Have you considered forex trading on the foreign exchange market (Forex)? If so, let us tell you that trading on the foreign exchange market is a great idea. Unlike the stock market, you can trade on the forex market at different times all week. This is because the opening and closing times of the forex market depend on the time zones of different countries.
So, if you’ve decided to start trading on the forex market, you’ll be better off in the long run. But if you are starting, trading on the forex market may be too hard, and you might think it’s hard to understand how the market works.
To trade well, you have to spend hours looking at trade charts. But that’s not true! You can trade on the forex market more effectively if you use a few simple strategies. This will give you some time to learn and get better at forex trading so you can become an expert.
Things to Think About When Trading Forex
If you ask a professional forex trader what advice they would give a new trader, they will always mention the two things below.
Investment percentage:
Most experts on forex trading say that you shouldn’t put more than 5% of your total capital into a single trade. This will help you keep your overall investment risks in check, ensuring that fluctuations don’t cause you to lose money.
Leverage is another thing that experts tell beginning traders to think about. Any new trader shouldn’t use more than a 1:10 leverage. Again, this will ensure they don’t lose much money because of changes. This also lets beginners have margin calls, where they can decide whether to pull out their money or wait for the market to turn around.
Since the beginning of forex trading, all traders have thought about these two things. But traders who wanted to take more risks sometimes ignored these things, which cost them a lot of money.
After the Great Recession in 2007-2008, most traders stressed that these two things are very important. Whether you are a beginner or an expert, you should always think about these two things before trading forex.
How to Trade Forex: The Basics
Now, let’s talk about the most important part of this blog post: the four basic forex trading strategies that every beginner needs to know.
Moving Averages
You will always want to make money as a new trader. Using the Simple Moving Averages (SMA) strategy can be helpful if you are a trader who wants to make money.
As the name suggests, you need to figure out the average closing price for a currency pair over a certain number of days. This will give you an idea of how the currency pair moves over time.
At first, you can figure out the SMA for 20 days. You must keep track of the closing price of the currency pair you want to trade for 20 days. Add the numbers together and divide by 20. This will let you know if there have been any strong trends over the last 20 days.
For SMA, expert traders look at longer periods, such as 200 days. But if you are starting, you can start small and grow.
Carry Business
This is one of the most popular ways for people new to forex trading to learn about the market and make their first profits without losing too much money.
The basic idea behind this strategy is to buy a currency with a high yield and a currency with a low yield. Until the position is open, the broker will pay the client the difference in interest. Here’s an example to help you understand how this plan works.
For instance, you have two currencies: USD/RUB and USD/JPY.
For USD/JPY, the Federal Funds rate range is between 0.25% and -0.1%, while the Japanese Bank rate range is between -0.1% and 0.25%. The difference between the two rates is about 0.35%.
Again, the rate range for USD/RUB is 0.25% for Federal Funds and 6% for the Russian bank. This means that their rate difference is about 5.75 percent. This means that a trader like you, who is just starting, can make up to $15.75 per day, which is $5,750 per year.
The only thing you need to remember is that you shouldn’t trade on new or emerging currency pairs because they are riskier and volatile.
Buying Power Parity (PPP)
Purchasing Power Parity (PPP) is an even easier way to trade foreign exchange. You compare the current exchange rates to the PPP, which lets you figure out which currencies are overvalued and undervalued.
When a currency goes 20% above the PPP, it is said to be overvalued. When a currency goes 20% below the PPP, it is said to be undervalued.
The forex market won’t always follow the PPP, but the most popular currencies will be 20% above or below the PPP. The main reason for using this strategy is to make it easy for the trader to decide which currency pair to trade.
Also, PPP is a great strategy if you want to trade for a long time. Then you can compare a long time of PPP with the current exchange rate to get a better idea of what is going on.
Rates of Return
Any guide for forex traders will agree that high-yield currency is more appealing than low-yield currency. A similar strategy for a new trader is to trade in the interest rates of currency pairs.
All you have to do is look at the Consumer Price Index from the country’s central bank to find out how much inflation they want each year. But you should know that the CPI can be affected by big changes in the country.
This will also affect how a currency does as a whole. And it can add to or take away from its value. The CPI can also be affected by things like the growth rate of the Gross Domestic Product and the unemployment rate.
Conclusion
When you first start trading on the forex market, you should always consider the leverage and the percentage of your investment which will keep you from losing as much.
You can also choose from four basic forex trading strategies to help you trade well at first. You can also learn more and trade better if you do.
But if you want to learn more about these basic and advanced forex trading strategies, go to Forex Traders Guide. This is a website where you can find everything you need to know about the forex market and trading.
You can use this platform, whether a beginner or an expert, to learn about forex strategies. Get market analysis reports, forex brokers, and forex robots. Forex Traders Guide is the place to go to learn everything you need to know about forex trading.
The online forex trading platform is meant to help anyone who wants to trade on the forex market quickly and easily. You can find information about the foreign exchange market. From the basics to advanced topics like forex brokers, robots, trading strategies, and more.
So, go to Forex Traders Guide if you want to start trading on the foreign exchange market and need help and information about current trends.
