Foreign exchange, in simple words, is an exchange of currencies. The value of one currency is determined in terms of another currency. For example, 1 KWD = 12.10 AED today (Kindly change this as per the publishing date). The value of the currency is determined by the entire concerned economy. And this foreign currency exchange takes place at the forex market. It is a group of many financial and investing institutions facilitates exchanges between different currencies globally. It helps in determining the foreign exchange rate between all the major and minor currencies.
The forex market is the most liquid and largest trading market all over the world. Therefore, traders and investors must play very smartly in order to earn maximum profits. Technical analysis tools and algorithms are used to determine the values of currencies. Such tips and tricks can help in making planned, researched and sensible decision. Some of them are:
1. Understanding the Market
This is the most important key to survival and prosperity in the forex market. A person must be a prodigy before turning into an investor. Thorough understanding of the market, regular updates about the concerned economies and check on forex charts are some things that each investor must do. Since you’re investing money, no loophole can be left undetected.
2. Using Multi-Strategy Approach
Traders must use different foreign trading strategies. This will enable them to get a better grasp over the market. Also, this technique helps is determining how much returns are made using different strategies. It can help you boost your trade in the longer run.
3. Breaking down Large Sum Of Money
Instead of investing the entire lump-sum of money into one major pair of currency exchange, the trader must invest into different major or minor pairs of currency. It balances out losses if any.
4. Wisely Choosing the Broker
Choosing a reliable and efficient broker is very important if you don’t want to enter the market directly. The broker would act as a bridge between you and the forex market. If the broker is efficient, they’d make sure hefty profits for you and a good commission for themselves. Plus, there are many frauds in the market. Always make sure that the person is an authorised broker with a license.
5. Don’t Be Greedy
Be a tortoise while performing on the forex trading platform. Instant profits might lure you in beginning. So don’t be voracious, instead be a smart investor! One small profit doesn’t mean that it will generate continuous profit every time. You must know where to stop.
6. Patience Is the Key
Investors don’t buy and sell every day. Patience helps them earn larger profits even after investing lesser amount as well. It is because economies don’t grow on a day-to-day basis. It is a gradual process. Let the money be invested for a while and then reimburse it when it is at its highest. Success never comes instantly.
7. Learning Is a Continuous Process
Evolution never stops and so shouldn’t be the learning. Every day something new is brought and something old is replaced. Same is the case with forex trading. It is an on-going learning process. Initially, one must start by investing smaller sums and then increasing it with experience. Constant trading practice will help you grasp the nooks of it. You can use many different forex trading tools to add more to your learning.
8. Set Your Expectations
It is always better to decide this in advance. This will help you make rationalised decisions and wouldn’t let you become greedy. You must compare your winning and losing trades. Expectations for both losses and profits must be pre-determined.
9. Must know when to stop
No one has the time to sit and watch the markets trends at all the possible hours. Plus, there is a life that you must live. So don’t be pulled by the nuances of the forex trading all the time. Calculate the risk and potential profits before investing.
10. Risk Is a Part of Success
Never forget that the money involved is yours. And no profits can be made without risks. These tips help you to make a better judgement but the ultimate risk bearer is you. There is no guarantee of profits. Moreover, profits and losses go hand in hand. Don’t be fooled by forged advertisements.
11. Plan Ahead
Forex trading is a strategic game which can be mastered over only by rational planning. Be sure enough before investing. Though it might go the way you didn’t expect. But that can be a scenario in both good and bad. Being prepared for unexpected is the best planning.
12. Keep a Check on the Trends
This is a very crucial step. Since you can always juggle between markets and different pairs of currency, therefore, a regular eye on the trends is essential. These trends are influenced by political, technical and financial environment. Also, you can use various forex trading tools beforehand to know and understand the trends better.
You cannot know the taste of something without tasting it. Similarly, experimentation is very important to widen your horizons. You can’t know more without trying it out. So, experiment but it should be a planned and thoughtful decision. Also, your strategy must be flexible enough to allow these experiments.
14. Regular Analysis
Keeping yourself updated with help you know about the economies and their trends better. This can be easily done on the weekends when the markets are closed. Patterns must be deduced and they will help you make predictions about the upcoming week. A printed document can help you a lot more as they will make your fundamentals stronger.
These tips are solely meant with the purpose to educate you. They can help you boost your profits. But the sole-person behind it is you. Use your instincts, research and understanding to be able to make better decisions. However, keeping an eye on the forex charts has never harmed anyone. A smart trader not only knows how to make profits but also knows how to mitigate the losses.