If you’re new to the forex market, you should know that this is a huge global entity with a daily trading volume of $6.6 trillion.
This reflects the market’s pronounced liquidity and highly leveraged nature, although it also hints at a volatile and fast-paced sector that’s driven by real-time price fluctuations.
But what are the best ways to trade forex? Here are some ideas to keep in mind as a beginner and aspiring novice.
Why Do You Need a Trading Strategy?
Interestingly, around 70% of all forex traders lose money on a consistent basis, so it can be extremely challenging to operate successfully in this space over time.
One of the most important things to keep in mind is the importance of a good and solid strategy, which helps to define your method of operation in the marketplace and creates clear criteria for buying (or selling) a currency pair.
This also enables you to trade with a keen sense of determinism, which allows you to account for the underlying laws that govern change and outcomes in the forex market.
By cultivating and honing a viable trading strategy and making use of either technical or fundamental analysis, you can understand the market in greater depth and execute trades with a far greater degree of confidence.
This can translate into improved and sustained gains over time, making it more likely that you’ll become one of the fortunate 30% of traders who regularly bank profits.
What are the Best Strategies and Tools for Beginners?
There are various strategies that you can deploy as a forex trader, depending on your outlook as an investor and overall appetite for risk.
For example, risk-hungry traders who want to leverage the forex market’s innate volatility could consider scalping or day trading. Both of these are short-term strategies, which are built on the principle of earning incremental profits on a large number of trades within a relatively short period of time.
With scalping, you’ll typically look to maintain open positions for between one and thirty minutes, whereas day traders may utilize time-frame charts of up to a few hours. However, you won’t maintain positions overnight with either strategy, while both will target the most liquid currency pairs with far tighter spreads.
For risk-averse traders with a longer-term outlook, there are more suitable alternatives such as swing and position trading.
These strategies enable traders to take up more conservative positions over a period of days, weeks, and even months, allowing them a little more control over their capital and creating the need for considerably less time-sensitive research.
In terms of tools, it’s also imperative that traders make the most of the technological features at their disposal.
For example, investors should ensure that they make the most of advanced trading platforms such as MetaTrader online, which offers access to a huge range of technical indicators and demo accounts that enable you to hone your strategies in a simulated and real-time market environment.