One of the most important things trading in forex markets requires is your time for proper analysis of current market conditions and other global economic factors.
For the beginners, it might take some time to understand the technical charts and patterns, market fluctuations, fundamentals, and how to get started and what forex strategies to employ.
So to help you understand better, below are 7 important things to consider before trading in forex market:
Study the market and currency pairs you wish to trade in
Examining the currency pairs is very important as every pair behaves differently and one must be aware of the concerned markets and any important development happening in the respective countries. Top 5 currency pairs are:
Try your hands on dummy trading first
In order to learn forex trading, you must practice by putting your trading plan to test in actual market conditions without putting real money at risk. After you understand how the market works you can start trading for real.
Understand the importance of Bid-ask Spread
One of the important factors to be considered is bid-ask spread, basically it is the difference between the lowest selling price and highest buying price. A higher spread indicates lower liquidity and lower spread indicates higher liquidity, therefore you must consider the spread and plan your forex trades likewise.
To what extent leverage is offered
Leverage is something wherein your broker allows you to trade in larger volumes with less amount of capital thus, trade size is magnified without investing a lot of money. General leverage would equal 100:1.
Devise practical forex trading strategies
Keep yourself well updated with current forex market news and upcoming trends to formulate forex trading strategies to meet your trading objectives. Some of the popular strategies are: Candlestick strategy, profit parabolic, strategies based on Fibonacci Retracements and technical indicators to name a few.
A tip: Apply your strategies in a demo account first to make sure it is working as expected and will build confidence.
Make your own trading plan
Always make plans after extensive forex market analysis to devise your trading objectives in a well informed manner, having a plan keeps you focused towards your goal while making any kind of trading activity (buy or sell). Keep an eye on any sign of positive trading signals to grab the opportunity the forex market has.
Keep a check on your emotions
Make sure you don’t let your emotions get in the way of your trading plans. The forex market is extremely volatile and one can easily get carried away by the emotions, but despite many ups and downs in the prices, one must stick to its plan.
Thus, keeping these seven things in mind before starting forex trading you can begin your journey in a positive manner. Make sure you keep regular checks on your trade by the means of forex market news as the forex market is highly volatile. Meta trader is a good platform to start with.