Forex is a virtual currency trading platform on a global scale. Many people are considering starting to play on the Forex market, especially during economic cataclysms. And, if such a decision is made, it is first necessary to master at least the basic principles of trading activity.
Forex and Simple Trading: Opening Deals
What are the types of transactions in Forex? Which ones can be concluded for a beginner, and which ones should you wait for now?
- Spot. A quick deal, based on which the currency is transferred to the buyer immediately. The simplest option, suitable for everyone, is comparable to buying and selling a hot dog on the street.
- Futures. By concluding such a transaction, you undertake to buy or sell the currency in the future at a predetermined price. This allows you to fix a favorable price for yourself if, of course, you correctly predicted future changes in the market. This type of transaction already requires mastering technical and fundamental analysis methods. An essential feature of a futures contract is that it can be resold anytime. For example, you understand that you are not ready to fulfill the terms of the deal, but you can find someone who is ready and sell him a contract. However, this will also require some training and experience.
- Option. By concluding such a contract, you acquire the right (but not the obligation) to sell or buy currency in the future (the term can be set from one day to four weeks) at a given price. An option usually has less risk than a future since you spend money on a contract, and whether you will exercise your right to buy and sell currency at a specified time at a specified price is up to you. If you think you have more or less mastered the market, you can try to conclude such a deal, but only at a small contract price.
- Forward. This is the same deal for the future as futures, with obligations on the currency price and terms, but more rigid in that the forward contract cannot be sold. Forward – for market sharks.
What Does a Trader Need to Know?
All people who successfully play Forex start with an essential minimum of knowledge.
- Basic trading strategies. Buy currency or sell? When to buy, when to sell, and how much? When to stop and exit the market? It’s all about the strategy you choose. But to choose the right one, you need to know what.
- Main types of transactions. The words CFD, “option”, “spot”, “forward,” and “future” should not lead you into a stupor. Particular terminology as you master the profession of “trader” will gradually become commonplace for you.
- Computer trading platforms. In what programs will you be comfortable working and why? Which are the most popular? There are about ten of the most popular trading platforms and client applications, and the rest are “variations on a theme”.
- Technical analysis. This is operational market research using graphs built on accurate digital data. For technical analysis, many computer programs have been developed, built on the methods of predominantly visual recognition of the price trend, and any trading platform provides them. Technical analysis answers the question “what is happening at a particular moment in time?” and helps to predict “what might happen roughly?”.
- Fundamental analysis. Technical analysis data is rather superficial, although by relying on them for a short time, you can successfully trade. However, without considering the global economic factors that affect the market, you can one day sit in a puddle. Fundamental analysis answers the question “why is something happening at a particular moment?” and helps to answer the question “what can happen more accurately?”. Fundamental analysis is used for long-term trading and adjusting current trading tactics. Its study usually involves obtaining a higher economic education.
Choosing a Forex Trading Strategy: Many Options
The whole mass of strategies is divided into short-term (valid for a maximum of one day), medium-term (up to a week or a month), and long-term (several months). Choosing the type of strategy and any specific option to stick to it is possible only based on personal experience. However, personal experience is always trial and error. To prevent mistakes from becoming fatal, you can try out a few simple strategies that, as a rule, are suitable for beginners. What are Forex’s methods?
- “London Explosion”. Although the OTC Forex market operates around the clock, it is helpful to know the opening hours of the world’s currency exchanges. So, the London Currency Technically, you can track where the exchange rate moves in the first hours of its operation. As a rule, the trend persists throughout the day. “London explosion” refers to short-term or intraday strategies.
- “Moving Averages”. When implementing this strategy, the average value for the period you have chosen, for example, for 21 days, is superimposed on the chart of fluctuations in the rates of your selected currency. This value is taken as the reference scale. Then you monitor price fluctuations around this value, and when the market turns up, you start buying the currency, and when it falls, you start selling. This strategy sometimes works well in the medium term.
- “Three Indians”, or “Three Candles”. The strategy is based on the principle “Where there are two Indians, there is a third.” Its essence boils down to the fact that if you see two extremums of the same direction on a steadily growing or falling chart, you can catch the third one. This strategy plays best as a long-term strategy, although it can be used in a shorter time frame as the trick is to track the extremes.
As a general rule, the longer your strategy, the less risk you take because you filter out market noise. But here, there is another chance, and despite the heat of change and jumping off the chosen course, one thing can be understood Forex Trading is the safest place where both beginners and those with experience can work. And in combination with strategies that are easy to change, you can achieve excellent results and get high profits without worrying about your future!
Last but not least, to ensure you remain cybersafe and avoid possible trading scams, only trade with a reputable and viable forex broker with proven track record of strong financial results.
