Traders have a unique strategy to earn money from Forex.
The reasons are Forex market is most liquid and very big in nature, almost five Trillian dollar a day.
As a result, there is no single way to trade. People have their own strategy and different mind sate to trade.
When to buy and when to sale depends on many factors.
When the market has more volume there is more volatility associated with high risk. In this content, we will try to make you understand the idea of buying and selling currency using a real example.
We also provide you with additional resources to bust your Forex trading experience as well as help to earn money from Forex.
WHAT DOES IT MEANS TO BUY AND SELL IN FOREX
Buying and selling in currency pare means taking the advantages of appreciation/depreciation in the value of one currency in exchange for another.
Once you develop your skill you can take go to other aspects of tools. You can develop your own eatery and exit plan so that you can manage your risk better.
Factors which help traders to earn money from Forex
Political instability, Government decision, Change in government, can affect the value of a currency.
For example when Donald Trump got elected Dollar price increased a lot.
If we look from the point of view of fundamental traders we can see
- Unemployment figures
- Monetary and Fiscal policies (just to name a few)
- International trade
- Interest rate
All these have an influence over the value of currencies.
On the other hand, technical traders look at :
- Key price levels (support & resistance)
- Uptrends and Down Trends.
- Other trends and indicators to form a basis for their forex trades.
Understanding Risk Management While Buying and Selling Forex
Risk management is very important in Forex trading otherwise you cannot survive in the long run in Forex Business. You have to understand the Risk/Reward ratio but you also have to understand the eminent swings in volatility. The factors that affect trading can be very significant so you can prevent or minimize the threat by implementing the risk management strategy. Forex market trading is a complex, you have to understand the mechanism behind it for example how to read currency pairs. We also recommend you to visit our web site theforexsecret.com
Know When to Buy or Sell a Currency Pair
Here EURO is the base currency and therefore the “base” for buy/sell.
If you find that the economy of USA is going down, then it might be bad for dollar price so you might put a BUY EUR/USD order.
Doing that you have bought euros in the expectation that they will rise versus the U.S. dollar.
If you see that the U.S. economy is getting stronger and the euro will get weaker against the U.S. dollar you may put a SELL EUR/USD order.
By doing that you have sold euros in the expectation that they will fall against the US dollar.
Here we consider USD as the base currency.
So it is the base for buy/sell. If you feel that the Japanese government is going to weaken the yen in order to help its export business, you would put a BUY USD/JPY order.
When you do that it means you have bought U.S dollars thinking that the US Dollar will rise against the Japanese yen.
If you come to know that Japanese investors and businessman are pulling money out of U.S. financial markets and converting U.S. dollars back to Japanese yen, and this activity might weaken the U.S. dollar.
You might put a SELL USD/JPY order. By doing so you have sold U.S dollars in the hope that it might depreciate against the Japanese yen.
Here The Great Britain Pound is the base currency which means the base for buy/sell.
If you feel the British economy will continue to grow than the U.S. in terms of economic, you would execute a BUY GBP/USD order.
When you do that you have bought pounds in the belief that they will rise against the U.S. dollar.
On the other hand, if you believe the British economy is slowing down while the American economy remains strong you would put a SELL GBP/USD order.
By doing that you have sold pounds in the hope that they will depreciate in relation to the U.S. dollar.
In the following example, the U.S. dollar is the base currency and thus it is the “basis” for the buy/sell.
If you expect the value of Swiss currency is increasing, you can put a BUY USD/CHF order.
When you do that you bought U.S. dollars in the probability that they will appreciate against the Swiss Franc.
If you see the U.S. housing market is getting weaker it will hurt future economic growth of the US which will weaken the dollar, you can execute a SELL USD/CHF order.
By doing that you have sold U.S. dollars in the hope that they will depreciate in response to the Swiss franc.
What is Margin Trading?
When you shop in a grocery store you cannot buy simply one egg, you have to take one lot of 12 egg.
In forex business, you cannot simply buy one Euro or Dollar.
You have to buy a lot of 1000 units of currency.
But most of the small investor does not have that amount of money.
So there is a policy of taking loans which are known as leverage/ Margin trading. When we borrow capital to trade we call it margin capital.
For example, if you have $25 or $1000 you can maximize it up to $1250 or $50000 respectively by using Margin Trading.
While treading you may use different Signals:
- Pin bar
- Engulfing bar
- Inside bar
- Chart Patterns
- Head and shoulders Patterns
If you want to know more about the forex trading it is a great place to start.
My advice is to pick one or two signals, learn the characteristics, entry and exit methods in the demo account before you to the real trading.
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