When you are carrying out foreign currency exchange trades, it is important that you have the tools and skills needed at hand to succeed. This includes market knowledge, as well as technical trading tools, with each aspect being as important as the last. To help you work towards your dream of foreign currency exchange trading success, here are 5 things that all the top traders do, and you should too.
Tip No. 1 – Use fundamental analysis at every turn
You will need to know what the prices currently are for integral currencies and what they should be looking into the future. To achieve this, you can look at the fundamentals of each currency through the appropriately named fundamental analysis. This basically means there are broad recurring themes that affect the market and if understood, can be used to determine the future performance. If you correctly carry out fundamental analysis, you can set up your own rules for entering and leaving a trade with profits in your crosshairs.
Tip No.2 – Pair strong currencies with weak currencies
Through doing this you can skew your results towards profit while dropping the dead weight currencies that are dragging you down and hampering the progress of your portfolio. However, one thing to consider is that you will be buying a strong currency, while effectively shorting the other. Do not ignore the fact that all currencies have advantages and disadvantages, meaning the situation may change in terms of profit at any moment. Saying that, though, the key for all traders is to pair the strong against the weak, this will result in profits.
Tip No. 3 – What is mathematically best may not always be the right move
When it comes to beginner traders, a delicate and precise approach is adopted within their trading strategies. This is carried out with the belief that this method will eventually lead to multimillion-dollar gains. Unfortunately, the market doesn’t always work like this, and the reason is simple. While mathematics is an essential part of success, it cannot be solely relied on. Other factors can change prices, which means mathematics is not the be all and end all of the foreign currency exchange.
Tip No. 4 – Scale your investments appropriately
Another crucial part of foreign currency trading revolves around scaling your investments correctly. This means trading in the correct way to reduce the risks that you are facing. If you do not do this, you will be exposing yourself to events that you could otherwise be avoiding. Remember, foreign currency exchange trading without scale will lead to uneven investments and eventual losses.
These tips may seem like common sense, but it is important to stick to such advice when you are looking into foreign currency exchange trading. When it comes to this market, the details are where you win or lose large sums of money. Professional traders already understand these core aspects and there is certainly a reason for why that is the case.
Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.