How to Trade Forex in an organized way
As you are reading this article, we can assume that you are novice traders. Forex market is the biggest financial marketplace and more than 13 million traders are transacting 6 trillion dollars every day. So, if you intend to trade the market, you are going to be one of them.
Forex trading requires some analyses, strategies, plans, and trader’s ability to decide. If you can blend them all, you can start healthy trading. Here we have discussed the four steps to begin your trade.
- Selecting currency pair: In the FX market, no products or shares are being bought or sold. Here the merchandise is money, and the price is also money. In this case, the money of a country is purchased with another country’s money. This pair shows the value of one currency relative to the other.
Suppose EUR/USD is a currency pair, showing us that we can purchase EURO in exchange for USD. So, the first step of trading is to select a pair.
Analyzing the pair with the market: The next step is to analyze the ‘pair’ with the market history and present situation. Say you have selected EUR/USD. Now examine the pair. Try to find out the answers to the following questions-
- Is this pair profitable?
- How much has the price fluctuated in the past?
- What was the lowest price of the pair in recent years?
- Which trend is going on now?
- What will be the next trend?
When will the current trend stop and the new trend start? There are several tools available around the markets, which are called Technical Indicator or Technical Analysis Tools. It will be wise if you use them and find out the answers you need. Then analyze the market according to the reports. Feel free to use a demo account to learn the basics. Try it out here and enhance your knowledge so that you can analyze the currency pairs in a smart way.
Reading Quote: You need to learn to read quote; otherwise, you cannot trade. Let us read a sample quote to understand it. Broker shows the Quote in this way – EURUSD 1.07173/ 1.07175.
EUR/USD is the pair where EUR is the Base Currency and USD is the Quote Currency. The base can be bought or sold by the Quote.
Now move to the SELL and BUY box. In the ‘sell’ box, the price is 1.07173, and in the ‘buy’ box, the price is 1.07175. So it means that if you want to buy 1 EUR, you have to pay 1.07175 USD, and if you want to sell EUR, you will get 1.07173 USD.
The difference between these two prices is called ‘spread.’ This spread is the broker’s profit. In the above picture, ‘1.8’ written under the ‘sell’ and ‘buy’ box is the spread. Spread is not fixed; it varies among brokers.
Picking the Position: Now you are all set. You have come to the final stage. It’s time to take your ‘ Position.’ Try to find the best trade signals and take your trades with low risk.
Selling Position- If you think the base currency’s price will be high, you should take the selling position. Say, you select the EUR/USD. If you believe the EUR is ‘Bearish’ or its price will fall, short the asset when the price test a major resistance level.
Buying position- If you think the base currency’s price will be low, you should take the buying position. In other words, if we believe the price of EURO is ‘BEARISH’ or will go down, try to buy the asset at the support level.
Now, be relax and start trading. A small tip for you, if you think you are not fully aware of Forex, stop trading and continue your study. Always remember, sometimes to trade is not any better than not to. Always look for high-quality trade signals as it will ease the overall process of trading.