Since you really want to be greatly successful in your dealings with currency exchange, you probably want to answer questions like:
How do the experts conduct their trading businesses?
What are their entrance and exit strategies?
How are they leveraging economic news and events?
How are they running their lives as they invest huge time and effort in their trading activities?
Those are questions that you really want clear answers for, so let’s tackle them here. Let’s get acquainted with crucial key points that truly define rich traders and poor traders. You can call them techniques or strategies, either way, is preferable. What matters is your absorption for each of them.
Understanding the Market’s Direction
It has been stated earlier in the discussion that becoming a successful Forex trader has something to do with understanding the international market flow. To achieve that, we can just stare at the 3 kinds of analysis that a Forex neophyte must just look into: fundamental, technical, and sentimental. What are they?
Fundamental analysis – This revolves around this simple idea: a bad economy means a decrease in currency value while a good economy is an increase in currency value. It would mean that you need to have some comprehension regarding a country’s government debt, inflation rate, employment status, and other similar stuff. It’s pretty heavy to grasp at first, but it’s something that you really should have some high consideration of.
Technical analysis – The easiest way to deal with that is understanding Forex charts, which is something that we will discuss in the next chapters. There are basically 4 factors that comprise technical analysis: price action, supports and resistances, trends, and indicators.
Price action is simply about the rise and fall of the prices that correspond to each currency. Supports and resistances on the other hand represent the low and high levels of a currency that it is able to reach overtime. Support gets manifested when a value drops to a point that should be the motivation for traders to buy some currency.
Trends will show the steady direction of a currency, often for prolonged periods. For instance, if a currency is going up steadily on its course, or if it drops in the same manner, they are called trends. Expert traders often use it to predict upcoming value changes within the Forex market.
Indicators are those points that tell exactly how high or how low a certain currency is. Seasoned traders consider them as tools that can help them with precise and specific trading decisions.
Sentimental Analysis – Are they things that can make you cry because of nostalgic past memories? No. they are actually sets of analyzed data regarding the positions of major players that participate within the Forex market. These are often the biggest banks and biggest business entities around the world. They are actually members of a huge group within the business world know as the Commitment of Traders
Understanding Pips
What are pips? To simply put it, we can just say that “pips” is the plural form of pip. I’m just humoring you, don’t get mad. As acronym that means “Percentage In Point,” They are actually the rise and fall of the equivalent value of a currency pair. For instance. If you hear a statement that from a Forex trader that goes “My pairing is up by 1 pip!” it means that his EUR/USD transaction becomes 1.1501 from 1.500.
Likewise, if you hear that trader say, “My pairing is down by a pip!” it means that his EUR/USD transaction becomes 1.1499. Counting pips is what determines your losses or winnings if you play the Game of Forex Thrones. The higher the pips are, the higher your income will be, the lower the pips go, the lower your profit will be. This is something that you should be good at if you wish to be truly profitable as a Forex trader.
Pips In Relevance To Lots
We talk about Lots in the previous paragraphs. Now let’s discuss them in relevance to Pips. We already understood that a Standard Lot is comprised of 100,000 units and has a volume of 1.00. Now that would give us a cost of Dollars per pip which is 10 Dollars. It means that it will be the multiplier that determines your profits or losses.
So if you have 100 Dollars it will be multiplied by 10, because it is the current price per pip.
So for instance, if the current Pip value moves to 20, then you’d have the total earnings of 200 Dollars. Likewise, if you lose, then you’d lose with the same amount, although actually, you just lose the original amount you staked during the initial trading process.
It goes to show that higher pips equate to higher wins, while it results as well in big losses too. Now if you’re a bit scared about it, you can always switch to a Mini Lot, or to make it less scary, you can also choose Micro Lot, which is way smaller.
A mini lot has the equivalent of 1 Dollar which will give you a profit of 20 Dollars. A smaller win, but a smaller loss too. Micro Lot is 10 times smaller, which again, results in a much smaller win, and a much smaller loss. The math is pretty easy to grasp, right?
Choosing The Right Broker
Whenever you engage in any money-trading transaction in Forex, you need some kind of middle man. Not exactly a man, but an online business entity that will facilitate the transaction for you: From you Dollar to Euro, from Swiss Franc to Pound, from Peso to Yen, et cetera. Such a kind of entity that handles the changing of any of these currencies into another is called a “Broker.”
Like any middle man in a real-world business setting, you need someone you can trust. After all, why would you entrust your hard-earned money to someone who has earned the reputation of swindling people’s money away? While the money-making mechanisms that make Forex function is definitely not a scam, there will always be those that will use the very nice functions of the market as a scam.
Just like the statement in the Bible that goes “The love of money is the root of all evil,” The problem is not money itself, but in the idea of how people deal with money and how they lie and cheat for the sake of attaining it. Forex, as a giant money-making system is also used by a lot of scammers and swindlers too, that’s why it is really important that an aspiring Forex trader must know the proper steps in choosing the right broker.
In this section, let us talk about the proper guidelines and checklist in tapping into the right brokerage firms on the internet. Even experienced traders constantly look for truly trustworthy traders that might help them increase their profits even more. You as a newbie should do the same too since failure for you is never an option since you are someone who’s super-excited to hit it big with Forex.
