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Forex Trading Is
Foreign exchange (FX or forex) trading is when you buy and sell foreign currencies in order to try to make a profit. Foreign exchange trading attempts to make a profit by predicting one currency or rate relative to another.FX trading is usually done through 'margin trading'. A small collateral deposit worth a percentage of the total trade value is required to trade. Trading in international currencies requires a significant amount of knowledge, research and monitoring.
How Forex Works
Forex trading is similar to buying and selling other types of securities, such as stocks. The main difference is that forex trading is done in pairs, such as the euro/US dollar (EUR/USD) or JPY/GBP (Japanese yen/British pound). When you trade forex, you are selling one currency and buying another. You will profit if the currency you bought moves up against the currency you sold.For example, the exchange rate between the euro and the US dollar is 1.40 to 1. If you buy 1,000 euros, you will pay $1,400 US dollars. If the exchange rate later moves to 1.50 to 1, you can sell the euros for $1,500, making a profit of $100.Not Looking for Profit, This is the Main Task of Forex Traders
5 Reasons To Choose Forex Trading
Increase forex profits, before that know the reasons why you should start trading so that you are more confident to start. Read below: 1. You Can Trade Anytime The Forex market is open every day and gives you the freedom to trade whenever you want to trade. This makes it easy and gives great flexibility to traders. You can trade part-time, but because there is no market opening or market closing timing, the potential profit opportunity is 24 hours per day or 5 days per week (Monday-Friday). Then, trading volume varies depending on the number of overlapping sessions, and is often reduced when there are bank holidays in major sessions such as on Wall Street. 2. Low Transaction Costs Transaction costs or retail admin (bid/ask spread) are generally less than 0.1% under normal market conditions. For larger transactions, the spread can reach values as low as 0.07%. Of course, this depends on your leverage, and all of that will be explained later.3. You Can Face a High-Risk Environment The forex market is a volatile market at any time, so you must be able to tolerate the level of risk that will occur. In protecting trading capital well, it is important to manage risk and capital well in accordance with existing rules. For example, you are required to determine the stop-loss and take-profit levels before you enter the market. Using this method you can estimate how much you will lose and also how much you can expect on the position you take. This is called the reward or risk ratio. 4. You Like Technical or Fundamental Analysis Forex trading relies on your ability in technical analysis, so if you have a fairly good knowledge of charts, technical patterns, price studies and others, then forex trading is a field that suits you. When you do technical analysis, you will likely need an economic calendar such as the Global Economic Calendar and the US Market Economic Calendar. The effects of forex news also have a strong influence on the Forex Trading market, because currencies are very responsive to conditions and also macro, micro economic news, and the political situation of a country. Therefore, as a forex trader you must review the economic calendar to see the fundamentals in determining the price of currency pairs that can penetrate high volatility levels. 5. You Want to Take Advantage of a Growing Market With High Liquidity, Volatility, and Leverage The Forex market has been a rapidly growing market for the past 20 years. The volume of this high trade increases the market liquidity rate, which means it is easy and fast for a trader to enter a trade and also reduces the potential risk of price manipulation by others. Forex trading also uses leverage which can magnify your profits (and your losses) in a very short time. This leverage allows you to manage more money than you currently have in your trading account for higher profit potential.Forex Trading Recipe for Continuous Surplus, Do You Know It?
Risks of Playing Forex
You should also pay attention to the risks of forex trading, read below the risks in playing forex trading:Settlement Risk
If you trade with an overseas broker or use a platform located overseas, there will be settlement risk, this is due to the time zone differences in different continents. As a result, currencies can be traded at different prices at different times during the trading day. The Australian and New Zealand dollars are credited first, then the Japanese yen, followed by European currencies and ending with the US dollar. Therefore, payment can be made to the party that is about to declare bankruptcy or is declared bankrupt, before the party makes its own payment. In assessing credit risk, traders must consider not only the market value of their currency portfolio, but also the potential exposure of that portfolio. Potential exposure can be determined through a probability analysis over time to maturity of outstanding positions. The computerized systems available today are very useful in implementing credit risk policies. Credit lines are easy to monitor. In addition, the matching system introduced in foreign exchange since April 1993, is also used by traders for credit policy implementation. Traders enter the total credit line for a particular counterparty. During the trading session, the credit line is adjusted automatically. If the line is fully utilized, the system will prevent the trader from dealing further with that counterparty. After maturity, the credit limit returns to its original level.Transaction risk
Transaction risk is the risk that a company faces when making financial transactions between jurisdictions. The risk is the change in exchange rates before the transaction is settled. Essentially, the time delay between the transaction and settlement is a source of transaction risk. Transaction risk can be mitigated by using forward contracts and options. For example, a Canadian company operating in China wants to transfer CNY600 of revenue to its account in Canada. If the exchange rate at the time of the transaction is CAD 1 for CNY 6, and then the exchange rate drops to CAD 1 for CNY 7 before settlement, the expected revenue of CAD100 (CNY600/6) will replace CAD86 (CNY600/7).Translation risks
Translation risk, also known as translation exposure, refers to the risk faced by a company that is headquartered domestically but does business in a foreign jurisdiction, and where the company’s financial performance is expressed in its domestic currency. Translation risk is higher when a company holds a significant portion of its assets, liabilities, or equity in a foreign currency. For example, a parent company that reports in Canadian dollars but oversees a subsidiary based in China faces translation risk, because the subsidiary’s financial performance – which is in Chinese yuan – is translated into Canadian dollars for reporting purposes.6 Ways to Play Forex Trading to be Successful
Understand how to play forex trading below so that your trading is successful: 1. Have Realistic Expectations The first way to play trading is to not have expectations that are too high. To be successful in forex trading, it is important to have realistic expectations. Many new traders enter the market with unrealistic expectations of quick and easy profits. However, the reality is that forex trading is a complex and challenging endeavor. While it is possible to make money in the market, it takes time, effort, and education to achieve consistent success. For this reason, new traders should approach the market with realistic expectations and a willingness to learn.2. Invest Small Capital and Increase Gradually
Traders should start with small positions and only increase the size of existing positions, as the market moves in the right direction. You can always increase your position, but you must first make sure that you are in a certain amount of profit before you increase the risk. Secondly, you should change your stop loss so that you can exit the position at least evenly. Some traders prefer to use the Set And Forget method, which has its advantages and disadvantages, but if you prefer to manage your positions, you should work with these principles.3. Control your emotions
Control your emotions. Greed, fear, and other emotions can lead to impulsive decisions that can cost you money. When trading forex, it is important to stay calm and rational. The fear of losing a trade often drives forex traders to jump into a trade without prior validation. Then, sometimes, making a trade in haste can result in losses if it turns out to be against you.4. Accept the Loss
The next way to play forex trading is to learn to accept your defeats, understand that it is part of the “game”. Try to learn from your mistakes, and understand how you can act differently next time according to your plan. The ability to learn from losses improves you as a trader and will reward you in the future.5. Develop a trading plan
A trading plan should outline your investment goals, risk tolerance, and strategies to achieve those goals. Without a plan, it will be difficult to stay disciplined and stick to your chosen strategy. Whether you are a new trader or someone who has been trading the markets for years, you need a trading plan that should guide you in everything you do.6. Develop Your Forex Trading Knowledge!
In addition to developing a trading plan, you also need to develop your knowledge about forex trading. You can visit the GIC website to read journals about Trading Fores. Then you can watch the GIC Academy youtube video here, learn forex that relaxed! Don't forget to register immediately so you can start trading now! That's all an explanation of how to play forex trading with various tips, hopefully it can help you in starting trading!
