What you need to know before trading

Tue Aug 27, 2019 12:58 am
avatar  Forex

Take time to study the forex market

It is important that you have studied the forex market before you open a position because the market mechanisms differ from those of most financial markets.

Forex is bought and sold through a banking network rather than a decentralized stock exchange. That's why the market is also referred to as the over the counter (OTC) market. The banks act as market makers, d. H. they offer a bid price to buy a particular currency pair and a price quote to sell a forex pair.

The forex market is located at four major trading centers: London, New York, Sydney and Tokyo. This means that market activities take place around the clock.

Learn about the factors that influence exchange rates

Making predictions about the future price of currency pairs can be very difficult, as many factors can cause price fluctuations. Like most other financial markets, the Forex market is mainly driven by supply and demand. But there are other factors that can not be ignored:

Central banks. Decisions taken by central banks may affect the supply of currency. Mostly it comes to the announcements to price fluctuations
News posts. Good news can boost investment in a particular currency; Bad news, on the other hand, is causing falling demand
Market sentiment. The sentiment and opinion of the traders can play a major role in the price movements of the currencies. Often, other traders are thereby induced to follow suit

Understand the risks

Even though the forex market offers many different options, you need to know the risks involved. The forex market is very volatile due to the many traders and the multitude of factors that influence the price movement of the currency pair. Traders should therefore always be aware of political, economic and social events that may cause volatility and have developed an appropriate risk management strategy to avoid unnecessary losses.


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