Simple Strategies for Trading Foreign Currencies

foreign currency

Trading in foreign currencies used to be the reserve of large companies as well as something most of us did in the past when we traveled to a foreign country that has a different legal tender. These days, currency or Forex trading is something millions of people all over the world do thanks in part due to the advent of the internet. However, it is estimated that more than 96% percent of Forex traders lose money, making it seem like an insider gig. In this post, we’ll provide you with actionable tips that you can use to trade in foreign currencies while mitigating your losses.

Forex trading usually deals with speculation. This basically means that the average trader will place bet and guess whether a certain currency pair will profit on the side of one currency. =

Common Currency Pairs:

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CAD

When trading these pairs, you are provided with leverage, making it possible to hold on to large amounts of cash in the Forex markets even with a low investment amount. For example, a 50:1 leverage on an initial investment amount of $1,000 means that you get to control $50,000 in the markets.

One of the main reasons why failure rates in Forex markets are so high is because a lot of people trade emotionally. Fear, greed and hope are some of the most destructive emotions during trading that need to be checked. Emotional-based trading decisions don’t take into account historical data on certain currency pairs, what the trading signals are currently alluding to and the fact that a negative value may only be transient and could mask an upward trend just around the corner.

Here are a number of great ways that can help you keep your emotions in check while trading foreign currencies:

  • Study the market
  • Learn from your trading mistakes
  • Be honest with yourself
  • Institute stop loss signs to stop you from hemorrhaging money on a pair that’s nose-diving
  • Don’t listen to the mostly false claims of success from other traders
  • come up with a trading strategy you can stick to on a daily basis
  • consider subscribing to a Forex signals service to limit your risk and increase profit chances

If you’d like to get started on Forex trading, we would prefer that you start with a demo account which lets you speculate on Forex pairs without investing any real money. In addition, most online Forex brokers allow you to shadow successful traders for a fee, something that can help you learn from the best, cutting down your learning curve so you can get in on the action much faster.

Forex trading is also governed by two types of analysis that are used by traders all over the world:

  • Fundamental analysis – This involves studying the economic profiles of the countries whose pairs you are looking to trade. This gives you an accurate idea of how these two currencies will perform if pitted against each other.
  • Technical analysis – this is when you use past Forex movements to determine future market behavior. This type of strategy relies heavily on data

When it comes to foreign currency trading, arming yourself with adequate information and keeping a cool head will see you beat the odds and help you make money on a consistent and long-term basis.