Here's Where You Start Your Forex Journey

This a continuation of the Forex article series that I started here.

You can’t be a Forex expert if you don’t know the market that comprises the whole scope of it. As such, it would be ideal to get to know the types of markets within the realm of currency exchange. As the Forex market thrives and grows, it is affected by a lot of factors. As you go on with this journey, here are things that you need to acknowledge and be aware of:

There are 2 types of Forex markets

Trending market – is a type of market that moves in only a single direction. By looking at the direction of this market, it has 2 subcategories: uptrending market and downtrending market. Like its namesake, an uptrending market moves in an upward direction. Conversely, the downtrending market is just the exact opposite. The market naturally moves in either highs or lows. So in an uptrend, there will be higher highs and higher lows. In contrast, a downtrend also behaves in lower highs and lower lows.

Ranging market – is a type that moves in a horizontal direction only. Thus, it can be referred to as a “neutral” kind of market. Some traders often call them a market that is “trapped between 2 worlds.” The market directions in Forex are often categorized as bullish, which is when it strongly moves upward; bearish, when it becomes sluggish or is moving downward, and neutral when it moves without any significant increase or decrease. The ranging market is classified as such.

There are various keyplayers within Forex

In addition to the advancements in globalization and technological development, the decision-making habits of the traders within Forex highly influence the rise and fall of the market. How this happens can be very evident by the fact that people spend a lot of time every day using various electronic gadgets in dealing with their daily lives. Because such devices allow a trader to monitor prices, make purchases, and pay for their bills via online means, the foreign exchange market also benefits from their actions.

In a much deeper sense, macroeconomics also affects currency exchange because of capital markets, geopolitical conditions, and economic releases. Capital markets are the most obvious indicators of an economy’s health. One solid example of this is when a heated rally or incident happens in a certain country, it could be an indicator that the economy there is at risk, or it could go down significantly in the next weeks or months.

Geopolitical conditions could also affect currency exchange because they can change the perceived value of a country’s currency. The most proficient Forex traders constantly monitor politically related issues all over the world to have a clearer set of decisions. For instance, elections are among the most notable events that can greatly affect the market's direction, especially if it’s a presidential election that takes place in a first-world country such as the United States.

Oftentimes, currency increases will often be more favorable towards countries that show signs of economic growth. So when huge events in politics show signs of substantial growth for that country’s economy, the investors would naturally take advantage of such a phenomenon.

The lessons and tasks that lie ahead of you as a Forex enthusiast will not always be pleasurable. Along the way, you will experience a lot of constraints which are often psychological in nature.

You have to be good with analysis

As mentioned earlier, you need to also know about the current scenarios that take place in a certain country if you want to make speculations about the direction of that country’s currency. You can’t just put your money on your chosen online platform or broker and expect it to grow while just doing nothing.

Making money with Forex is not some form of “easy-money journey.” You need to conduct some analysis by making observations about the current economy of a country, its political situations, some calamities that might be happening there, and what are the possible outcomes when all of those factors are put together.

You may also experience some losses and downturns. Although currency trading is mainly about savings and making interests with your personal investments, it is also a form of business. Of course, such an undertaking is too burdensome even for the most experienced currency traders.

From a simplistic perspective though, the best course of action would be to look at graphical charts in which the next movement of currencies can be visibly perceived, or possibly predicted. Understanding these illustrations called “candlestick charts” is also a major skill that you need to attain – it can surely make or break your overall trading endeavor.

You may just use a small capital

The really good thing about Forex trading is that you don’t need to have a high initial capital for it. Depending on the broker you may choose, you could have a starting investment of just a hundred dollars. There are even some online platforms that allow you to use a free amount of say, 30 dollars. If your first trading act becomes successful, you will pay for that amount. But if you lose, they will just give it away for free.

If you think $100 is still too big, there are other brokers that will just accept smaller capitals – there are those who accept $50 or even lower. If that’s still not affordable for you, how about having no capital at all? Most trading platforms today feature a “practice account” in which you can do some practice trading.

In there, you will be given some practice money that you can use for your first trading acts. The cool thing about it is that the experience looks exactly like a real one. After you’ve accumulated enough knowledge already, you may then use some real money so you may experience real trading. It is the best way to condition yourself into becoming a profitable trader in the next few days.

Facts like that make Forex sound so easy. In reality, though it’s not really as simple as that. To be really good with it, you need to attain the right mindset, the right attitude, and technical know-how. Success in any money-making endeavor doesn’t happen overnight. It takes time to learn the appropriate knowledge and learn from your own mistakes as well.