Are you looking to start off a lucrative career in forex trading and are excited by the prospects? If so, then here are a few tips that you should keep in mind before kick-starting.
- Choose a broker
- There are quite a few forex brokers to make your choice, like the best binary options brokers. Look at the ‘spread’ or the difference in the price at which a certain currency can be bought and the price at which the currency can be sold. This difference is how the broker earns money. Remember that the lower spread is, the more money you will save.
- Any forex broker that you choose has to belong to a proper institution. The best binary options brokers usually belong to large banks because of the amounts of capital involved. Also, the forex broker that you choose has to be registered with the FCM or the Futures Commission Merchant and also be regulated by the CFTC or the Commodity Futures Trading Association.
- All brokers provide their clients with different tools and platforms as resources. These have charts updating in real-time, analytical tools, news and other forms of data-driven support. All these are the factors that will help you succeed so make sure that your forex broker provides these.
- If you don’t have too much capital then make sure that your broker comes with high leverage. On the other hand if you have lots of capital then you have more choice. Leverage is extremely crucial in forex trading because the profit comes from price deviations which differ in terms of cents. It is the amount of money that a broker will give you for your trading. Less leverage means less risk so take this option if your currency pairs are risky and unpredictable.
- Usually brokers have two or more types of accounts. The one which is smallest is a mini account which lets you trade with a minimum sum and offers a lot of leverage, obviously. Then comes the standard account allowing trading with different leverage and then are the high value premium accounts.
- Creating a forex strategy
There are two basic kinds of strategies available in foreign exchange trading. These are technical analysis and fundamental analysis. However, most traders commonly use technical analysis.
Technical analysis involves analysing the price trends in the forex market. Some of the most common methods of technical analysis in forex are as follows:
- The Elliot Waves
- Parabolic SAR
- Pivot points
A lot of technical analysis is done by combining different methods to make their predictions accurate.
Fundamental analysis is a complex strategy and is used to predict loon term price trends in the market. Again there are different markers or indicators that are used. These are:
- Nonfarm payrolls
- Purchasing managers Index or PMI
- Consumer price index or CPI
- Retail sales
- Durable items
However reports based on these markers are not the only important trends to look out for. Meetings are held where there are a lot of quotes as well as commentaries. These determine the condition of the market. At these meetings, factors like interest rates, inflation and other points are discussed. Some of the important meetings to look out for are the Federal Open Market committee and the Humphrey Hawkins Hearings. If you read these reports and commentaries, then you will gain a good understanding of the forex market and the trends that affect it.
Finding the right strategy can be a bit of a trial and error process.