Recent global events, such as Brexit and the US presidential election, while being of concern to many, have presented a number of potentially lucrative opportunities for others.
Foreign currency trading (Forex) is influenced heavily by events that happen around the world, the more dramatic the event, the higher the potential profits and so the current political climate could spell sunny days for those who know how and when to trade Forex.
So, if you want a slice of the Forex cake, where do you begin?
The Nature of the Beast
Well first off, you must learn how Forex trading works. Currency pairs, for example the American Dollar (USD) and the Great British Pound (GBP) are traded against each other. That is to say, if you invest in USD and the exchange rate between the USD and the GBP rises in favour of the USD, you make a profit and if it rises in favour of the GBP, you take a loss.
Understanding the way Forex trading works is not difficult, but you must know it thoroughly if you are to stand a chance of trading profitably. Once you have a firm grip on the process and language of currency trading, you can start to look at what affects the markets.
Cause and Effect
Keeping a close eye on international news and in particular politics and economics is the key to being able to trade the Forex markets profitably. If a country is experiencing political or economic problems, then the likelihood is that this will have a negative effect on the strength of its currency.
Brexit is a great example of this, immediately after the results of the Brexit referendum were announced, the price of the GBP dropped dramatically because the economic future of the UK became unpredictable. Those who invested in the USD against the GBP, prior to the result, would have made a significant profit.
These dramatic events, however, are difficult to predict and many Forex traders opt to track and invest in currency that shows a steady improvement over a longer period of time and thus expose themselves to less capital risk.
Set the Scene for Success
Being conscientious and organised will make your chances of making a profit when trading Forex far greater. Setting up news feeds using social media and regularly checking websites and print publications for information that will give you an overview of the trends within the markets is crucial.
Set up a trading calendar that highlights all the major events that could affect the markets you are watching and of course watch the markets themselves to help you to make decisions.
Write Your Own Rules
Making decisions about how much you will trade, on which markets and how long you will keep a trading position open for, are all factors that make up your marketing strategy. The most successful Forex traders all have strategies that they strictly adhere to.
It is easy to get swept up in the moment and hang on to a trade too long, before you know it the market has turned and your profit has turned to loss.
Make use of “stop loss orders” to ensure you don’t loss more money than you had initially planned to risk or to get out with a healthy profit while the going is good.
Forex trading sees billions change hands on a daily basis and the markets are open 24 hours a day. For those who master the art, there are massive profits awaiting, but it takes time, commitment and an intelligent approach in order for these rewards to be realized.
And so the question remains – is now the right time to start trading Forex?