Forex is something that most of us have heard about. It stands for the foreign currency exchange. It is the place where all the currencies of the world trade. The foreign currency exchange market is the most liquid of all the markets with a staggering $5 trillion being traded every day. Traders bet on the forex market, as they would the stock market, by buying a currency when it is valued at a lower rate to another currency, and waiting for the exchange rate to become favorable to sell. For example, if a person were to buy USD with Euros when it is $0.90 to the Euro and sell it when it is $0.94, they would have an increased amount of Euros. It may not seem like much but when it is traded in volumes, it quickly adds up.
In this article, we will look at tips for improving your cash flow with forex.
Finding pairs of currencies to trade
Currencies trade in pairs, such as EUR/USD. A starting tip when trading on the money market is to trade during peak times, even though it trades 24 hours a day during the week. This will ensure liquidity of your assets, ensuring a favorable selling position. On an average day, you can expect to trade in the morning or in the afternoon, depending on your currency pair.
For beginners, experts advise to choose the USD with another currency as a starting platform. Even seasoned forex traders still prefer the USD with another currency pairing. The vast majority of currency exchange happens in the following pairs:
For those with a little more experience in the market, the following offers highly-liquid pairs to trade:
If you lack the free time to trade during peak times, the USD/EUR pair is advised as it always trades in high volumes.
Find the right company to trade through
There is a near endless list of trading firms that you can use to begin your forex career. CMC Markets is one of the leading firms with an up-to-date news feed and further services to help you along the way. The key aspects of a company to look for are their fee structures, customer responsiveness and their reputation. Choose a website that will not overcharge you with the amounts you are looking to trade. Minutes can be costly, so having a responsive support team is vital.
Consider an automated system
As a part-time trader, it may be a good investment to get an automated trading system to help buy and sell throughout the trading peak times. The software should monitor the market in real time and be able to recognize profitable spreads, automatically placing orders. While these systems are not guaranteed by any means, it can be a way for some people with limited time to get involved with forex. If you are looking to get comfortable with the market before making individual trades of your own, the software can also be beneficial. You can watch how it makes trades on your behalf, learning what you need to do.
Discipline and dispassion
If you are not using an automated system, discipline and dispassion are a crucial part of your success. As a new trader, experts advise to take advantage of profits as they happen instead of trying to anticipate spreads for big profits. To achieve this, self-discipline is required. Trends can cause change in the money markets that can instantly revert due to some external event. A part-time trader should limit their trades to on-the-spot profits. Furthermore, new traders should keep away from making big trades – smaller trades will serve them best. Suffering a large loss early in your forex career can be a major setback.
For those just starting out at a forex trader and for those that have experience in the field, every day is a chance to learn. With an open mind, persistence and a sense of dispassion, allowing you to stick with your strategies, increasing your income from forex is not only possible but almost inevitable. Like all markets in the world, nothing is guaranteed and losses will surely occur, but you can make a healthy career out of it.