Many beginners in the Forex industry lose their capital because of not understanding the mechanisms of the price’s flow properly. These people place their orders randomly at their will without even prior analysis. They don’t understand the importance of money management techniques, strategy indicators, and so on.
All these issues arise because of emotions. Either these investors become too greedy, or they become too scared. Greedy ones quickly jump into trades without adopting any money management plans. They only want to get riches within a very short time. Here, we will provide our readers with all the information that he needs to start trading safely. After reading this article, he will also realize why he should follow the rules. But those who intend to trade bonds, must know about the optimum trading condition. Visit here and know the features of Saxo so that you can trade in high end environment.
Basic issues that every Forex beginner should know
Timeframe indicates the duration or period a trader has to retain the currency. He may have to hold it either for a longer time (ranging from a few days to weeks) or a shorter time (ranging from a few seconds to minutes). The timeframe is essential for every beginner to know because his preference will identify the other issues and trading strategies.
· Trading style
Every newbie should be concerned about is the trading style. There are various styles for Forex investors, which are – position trade, swing trade, day trading, and scalping. These are the four major strategies. Each of these styles has different advantages and disadvantages.
- Position: It is a long-term business style, and an individual may have to wait for either several days or weeks. He needs a fundamental analysis to predict the upcoming flow. This is a higher timeframe (long-term trade).
- Swing: It is actually a medium-term business strategy, in which the individual needs to hold his financial instrument either for a few days. He may use both fundamental and technical analysis to identify a potential opportunity.
- Day trading: It is a short-term strategy in which the individual has to retain the asset for a shorter duration. But he must execute the trade within the day.
- Scalping: It is also a short-term style, but the duration ranges from a few seconds to 5 minutes. It is regarded as the riskiest one. You have to be a technical analyst to be a scalper.
· Method of Forex analysis
There are two different methods to analyze the Forex market –
- Fundamental analysis: This investigation deals with the analysis of the economic performance of a country. A fundamental analyst must observe the economic calendar of a state. Some of the fundamental indicators are GDPs, interest rates, inflation, unemployment rate, economic recession, consumer price index, trade war, and so on.
- Technical analysis: This study deals with the analysis of only the chart. This investigation helps an investor to figure out an excellent point to enter or exit the trade. There are several technical indicators that carefully analyzes the support and resistance level to aid an individual.
· Forex money management
Money or risk management is crucial in the FX industry. It can minimize your losses during a huge market failure. To overcome the situation, you need to adopt money management techniques. Many Singaporean traders lose their careers because of neglecting this essential term. There are different ways of risk management.
- Risk: reward ratio: Evaluate the ratio before entering the trading business. The net value should always be less than 1. The lesser value indicates that the investor has more opportunity to earn profits.
- Stop-loss limit: This is another essential thing that the novices should always include. Setting a predetermined value can help their deals to be closed automatically during a downtrend.
These are the basic issues about the CFD industry, and every novice should read this article carefully to develop his knowledge.