How can I increase my money in forex trading

It does not matter who you are - individual beginner investor or professional. The forex market is where all the action is. Forex trading is said to be worth 6 trillion USD per day. Bond markets or stock trading appear pygmies in comparison.

Who are the main forex players?

The main forex players are companies, traders, governments, and banks.Commercial and investment banks account for the lion’s share in forex trading.

In a bid to improve their nation’s balance of trade, as well as to control inflation, national central banks frequently do adopt large positions of buying/selling their own currency.

Corporations also find forex trading to be principal to their interests. They trade forex to hedge their basic business operations in foreign markets. For instance, if a US corporation is doing business in Russia, then, in order to hedge against a decline in the Russian ruble, they will sell the currency pair USD/RUB.

Be it professional; investment fund managers or individual investors of not considerable means, the last group of investors in forex trading are not the least important.

The basics of forex trading:

Currency pairs:

The fluctuation rate between the various national currencies is what involves currency pair trading. In the currency pair EUR/USD, the first is the base currency while the second is the quote currency. The most commonly traded currencies are the ones that find most of their use globally. Among these are the Euro (EUR), US Dollar (USD), Japanese Yen (JPY), British Pound (GBP), and the Australian Dollar (AUD) as well.

What are pips?

A pip is the most minor fluctuation in an exchange rate. The minimum pip of the majority of currencies is 0.0001 pip. 0.01 pip is the measure of the minimum pip for the Japanese Yen, so that’s a major exception. The lot size traded and the currency pair involved are the factors affecting a pip’s value. A $10 pip equals a standard lot. A pipis $1, when trading mini-lots. When micro lots are traded, a pip is valued at 10 cents.

What are lots?

100,000 units of base currency equal a standard lot. The other lot sizes are mini-lot and micro-lot. Online trading has led to the use of lot sizes other than those used till that point. An example is the nano lot, which equals 100 units of a currency.

Why trade in forex at all?

Forex trading comes with a number of features that, other factors being equal, are guarantors of profitable trading. A conspicuous characteristic of forex trading is the possibility of very high leverages. When a trader uses just a fractional amount of the value of the instrument he is trading with to hold the market position, we have leverage. ‘Margin’ is another word to describe the fractional value.

To show the amount of margin a broker needs in order to hold a position, the leverage is expressed in ratio form. For instance, a 50:1 leverage shows that a broker has only to place 2% of a trade’s total value to begin trading.

Relatively minor capital amounts can be leveraged to gain sizeable gains. For instance, a 500:1 leverage micro-lot trade can help a trader achieve a profit of $20 dollars ( his initial investment being $10). This follows a 20 pip fluctuation in the exchange rate. Most currency pairs undergoing a change of at least 100 pips daily, small wonder brokers can leverage handsome profits out of trades each day.

Liquidity

The high volume of trade each day in the forex market is a direct reason for high liquidity. Low bid-ask spreads are helped by high liquidity. This facilitates the easy entry and exit of traders with respect to trades in the course of the day.

Compared to most popular stocks, bid-ask spreads on currency pairs are low. This keeps transaction costs low. Banks are enabled by high liquidity to trade large positions. The price fluctuations remain low. This again reduces total trading losses.

High liquidity also catalyses long term trades.

Volatility

A daily trading range of 100 pips plus characterises most currency pairs. This volatility, along with high leverage, permits brokers to achieve profits, all inside the daily price fluctuation range.

While in the stock market, there are some restrictions on short selling. However, no such restrictions dog the trader here. Given that the trading range each day is exemplary, and there are fair opportunities to get involved in both selling and buying, the forex market finds favour with many traders worldwide.

Forex trading strategies

Fundamental analysis

Fundamental analysis is principally adhered to by traders who are in the game for the long term. Economic factors, national and global, impact upon fundamental analysis.

