If you are going to trade forex, then you must know about the fundamentals of the market. This setup will lead you to an organized approach to trade and should guide you to become a more advanced trader of the foreign exchange market.
- Know the Forex Market
Don’t exaggerate the importance of educating yourself on the foreign exchange market. Take a while to know about the currency pairs, market movements, trading objectives, FX strategies, and what affects the market before risking your asset. However, knowing the market is actually an investment in time that could save you a good amount of money.
- Select a Trustworthy Forex Broker
It is important to select a trustworthy broker for trading in the foreign exchange market, so it is helpful for you to take time to research the different brokers. Know the policies of every broker and how they go about making a market. For instance, trading in an OTC (over-the-counter) market or spot market is different from trading in exchange-determined markets.
Moreover, ensure the trading platform of the broker that you select is suitable for the analysis you want to do. For instance, if you want to trade off Fibonacci numbers, then ensure that the platform of the broker can draw the Fibonacci line. It can cause issues if a good broker with a bad management platform or a good platform with an unsatisfying broker. That is why make sure that you get the best of both for a better trading experience.
- Dealers Control the Trading Platform
When you are trading on the digital trading platform, Dealer’s site, or mobile application, it means you are not connecting to a live exchange. You are connected with the dealer that controls the data you view on your screen, including charts, prices, and everything.
Most frequently, the cross-border dealers who are not registered have used popular trading software to offer a coating of legality. But they manipulate trade data to steal from customers. So, compare the prices with third-party sources to confirm you are seeing genuine market price activities and levels.
- You are Trading Against the Dealer
Until you buy forex futures or opt for a controlled exchange, you are trading off-exchange or OTC – over the counter. It means you are trading FX only against your dealer – not trading in the open market. Once you buy, your dealer gets money when you trade more often loses money or pays charges, spreads, or commissions.
- Your Deposits are not Safe
If a dealer scams you or goes bankrupt, then you may not be able to get your money back. So before opening an account, make sure you closely review your account agreement to know what rights and protections you have. After that, check the requirements for funding and withdrawing from the account with any related charges.
Fake dealers of forex frequently refuse withdrawals till the customers pay expensive unidentified commissions, pay made-up taxes, or invest more to reach a higher account level status. You should never have to pay more cash to get your money back.
- Close Position is Restricted to the Dealer
Another thing you have to consider is that you can close the positions in trading. Because you are trading against the dealer on its platform, you are restricted to the prices and conditions the dealer provides you.
- Understand Where to Stop
Nobody has time to sit and watch the market conditions all the time. In this situation, manage your risk and protect potential profits through stop and limit orders. It will get you out of the forex market at the price you set.
Moreover, understanding stops is helpful as it trails your position at a specific distance as the market moves and helps you protect profits when the market converses. Placing contingent orders may not certainly bind your risk for losses.
- Social Media Scams
Many of the trading frauds start on social media platforms. That is why you have to be cautious of anyone who approaches you on social media, messaging applications, dating applications, or via unsolicited email and wants to discuss forex trading.
Here, we have shared some signs to watch on social media when trading FX.
• Directing you to an unregistered dealer with no physical occurrence.
• Imposing you to move the discussion of a platform to a private messaging application.
• Having a site that does not show a physical headquarters address or branch locations or the address does not exist when you do a street side-by-side map search.
• Offering only BTC: Bitcoin or any other digital currency as a payment method.
• Offers massive income and guaranteed revenues in a short amount of time.
• Using a WhatsApp or Telegram customer service number or having no phone number at all.
• Providing leverage that is higher than legally allowed in your region.
- Keep your Emotions and Biases Aside
Suppose you have an open position; unfortunately, the market is not going as you want. In this situation, everybody thought to make up for the trade that didn’t fit their trading strategy and thought that it could not affect their trading.
It is highly recommended not to let your emotions get in the way of your plan for successful trading. When you have a losing trade, ensure that you keep your emotions and biases aside and don’t try to make it back in one shot, as it rarely ends well. It is a wise decision to stick with your strategy and make the loss back a little at a time then to find yourself with two paralyzing losses unexpectedly.
- Execute Weekend Analysis
Trading markets are closed on weekends; at that time, analyze the weekly charts to look for patterns or news that can affect your trade. The pattern is probably making a double top, and the experts and the news are signifying a market reversal. It is a reflexiveness where the pattern reminds the experts, who then strengthen the pattern. Taking objectivity into consideration, you will make your best strategies. So, wait for your circumstances and learn to be patient for an improved forex trading experience.