Forex trading does not rely on luck. Serious investors research market conditions before placing orders to become more successful. Investors are always looking for the best opportunities, and one of today’s biggest online trading forums is the foreign exchange, or forex market. Several trillion dollars’ worth of transactions are completed every day in over-the-counter trades, and it is the most liquid investment vehicle which individual investors can access.
With all of these benefits, many people are concerned that there is a hidden catch and wonder whether forex trading is really just gambling. However, unlike investment vehicles like binary options, there is an established correlation between market news and currency prices. Therefore, those who are willing to do the research necessary to find the right assets and the best times to trade will soon see that this financial activity is not merely a matter of luck.
FX trading involves buying and selling a pair of currencies at the same time. Traders want to buy the currency whose price they feel will go up and sell the currency whose price they feel will go down. Your profit is measured by how much the currency that you felt would perform better increased in value. If your selected currency depreciated, then you lose money.
Because of the large number of currency pairs that are available, it is easy to find an option that represents your preferred level of risk based your knowledge of the market. The most popular currencies are the U.S. dollar, the Canadian dollar, the Australian dollar, the British pound, the euro, the New Zealand dollar, the Swiss Franc, and the Japanese Yen. Most actively traded currency pairs are based on at least one of these currencies, with almost 85% of the transactions involving the U.S. dollar.
Because each of the most popular Forex currencies are associated with a different region, it is not hard to look for news related to the underlying region and then project whether this will cause the country’s economy and monetary units to go up in value. This is one reason why traders tend to rely on reports released by governments related to unemployment, GDP, and consumer confidence, in order to determine the strength of the USD, CAD, JPY, etc., prior to placing a trade. This type of research is called fundamentals analysis.
After several years, investors realized that the markets were often cyclical, with periods of highs and lows that could be determined by carefully examining previous trends. By looking for patterns in charts and then finding how those configurations related to price movements, traders eventually created indicators that can flag potential shifts. This trading is referred to as technical analysis, and often relies on things like candlesticks, bar graphs, and oscillators, which tell when is a good time to buy or sell a specific pair.
Learning how to use both fundamental and technical analysis can greatly improve your success rate. Most traders profit the most when they stick with a relatively small number of Forex pairs, and keep up to date on building a diverse portfolio. Now is a great time to explore the investment opportunities offered by a respected platform such as that provided by our Platform. For more information on pairs trading, make sure to visit our webpage.