Exchanges and Stock Markets are becoming popular ways to invest and earn money not only for financial experts. According to the latest statistics, micro- and nano-transactions made by ordinary people with the help of brokerage companies occupy an increasingly large niche of trading transactions in the most popular and stable Forex Market. Innovative mobile FX platforms provide mass users with great opportunities for both long-term investing and stable earnings on speculative trading. Reliable Forex Broker JM Company regularly provides its clients with relevant reports on the most profitable currency pairs or changes in key market fluctuation indicators. But before immersing yourself in trading currencies, metals, or commodities, it is important to understand the basic characteristics of FOREX exchanges.
Basic Concepts that Every Beginner Forex Trader Needs to Know
There are several things without which it would be irresponsible and most probably loss-making to start trading on FX exchanges. The work of the exchange market is based on such concepts:
- Currency pair – your main trading instrument, expressing the value of one currency in another (e.g. EUR/USD). It consists of a first (base) and a second (quoted) currency. The difference between buying (Ask) and selling (Bid) is called the Spread. And the standard volume of a transaction is a Lot.
- To understand the basis of pricing processes and the formation of transactions, there are such terms as Leverage (the amount of borrowed funds that are available for trading) and Margin (collateral that is required to open deals).
- The general types of orders are Market Order (immediate buying at the current price), Limit Order (buying or selling when a certain price is reached), Stop-Loss (automatic deal closing at a given price level), Take-Profit (also automatic deal closing, but when a given size of income is reached).
Separately it is worth looking at such a term as Volatility because thanks to it it is possible to see the level of profitability or the degree of risk in time. Volatility in Forex is the rate of price jumps of an asset in the market for a specific period.
Main FX Indicators and Their Role in Analytical Projections
It is hard to imagine a successful financial expert who would not have deep analytical skills. For effective commerce, traders have to quickly and qualitatively master the basics of fundamental and technical analysis of data and graphs of price changes for currencies, metals, or other assets. An additional task is to learn how to combine them in a balanced way to rely on key indicators to predict market behavior and calculate your actions several steps ahead.
New generation forex platforms provide users with a wide range of both simple and combined indicators and metrics. They can show both the current situation (doping indicators) and those focused on predicting changes in asset prices (e.g. RSI, CCI and others).
Briefly categorize them according to their functions as follows:
- Trend indicators: identify the direction of market movement (Moving Average, MACD).
- Oscillators: detect overbought/oversold (RSI, Stochastic).
- Volume indicators: analyze trading size to confirm trends (OBV, Volume).
- Volatility indicators: analyze market swings (Bollinger Bands, ATR).
- Support and resistance indicators: mark important levels on the chart (Pivot Points, Fibonacci Levels).
There may be different opinions in the traders’ community about the interpretation of the results of analyzing these indicators. But with any technique and approach, they are used further to configure algorithmic processes of opening and closing deals. And also for creating and testing individual trading strategies.
What are Trading Strategies and How to Use Them Correctly
For Forex trading strategies are pre-formulated and detailed plans for making deals, on the basis of which decisions on buying or selling assets are made. The foundation for profitable strategies becomes extensive market analysis, goals and often personal professional financial experience of the trader.
There are technical strategies that are based only on the analysis of indicators. But an important specific feature of Forex is rightly considered to be the rapid market response to geopolitical, micro- and macroeconomic activities. That is why news and complex combined technical-trend trading strategies are the most effective.
If we are talking about long-term investment in capital preservation, then the strategies of trading stable assets, such as precious metals or stable world currencies, will be used. And if the goal is to make money quickly by speculating on prices, then scalping and swing trading methods will be the most suitable.
Risk Management as Part of a Successful Trading Process
Risk control techniques cannot be undervalued when entering the FX trading industry. The psychology of risk management takes a big place in the training process for financial analysts and traders all over the world. It is viewed as the basis for using special built-in tools for limiting trades and setting up automatic sells and buys when there are huge fluctuations in the asset value. This helps to control capital on the basis of risk/profit ratio calculations.
But a typical mistake of beginners is emotional instability in stressful situations. Along with the irrational use of lending opportunities provided by brokers, this is a dangerous factor that exposes even the most successful traders to extra risks. Studying all facets of the skill of proficiency of successful Forex trading may take a lot of time, but will definitely bring the expected benefits.
Conclusions
Researching the topic of effective and highly profitable trading on international Forex stocks, one cannot ignore the global importance of a complex view and a balanced attitude to mastering the theoretical foundations of financial processes. Trading currencies and other valuable assets is a highly profitable sector, but it requires traders’ deep analytical skills, perfect knowledge and bravery to try new unique strategies and techniques in practice. The study of key indicators and in-depth training in automatic trading with a strong focus on risk control is often the right way to master FX trading.
