Foreign exchange rates are in a constant state of flux because the world that they symbolise is constantly changing. As a trader, it’s up to you to harness this volatility to make a profit. Such a challenge is not as hard as it seems. There are a variety of charting indicators that can help you plus trading methodologies that feed off of various regional pricing differences. If you’re a beginner, learning all this will take some time. The internet is a great place to start your research. Many banks publish reports, commentaries and recommendations on their websites. News organs, such as Reuters or Bloomberg, also have a wide variety of excellent reports. Some traders maintain their own websites and freely offer their advice.
In order to contain losses, beginners should never forget some basic “rules of the road”. Do not trade high-flying currency pairs. Keep all trading to the middle of the week. Reduce your amount of leverage to 50:1 or lower. Always use stop losses; and, take trading breaks.
How Can Changing Foreign Exchange Rates Affect Forex Trades?
Currency pairs have personalities of a sort. Some are normally meek and mild (GBP/CHF or EUR/CHF). Others are the kings of their hills (e. g., AUD/UISD and AUD/NZD). Some go when no man should dare to go (e. g., GBP/JPY or NZD/USD). What’s the difference? Relative volatility. So, before you start trading a currency pair, take a temperature check of the water. Use an “ATR” (“Average True Range”) indicator. Depending upon the nature of what you’re up to, you may want to calibrate for 1-hour intervals or, perhaps, daily intervals. Some traders, particularly short-term ones, thrive on high volatility. Others are not impressed. If you’re a beginner, stick with low-flying currency pairs. In case of a crash, there’s less blood.
Keeping Track Of Foreign Exchange Rates As A Forex Trader
Forex is a market constantly in motion. As discussed, some currency pairs move relatively faster than others. If you’re a beginner, stick with the European “majors” (i. e., EUR/USD, GBP/USD, USD/CHF). There’s usually enough movement in these pairs to satisfy most everyone and the chances of a participating in a train wreck are not that high. This doesn’t mean that you shouldn’t keep your eyes on what “the competition” (i. e., USD/JPY, AUD/USD or USD/CAD) is up to. You should, since many pairs share the same mate (e. g., the USD or the EUR). This is what experts do on weekends, particularly with weekly charts. They are looking for major trends and which currency pairs are affecting other currency pairs.
Key Techniques To Prevent Losses From Altering Foreign Exchange Rates
Obeying 5 simple rules can save you a lot of money. First, do not trade a highly volatile currency pair (if you’re unsure of how volatile a pair can be, use an “ATR” – “Average True Range” – indicator to scope out a pair first). Second, only trade Tuesdays through Thursdays. Trade volume is the highest on these days and the chances of a horrible price spike is relatively less. Third, use a leverage ratio of 50:1 or lower. This slows down a potential trade meltdown. Fourth, always use stop losses. This puts a floor under any potential trade meltdown, saving your cash kitty from extinction. Finally, remember that it’s okay not to trade. Nobody is standing over you, demanding constant trading.
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