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The currency trading (forex or more commonly known as forex) market is the largest and fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars. The participants in this market are central and commercial banks, corporations, institutional investors, hedge funds, and private individuals like you.
In the forex markets, investors trade on the currencies (as well as gold and silver) of different countries. For example, you can buy Euros with US Dollars, or you can sell Japanese Yen for Canadian Dollars. It is as basic as trading from one currency to another.
Actually, forex trading is very similar to the stock market. To win every battle, you must have enough market knowledge. But the difference between forex trading and the stock market is that forex trading will not lose more than your initial investment.
How To Make You More Cautious On Forex Trading? Below I will share my opinion on it:
- Trading Currencies – Forex trading is always done in currency pairs. For example, imagine that the Euro to US Dollar exchange rate on a certain day is 1.1999, with the number being called the foreign exchange rate. If you had bought 1,000 Euros on that date, you would have paid US$1,199.00. Some time later, the forex rate is 1.2222, the euro has increased in value with respect to the US dollar. If you sell it now, you will make a profit of USD23.00. This is the power of forex trading. Of course, if you are not careful about the market then you will have a chance to lose money.
- Market Alerts – Before you want to start investing in forex trading, you should give yourself enough knowledge of the market. This information can be obtained through newspapers, business shows, press conferences, business magazines, etc. In fact the currency of a country is affected by major events like launching of mega projects, inflation, fluctuations in prices of commodities etc. Because, the safest way to invest after any news announcement. But always higher risk will bring higher profit. Hence, investing on forex requires a keen eye on the market.
- Volatility and Risk – Volatility is the degree to which a currency’s price fluctuates within a given period of time. For example, in an active global trading day (24 hours), the EUR/USD exchange rate can change its value 18,000 times in a matter of seconds, flying 100-200 pips if the market gets wind of an important event. Given these, high volatility will create a large volatility in the currency; Profit and loss all happen in a glance.
- Frequency of trading – Most investors find that the more actively they engage in Forex trading, the more market awareness they can gain and be able to earn decent profits. Actually, this is not true. Every year, there will be great transactions in the forex trading market for some time. As a prudent investor, you should invest at the right time.
- NEWS MONITORING – Stay informed with news from around the world. Read all headlines, especially those that are directly related to Forex. Examine the effect of such news on the chart, if any. Also, read daily/weekly outlooks posted on forex or general financial sites. Many include alerts for upcoming reports and events such as market indicators and interest rate decisions. In addition, you should pay attention to forecasts, some of which are available for free. Keep in mind that forecasts and predictions are made by people, none of which can guarantee future events will happen. Don’t forget about forex glossaries, which are offered for free on many platforms. A given term may have different meanings as it relates to the terminology used by foreign exchange and forex market participants.
- Investor’s Self Discipline – Always remind yourself that you should invest only when you are confident. Don’t listen to rumours. It always happens that people lose money because of their greed and listen to other people’s ‘suggestions’ without detailed study.
Finally, I would like to inform all of you about the potential financial risks of engaging in Forex trading. Before deciding to undertake such transactions with a Forex trading platform, a User should carefully evaluate whether your financial position is suitable for such transactions. Trading forex can result in substantial or complete loss of money and therefore should only be done with risk capital.
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