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FOREX TRADING AND TRADE MANAGEMENT

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 20 Apr 2023
Category: Trading
Trading Performance Analysis

Table of Contents

You must be aware that the forex market never sleeps. As one session draws to an end, another is opening. So, irrespective of your favorite trading session, traders can make as much profit as possible. However, forex can be tricky if you don’t know your way around the market. Being a successful trader is not just about knowing the currency pairs and placing trades. As fast as forex can make you a millionaire, in the same way, you can lose your capital.

To save you the misfortunes of poor trading, this article expounds on the sensitive aspects of forex. You will also learn how to manage your trades and be profitable in forex for a long time. We have a long rope to pull. So, you should probably know what forex trading is all about before we continue.

What Is Forex Trading?

Forex trading occurs when one buys a particular currency and sells another currency simultaneously. The process involves speculating the movement of a currency in the global market. In essence, you are trading the strength of one currency against the other. For instance, you may prefer trading the USD/CAD currency pair. While USD is the base currency, CAD is the quote currency. Thus, if you decide to have a long trade, you are sure that the value USD will be higher than CAD. Then you are buying the pair. And if your choice is short trade, you are speculating that USD will be weaker compared to CAD. This means you are selling the pair. In short, the market determines short vs. long decisions.

Forex Trading Is Not Gambling

Many failed traders see forex trading as gambling. But this is untrue. Do you want to know why they failed in forex trading? Well, it’s simply because many of them refused to master the art of trading. They never learned trade management. Hence, they ended up blowing their trading account. But you are lucky to be reading this piece. I bet you will be better informed when you conclude this article. So, ensure that your attention is not divided as we move on.

What Is Leverage In Forex?

In the ordinary sense of the word, leverage means borrowing an amount of money to invest in a particular venture. This meaning is also similar to what occurs in forex. Leverage in forex is when a trader can trade bigger volumes with limited capital. Thus, we can say that the market is lending them the money.

Many people fall in love with forex because of the huge leverage ratio, which could be as high as 100:1. This means that you can have a trade value of $100,000 with just $1,000. Who wouldn’t want to benefit from this kind of largesse? But leverage in forex can make or mar you. Traders can multiply their gains with large leverage and also lose out terribly. The greater the leverage in forex, the greater the risks and profits are. So, how do you ensure you are always on the winning side? You just have to learn leverage management! As a beginner, leverage of 5:1 or 10:1 is okay for a start. Over time, you will learn more about the market and hone your trading skills. You can then take more risks and monitor your profit factor from time to time. Also, you must learn how to use limit stops to trail your losses.

What Is The Best Time To Trade?

Forex Volatility tool
Forex Volatility tool

Your target as a forex trader is currency volatility. Hence, you need to look for the perfect time of entry. You will recall that we said earlier that the forex market never sleeps. Of course, you can make profits at any time. However, there are best times to trade in forex. And if you can maximize such opportunities, you will surely meet your target.

The best time to trade forex is when multiple trading markets overlap. The London/US markets overlap just like the Sydney/Tokyo markets. However, more profitable traders are made in the London/US overlap. And this is because London has the busiest trading session, followed by New York. Hence there will be more currency volatility when both sessions are about to overlap. So, you should be preparing to enter the market when it’s about14:00 GMT.

You should also bear in mind that Monday morning is not a good time to trade, as the market is just beginning to pick up. But if your analysis convinces you, you can as well place a trade.

Why Must You Check Trade History?

The essence of data is to guide you in making profitable decisions. Therefore, traders must be patient enough to check out the activities of other traders on a particular currency pair. This will guide you in the right direction of the market. Clever traders are able to use trade history to their advantage. If you notice that the trading history is filled with orders in green color, it suggests that there are more buyers at that time. Likewise, trading history with red color means more people are selling the currency.

So, noticing a positive or negative pattern is one way to know the true state of the market. This is one way for you to draw accurate conclusions and trade better and faster.

Other Tips That Can Make You a Profitable Trader

As we mentioned earlier, forex trading is not gambling. There are some useful tools available for currency analysis. The most common forex indicators are the Moving Averages, RSI and MACD. You can use trading oscillators if you want to know when a particular trend is likely to end. Thus, you will know the perfect time to pull out or get into the market.

Economic data cannot be overlooked in forex trading. Remember that you are trading countries’ currencies; hence, economic news from these countries will lead to movements in the market. For this reason, you must pay attention to economic data and news just like you use your forex indicators and trading oscillators.

No two traders indeed are the same. Trade duration differs. Some people enjoy long-term trade while others prefer to meet their target in a short period. The latter is known as forex scalping. Scalpers love to take small profits from different trades. You should practice both trading patterns for some time and discover where your strength lies.

Final Thoughts

Forex trading is more profitable when you have mastered the strategies. But here’s an eye-opener for you as a trader. The same tools cannot work for all forex market conditions. While some strategies are better-suited for trending markets, other tools can help you make more pips in volatile markets. And, of course, you will not always win in forex. But make sure to use trading results analysis to know your trade win ratio. If it’s on the high side, your trading confidence will improve.

Suppose you are ready to begin your foray into forex trading. In that case, you should download the MT4 or MT5 app (Meta Trader 5 and Meta Trader 5, respectively). Then, you can open a trading account. But remember that you can only be a master of the market with consistent practice!

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AnalyticsTrade Team

AnalyticsTrade Team

πŸŽ‰ Introducing AnalyticsTrade's exceptional team of expert analysts! 🌟 These seasoned pros have been dominating the capital market, trading a diverse range of assets for more than 15 years! πŸ“ˆπŸ’Ή Get ready to level up your game with our top-notch, captivating resources in the capital market! πŸš€πŸ“š Wishing all you incredible forex traders the best of luck and massive success! πŸ’°πŸ”₯

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