Forex trading: definitions and tools

Forex trading is the decentralised market in which currencies are negotiated, whose purpose is to facilitate the financial flow derived from international trading. This market is the largest and most liquid commercial market in the world, with daily trading that exceeds joint trading of all the bond and stock markets of the world, for more than 5.4 trillion dollars a day.

To understand what this volume of business means, it is what the New York Stock Exchange (the largest in the world) moves in a whole stock market. As in the stock market, you can change the currency based on what you think is worth (or where it’s headed). The big difference with the Forex is that you can trade up or down with the same ease. Let’s find out a little more about trading and forex.

Facts about Trading and Forex

Forex trading is, in simple words, the act of trading money. The currencies are traded through a broker or dealer in pairs, for example, euro and US dollar: (pair EUR/USD). Don’t get confused by the fact that you won’t buy or sell any physical money. Think of buying foreign currency as the purchase of a share in a country’s economy. You will be exchanging your money for another currency, based on that country’s economic activities and strength.

In Forex, the price of a currency pair is determined based on the country’s economy against the nation of the other currency.  Unlike other financial markets, the Forex market is decentralized and does not have a physical location. The Forex market is considered OTC (over-the-counter) market, because this market works electronically, in a network between banks 24 hours a day.

If you think that a coin will increase the value, you can buy it, if you think it will decrease the cost you can sell it. With such a large market, you will find a buyer when you are selling and a seller when you are buying, it is much easier than in other trading markets. Maybe you hear on the news that China is devaluing its currency to attract more foreign businesses to its country.

Forex trading tools

As with stocks, you can trade currencies based on your opinions about their values (or the prices you think the coins will have in the future). However, what sets Forex apart is that you can trade in both bullish and bearish trends. If you predict that a currency will increase, you can buy it. If you think your price will fall, you can sell it. Also, since Forex is so vast, finding buyers and sellers is much more comfortable than in other markets subject to liquidity.

If the price quotes are up to hundredths, how can you make significant profits by investing in Forex trading? The answer is leverage. To use leverage, you just have to set aside the margin required for the size of the operation. For example, if you apply a 50: 1 leverage, you can trade with $1000 by setting aside a margin of only $ 20 in your trading account. That gives you a much more significant exposure to a low investment.


Author: Editorial staff of 70 trades reviews blog

Advertisements

Why do some traders fail when they start doing online trading?

Some traders fail when they start doing online trading. Why is it happening? How can they avoid it?When we say that some traders fail when they start doing online trading, we do not mean to lose money: everyone who trades can lose money, this is part of the rules of the game. The traders who fail are those who lose (very little, no matter), they are discouraged and stop trading. Why is it happening?

Not everyone was born to do online trading

Online trading can be a source of great earnings but you should not think about trading as a machine to make easy money. When you start, the online trading does not take a big capital (you can start with a capital of just 10 euros) but it takes courage and winning mindset.

Making online trading means doing market operations, many transactions. Some of these will close in loss, others with earnings. Even millionaires traders lose money on some operation.

Those consider any loss as a tragedy, they are not really fit to do online trading. Better for them to do something else.

The winning trader is not the one who knows complex strategies, after all the strategies you learn or you can copy automatically using a social trading broker. The winning trader is the one who is capable of dominating the emotions.

And unfortunately not all are capable of it. To avoid loss as a trader is important, then, do an analysis of your personality to figure out whether you are able to withstand trading stress or not.

The wrong trading platform

Needless to go around: The online trading platform that you use it really makes the difference. In many cases, you can lose money because of a wrong choice.

The most striking case is that of unauthorized platforms: choosing a platform like that means losing all your money, because in most cases they are real scams.

scam-tradingBeware of scams

The worst way to start doing online trading is to believe the promises of easy earnings. Systems such as 1k Daily Profit, safe and instant gains. In fact, they are systems that do not work and that, indeed, they make you lose all the invested capital.

Those who start doing online trading should never believe, for any reason, to that kind of promise. They are fake and deceptive promises, designed to drive the trust and money of the less experienced.

Online trading is not a way to make easy money: to earn it requires an authorized and regulated platform, it takes commitment and takes time to devote. Anyone say something different, probably, is trying to cheat.


Author: Editorial staff of 70 trades reviews blog

Stop loss: what is it and how to use it

Stop loss are a tool to control trading losses. You can lose with online trading, you have to remember it always. Even the best traders, those who can make millions, are not immune to losses because no one can control what the market does. Good trades are not afraid of losing money, simply using the best tools to control the risk. The best tool to control the risk of loss is called stop loss.

Using stop loss is absolutely necessary if you want to keep track of your losses. It is a simple tool but must be thoroughly understood.

A stop loss is the maximum level of loss that a trader is willing to accept. As you open a position on a trading platform, it is always advisable to fix the price level at which the platform automatically closes the position. It’s a really simple procedure, even for those who do not have much experience and so always recommend doing it.

stop-loss-chart-explainHow to set stop loss

The novice trader who has come to this point of the article is surely thinking that stop loss is a great idea (he is right) and has already figured out what the right loss threshold is willing to accept: 0. And here you are wrong.

The problem is that the price of an asset on the market varies continuously and so if you stop the loss to zero you seriously risk that your position is closed immediately because there is a small loss. In practice, if you set the stop loss at zero, many operations would be closed immediately. Online trading would be a waste of time. Most of the operations would be closed before they could generate profits.

It’s obvious that fixing an excessively large stop loss also has negative effects because the expected losses could be excessive. Fixing stop loss is an art that you learn with practice.