Financial stability is one of the major aspects of comfortable living, however, your savings can easily lose their value due to economic instabilities and continuously growing inflation.
One of the most workable solutions to protect assets and personal funds is financial investment, Forex in particular.
Forex is a globally accessible financial market of currency trade, which allows traders to put their savings into action and increase their value. What are the basic things to know about Forex and how to become a successful trader? Let’s follow the guide.
Forex, or foreign exchange, is a global foreign currency exchange market. As a rule, the exchange is performed for various reasons, like tourism, trade, and commerce. While the majority of us have participated in forex operations when traveling or ordering goods from other countries, the currency trade is still wrapped in mystery.
Forex market works non-stop during weekdays, closing down only for the weekend.
Forex is one of the best financial investments, as it helps to make money when the value of currencies fluctuates. While the majority will worry about losing their savings, the Forex traders will actually benefit from it (provided there is a profound knowledge of the process).
Forex is allowed in the majority of the countries, with just a few exceptions. You may wonder kenapa forex haram, if it is quite beneficial. Such a misconception is mainly related to religious restrictions, as trade is compared to betting. Apart from being completely different, Forex is also a highly regulated venture, as all the brokers need to undergo certification from internationally accepted regulatory bodies.
What are the Basic Terms of Forex to Operate With?
1. Currency Pair
All the forex operations are based on buying and selling currencies. The basic currency unit is called a currency pair, which has base and quote positions.
For instance, one of the most common Forex pairs is USD/EUR.
The USD is the base currency (usually, a domestic one), and the EUR is a quote currency, which represents the cost of one unit of the base currency.
The trader is supposed to predict the movement of currencies’ value against each other, selling or buying the pairs respectively. If the prediction comes true, the trader leaves with a profit, otherwise, loses the money.
2. Forex Trading Styles
There are four major trading styles: scalping, day trading, swing trading, and position trading. The major distinction between them is the timeframes of the trade.
Scalping – is one of the beginner styles; it is a short-term trade. The scalper keeps the position open only for seconds and minutes, making small and quick gains throughout the day. While separate profits may seem rather small, by the end of the day, the numbers will get significantly higher.
Scalpers usually work with major currencies, like EUR, USD, GBP, and JPY, due to their high liquidity and trading volume. Scalping is typically performed when the trading sessions overlap, as it is the busiest time, with high trading volume and volatility.
Although scalping involves fewer risks, it can be too intensive.
Day trading is a more relaxed approach and less intense; its timeframes are limited only by one day, thus, the trader enters and exits the positions on the very same day. The trade can be held for hours, therefore, such a style requires a more profound analysis of the market and constant monitoring of the situation.
The main profit is counted at the end of the day, depending on the number of trades.
Swing traders possess a great deal of knowledge regarding the forex market. It is a suitable form of trade for those who already feel comfortable in the forex environment, and possess a great deal of trading skills. Unlike scalpers and one-day traders, swing traders hold their position for days and weeks. As such an approach is easier in terms of timing, there is no need to constantly monitor the price charts. Such a style fits best the ones who are involves in a full-day job.
Position trading is a long-term trade, which is focused on gaining profits from big shifts in prices. The position can be held for months and years; yet the traders need to monitor the weekly and monthly situations, to identify the potential risks, and close the trade.
3. Forex Types of Analysis
1) Technical analysis involves constant research into the price charts to identify movement patterns and anticipate market fluctuations.
2) Fundamental analysis relies greatly on the trader’s global awareness, as apart from focusing on the forex functioning, the trader relies on the knowledge of geopolitical and economic situations on a global scale.
3) Sentiment is one of the ‘intuitive’ parts of analysis. It is important to take into account the opinions and ‘feelings’ of the traders regarding the currency movement. Although it is not the main approach, it complements the above-mentioned techniques.
Forex is the best protection for your funds, as it helps to keep up with an ever-increasing inflation and unstable economic situation. Forex is rarely about pure luck, it is mostly based on decent informational preparation, and constant analysis of the world’s events and practice. Forex market bears no rushing, therefore, take your time, learn all the approaches, and try your hand at implementing them using a demo account. Once you feel ready or trade real money, take one step at a time, and gradually grow your trading volumes and thus, the profits