There are terms in the Forex market that may be foreign to beginner traders. Did you know that knowing and understanding these terms will help you make better decisions in the market, leading to your success?
Currency Trading For Beginners
Forex trading or currency trading is more exciting than you think. Although there are brokers who claim that they can positively provide you with the ‘secret’ to success. There’s actually no such thing as ‘secret’ to success in trading. The challenging yet fun part here is the learning process. Newcomers aren’t to be underestimated. If they start it right, they might even overcome those experienced traders. As long as you give importance to financial education, control of emotions, and fix unrealistic expectations, you will surely progress into a financially stable trader.
Knowing More About The Forex Market
Foreign Exchange Market, better known as the Forex Market, is a financial market that deals with currency exchange. There are different kinds of market players such as central banks, institutional investors, commercial banks, multinationals, and now, retail traders.
Unlike huge financial institutions, retail traders can’t seem to cope with the demands of the market. Because of this, they mainly gain access to the market through CFD brokers and Forex brokers. Then, they make a profit when they buy and sell currency pairs. When trading currencies, they always come in pairs – the base and the quoted currency. The quoted currency will always be equivalent to the base currency.
What are the Types of Trading?
As forex trading, it is just right to know the different trading styles so you can pick which one is best suited for you.
- Swing Trading
- Day Trading
The two most active and most aggressive trading styles are scalping and day trading. Both of these trading styles prompt the closure of trading positions at the end of every session. What’s different among these styles is the trading frequency. In scalping, traders take advantage of the small price changes. Buying and selling are mostly done in a matter of seconds. Day trading, on the other hand, tends to hold their positions open for several hours. Swing trading is totally different from day trading and scalping. In swing trading, positions are held longer, even for weeks.
The trading style you choose now depends on you. Moreover, in the trading style you choose, there is a corresponding type of order that you’ll need to employ. For example, market orders are ideal for scalpers than swing traders because this type of order allows you to determine the best price available when entering and exiting the market.
For swing traders and day traders, it is advisable that they use limit orders because it allows them to enter the market with a pre-determined price. Another benefit of currency trading is leverage wherein profits get magnified. However, this advantage can turn into a disadvantage if the leverage is not properly handled. In this case, you should stop-loss orders to limit the possible losses that you may acquire in the market.