Note From Kalen: I include the full spectrum of articles that show all sides of investing. That being said, remember that before you make any investment decisions, make sure you fully understand the investment. Forex trading and CFDs (similar to futures) can be extremely risky if you don’t know what you’re doing, so please only make informed investment decisions.
The foreign currency markets are incredibly volatile, and this means that there is a lot of opportunity for savvy traders to make a profit. However, there are also plenty of opportunities to make a significant loss too. If you want to learn forex trading, then you must understand that even the best traders can and do lose money, so you must only trade with money that you can afford to lose, and you should keep some money in reserve to allow you to trade for a few days even if you are on a losing streak.
At the moment, CFD trading is gaining popularity in some countries as it is a less risky endeavor. But if you keep in mind that there are two approaches to forex trading and stay disciplined, you can make a profit. These two approaches are technical analysis and fundamental analysis. The best way to learn forex trading is to look at both of these separately, and then integrate them into a sound, logical and reasonable approach to trading.
Learn Forex Trading By Leaving No Room for Emotion
The volatility in the markets is one of the main reasons why the vast majority of traders lose money. Traders often get caught up in the excitement of their investment. They hold on to currency pairs that are doing well because they believe they are onto a good thing – but then the currency crashes. Or they throw good money after bad when the markets are going the wrong way, hoping to recoup their losses when it would make more sense to just set a stop loss, accept that money is gone, and go back to the drawing board for a new trade. You really have to make an effort to distance yourself from the emotions, it’s the best way to learn forex trading, and the same goes for CFD trading as well.
Technical Analysis for Beginners
The easiest and most popular trading platform to get started with – and indeed the one that experienced traders still use – is Meta Trader 5. This platform has plenty of technical analysis tools built-in to it, so you can use it to guide decisions about which currencies to buy, and at what level to sell. You can set automatic sell points to take profits or sell up before your losses become too great as well.
When it comes to forex and CFD trading, most trades are based on trend lines. These look at the movements in the market, and use mathematical formulas to predict how the market will behave in the future, based on how it has behaved in the past. This is where things like ‘support’ and ‘resistance’ come from. Unless something incredibly unusual happens on the political world stage, the markets will usually follow fairly familiar patterns.
When strange things do happen, that’s where fundamentals come in. Fundamental analysis looks at how an election, war, or recession could impact the value of currencies. A natural disaster happening in one country could greatly impact that country’s economy, but it could also impact other countries as well – if you understand how different countries influence each other, you could use that knowledge to your advantage.
Forex and CFD trading at Xtrade (https://www.xtrade.com/) requires a fairly significant time investment, but it is well worth it. With patience, and research, you can make some decent money from foreign currency trading. Try a demo account to start with so you aren’t putting real money on the line while you experiment.