Reports of an economic nature are being released every day, by nations powerful and more modest. All these economic factors have an effect on the trading of currency pairs and their exchange rates. Positive reports shore up a currency’s value; negative reports do the opposite.

Some of the types of factors mentioned above include:

the Consumer Price Index (CPI);

the Producer Price Index (PPI);

the Gross Domestic Product (GDP);

consumer and employment confidence reports;

central banks’ policy decisions.

Interest rates, as well as interest-bearing accounts, become some of the reasons behind the rise in popularity of some currencies over and above others. This is just one more reason why policy statements of central banks ought to be studied.

Forex trading strategies

Technical analysis

Technical indicators interpret for us what the charts have to say. These read price information or give signals that show exactly when we should buy/sell a particular currency.

For the simple reason that historical data form the subject of technical analysis, we cannot expect them to predict the future. There are the following types of technical indicators:

trending indicators;

oscillating indicators;

volume indicators.

Trending indicators:

these, as the name implies, examine trade trends in currency pair trading. Following these indicators, you might be able to enter a trend just as it has begun, and exit it soon after it has ended. This facilitates your profit.

There are two principal trending indicators: moving average; Bollinger bands.

Moving Averages give the direction of the trend, as also the location of possible resistance and support levels. It really helps you to know: how moving averages are plotted; trading signals associated with moving averages; the merits of moving averages.

Moving averages trading signals:

These are the prime technical indicators that help you maintain profitability. There are analytical tools on ROinvesting’s trading platform that help you make maximal use of trading signals. We will know just now how vital these signals are:

Entry signal; exit signal.

An entry signal is obtained, when: after hitting an up-trending moving average, a currency pair ricochets up; after hitting a down-trending moving average, a currency pair ricochets down. An exit signal is obtained when :

(with reference to an up-trending currency pair) the stop loss being below the moving average - in the event of the currency pair breaking far below the moving average, it will be the stop loss that will be your ticket out of the trade;

(with reference to a down-trending currency pair) there being a stop loss below the moving average - in the event of the pair breaking far above the moving average, the stop loss will be your pass out of the trade.

Another sophisticated technical indicator category is that of Bollinger bands. We look briefly at them now, as they too have entry and exit points that are synonymous with profits.

Besides the direction of the trend, currency pair price movement volatility has achieved concern with Bollinger bands. Along with a moving average, the Bollinger bands come in two forms - upper and lower.

Bollinger bands trading signals:

When we seek powerful breakout signals with respect to currency pairs that are consolidating, we have Bollinger bands.

Entry signal:

This is obtained when, following consolidation, the bands begin to move away in opposite directions - you can enter the trade when the change first occurs;

Exit signal:

When the bands narrow and move away from current price - a trend reversal and a trailing stop loss are your ticket out of the trade.

There’s yet another important technical indicator that shows entry and exit points: the commodity channel index (CCI).

It is based on averaged price movements in the past.

We have another important indicator that helps with entry and exit points - the Moving Average Convergence Divergence, or MACD.

Lastly, slow stochastic also gives entry and exit points. The indicator is generally plotted below price movement.

A great trading plan:

It is important to have your own trading plan. It should reflect your own attitude vis a vis risk and capital investment. Personal risk management tools, and steps of record-keeping, are aspects especially to be mindful of.

Your own risk-reward ratio:

It is useful to have a 1:3 risk-reward ratio, which merely points out that every potential profit will be at least double every potential loss.

Trading diary:

It is best to jot down all that you are doing in a trading diary. You ought to be aware of what works, and what doesn’t. The rationale affecting each decision should be noted. This will help you keep all your strategies in sync in future.

Conclusion:

Forex trading is much more than an adrenaline rush. That drive has to be supported by clear planning, and a knowledge of the markets. You need to be in a market-mind while doing forex trading. Technical analysis can establish you while adding fundamental analysis can set you up in forex trading for the long term. ROinvesting has tools on its trading platform that truly facilitate successful trades.