Trading on the currency exchange is one of the ways to actively invest. The user not only buys a block of shares and expects a good profit, but additionally earns from fluctuations in exchange rates. Most often, one trades currency pairs, stocks, resources, and futures.
How to trade at the Forex exchange
There are different attitudes to exchange trading. Some people think that it is a new type of fraud, and some people think that it is easy and fast to make money on the exchange. Both opinions are wrong. Successful traders really do exist, and trading brings them a good profit. But there are a lot of cheaters in this sphere. The real currency trading at the exchange market is a profession, just like the others. To increase the value of investments rather than to lose them, it is necessary to spend a lot of time, study all the strategies, apply them, study the behavior of currencies, act according to pre-determined plan.
Tips for Beginners
A beginner trader, who set the goal to earn on the currency exchange, should pay attention to several pieces of advice:
- Take stock exchange courses – in order to have success, it is necessary to study the field thoroughly. To be successful in the foreign exchange market, initial knowledge and skills will be required. Many companies now offer online training courses.
- Use a demo account – working with a demo account is the same as real trading. The only difference is that the trader trades with virtual money. It is a free way of trading, suitable for beginners. They can try out different ways of trading without risking their money.
- Choose a reliable company – when a trader starts trading with real money, he has to choose a company through which to trade. The company’s reputation, reliability, the duration of its work, and the availability of reviews are taken into consideration.
- It is necessary to read the original contract, to get acquainted with the commissions, the terms and conditions.
- Observe the rules of risk-management. One should not lose all the money on the foreign exchange market, it is necessary to apply the basic rules of capital management. Making a transaction you must spend a certain part of your capital. This will prevent substantial losses. It is recommended to invest funds in several instruments at once. To avoid serious losses and to make trading disciplined, it is recommended to set clear limits of losses and profits.
- You should trade with those funds that you do not feel sorry for.
Peculiarities of currency exchanges – how a deal is made, who can trade
The essence of the transaction is simple: a person buys a particular currency, paying for it with another. After a while, he sells that currency, but at a different price. Everyone can trade on the currency exchange: individuals, legal entities, residents, non-residents of the country. But to start trading, it is recommended to get a broker. This is a company that has a license and can trade currencies. It charges a certain commission for its services.
The currency exchange has the following features:
- There is no average profit value.
- There are a number of factors that affect the rate – inflation and its rate, growth of national income, monetary policy, the strength of supply and demand, unforeseen events (war, man-made disaster).
- Trading currency has large volumes, and thus an enviable liquidity.
The currency exchange works 5 days a week, and trading is done around the clock. Its advantage lies in the peculiarities of price fluctuations. While shares can rise and fall in an instant, currencies move more stably. It does not make sharp jumps, and even if it happens, the rate often comes back to the previous level. Currency exchange offers its visitors the leverage. This is the ratio of the deal volume, i.e. the loan capital to the trader’s personal funds.
Common Mistakes of Newbies
Beginning to trade at the currency exchange, newbies immediately lose their investments. It happens due to various reasons. It may be the lack of money management, i.e. the trader uses the whole deposit during the first deal. The first rule of risk management – the loss on transaction cannot exceed 3-5% of the entire deposit. With minimal deposit (up to $200) it is difficult to fit in risk management. The trader will have to be satisfied with a modest income. A reasonable amount suitable for trading is $1,000.
The problem of many traders is excessive emotionality. If the user has made a profit from several trades, he begins to create the next ones thoughtlessly. Many beginners lose money because they apply untested strategies or use other people’s signals, robots. To get regular profits, it is recommended not to stop at one strategy.