make money overnight and requires quite a bit of hard work and dedication to make a profit. You have to practice trading with a demo account because trading live is completely different to theory and take the time to learn the theory as well. It is essential, for this reason, for you to practice trading on a demo account for a while or, preferably, until you are consistently profitable. Only then should you put your own money into the markets.
Any successful Forex trader needs to know how to conduct technical analysis, which is the study of price movement. Since history has a habit of repeating itself, the idea is that by looking at how price has reacted in the past, it will be easier for a trader to forecast how it will behave in the future. Basically, one presumes that price is likely to behave as it did in the past and traders use price charts to identify potential trading opportunities. However, technical analysis can be highly subjective as two traders are very likely to see completely different things on the same price chart. You need to learn technical analysis, though, if you wish to succeed at this occupation, which means being able to identify chart patterns, being able to apply indicators such as Bollinger bands, MACD and pivot points.
Learning to identify candlestick patterns will benefit your trading greatly. A candlestick is one way of presenting currency value for the timeframe being traded, showing the highs, lows, opening and closing prices. Since you can see the direction of the market at a glance, considering that the bodies of candlesticks are color coded according to whether price is moving up or down, they have become extremely popular with traders. The shape of a candle can signal a change in the direction of the market or the continuation of a trend, and that is what candlestick patterns refers to. A candle with a small body and a long tail, with price closing higher than it opened, is known as a hammer, for example. If it appears after a series of candles where price closed lower than it opened, it usually signifies that the market will change direction. There are plenty of patterns that can also help to determine whether or not the trend will continue.
Forex trading can seem daunting, especially when you realize exactly how many concepts you have to understand. You will have to put quite a bit of work in, but it’s more than worth it. But never put money into the market before you have proven results on a demo account first. This increases the chances of your live account being profitable.