What You Need To Know About Forex Trading In 2018

Forex is a shortened way of saying Forex exchange. This refers to the act of buying or selling one country’s currency for another for different reasons including commerce, tourism or as a personal investment. Many businesses run on a global scale, as such it is important to translate with other countries using their own currency hence creating a niche for Forex trading. Countries, businesses and people from all walks of life all participate in Forex trading making it the number one traded market worldwide.

You have probably participated in this popular trade for instance when you went on vacation to another country. You probably had to exchange your currency to the currency of where you were visiting for instance US dollars for Euros. The demand on the market for certain currencies will either boost or slow down its value when compared to other currencies.

Until the internet came into the scene, Forex trading was limited to the interbanking systems trading on behalf of their clients. With time, banks set up their own proprietary desks so that they could trade using their own accounts. It was long after this that large corporations, hedge funds and high net worth people jumped on the trading Forex band wagon, and it has proven to be a great source of income. To put it in a nutshell, global market trades at about $22.4 billion per day, while the forex market trades about $5 trillion per day.

Keeping this in mind, it’s no surprise that there are a surge of individual traders looking to make a profit from trading. If you are one of those individuals who are keen on trading currencies, here are a few pros and cons on Forex trading:

Pros and Cons of Forex Trading

  • Forex trading is the biggest financial market in the globe. According to the last triennial survey of the Bank of International Settlement (BIS), the size of the forex market turnover was $5.2 trillion. This means that it can offer the most liquidity; therefore you can enter and exit within a second in any of the major global currencies.

 

  • Due to the impressive range of liquidity and the ease with which a trade can exit or enter the market, brokers and banks entice traders by offering them a large leverage. This gives traders the ability to control large positions having chipped in little money of their own. Of course in order to garner maximum benefits, traders have to understand how to use leverage cautiously and effectively and the risks imposed on the account should the leverage be misused.

 

  • Another key advantage to Forex trading is that it operates 24 hours, starting out in Australia and coming to a close in New York before the cycle starts out again. Some of the top cities to focus on in 2018 when it comes to trading include: Sydney, Hong Kong, Singapore, Tokyo, Frankfurt, Paris, London and New York.

 

How to Be a Successful Trader

Over the years, there have been reports of massive losses as a result of undisciplined and inexperienced traders who do not know how forex trading works and have ignored platforms and methodologies such as the Elliot Wave Trading Theory. Below we shall uncover the key things you need to know in order to be a successful trader in 2018 and recap big profits.

 

  • Make A Plan

To profit in trading, it’s not only important to be well versed in the trades of the market itself, but to be self aware as well. This means that you risk tolerance and capital allocation to the trading. You have to sit down and analyse your own financial goals and your account before engaging in Forex trading. Once you determine your Forex trading goals, you have to set a time frame and jot down a working plan, be it short term or long term for your trading career.

Having clear goals means asking yourself a few trivial questions such as what should be the time frame for trial and error process? How much time do you plan on devoting to Forex trading, or whether you are getting into the trade as a hobby or a means to generate technology stable income? Answering such questions will help you determine the risks vs. returns and should the risks overshadow the profits, then it might be wise to embark on another endeavour.

  • Pick A Reliable Broker Then Start Small

Prior to focusing on the intricacies of trading itself, it is important to choose a broker who is in tandem with your trading goals and is of good expertise. It is wise to enquire about the brokers’ client profile, their trading software, and even how efficient their customers’ service is. The next step is to choose an account package that suits your expertise level. As a general rule for beginners, it is best to start out with a lower leverage. This gives you the much needed grave period to learn and maybe make mistakes that are not too costly. Start small and add onto your account as it gradually generates profits.

  • Stick To A Single Currency Pair

The forex market is vast and has brought together central banks, investment banks, commercial banks, hedge funds, retail traders, technology providers, statisticians, quants, software developers, analysts, just to name a few. It is an increasing industry that supports over 20 other industries. As such it can get chaotic, and in the midst of this chaos it is hard to grasp the nitty-gritty of all the participants in the trade. As such, it’s ideal to focus on trading with one currency pair which you are familiar with and understand, preferably the currency of your own country. Alternatively you can start off with the most liquid and widely traded currency pairs that are an ideal choice.

  • Understand The Trade

Forex trading in a nutshell is about probability and risk analysis. There is no single strategy that can guarantee you profits all the time. However, proper money management can help you to maximize profits and reduce losses. It’s also important to study the every changing market both its macroeconomic and microeconomic aspects and technical factors that come into play. Most importantly don’t make decisions based on your emotions.