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How Forex Exchange Rates Work In Forex Trading

 Forex Exchange Rates

Forex Exchange Rates And How They Relate To Forex Trading

The majority of people believe that finding the best foreign exchange rates is the key to successful forex trading. While a good foreign exchange rate is an important aspect for forex trading, it is not the only factor involved in successful trading.

There are numerous aspects to consider when entering the forex market including forex trading strategies, forex brokers and forex trading tools. In order to be a successful trader one must have an understanding of how these factors interact with each other and the roles they play in the forex exchange rates market.

Forex brokers and the foreign exchange rates

The most competitive forex exchange rates are found on the top forex brokers. In order to experience these rates one will need to find a reliable and efficient broker. The best brokers will offer  beneficial features on their trading platforms; potentially the most important being advantageous spreads on your trades. Should you not have good spreads then it will be easier to make regular profits; especially if you are scalping.

New traders may wonder, what is a spread exactly? The spread is where a forex broker will earn their money off your trade. Unlike stock brokers, forex brokers do not charge a commission on trades, and thus it is off the spreads that they make their profits. The rate you receive is based on both the forex market and this spread. It should be noted that bigger spreads mean less profits per trade. If you are looking for multiple short timeframe trades then you will need to find the broker with the smallest spreads. Oando is one that is often recommended in the forums. Some brokers have policies to stop traders scalping on their platforms.

Foreign exchange rates and the trading strategy

Before you begin trading forex live it is important you have both a sound trading strategy and a secure trading plan. Only once you have these in place will you be able to trade effectively. The way in which the forex exchange rates are trending, and their volatility, will dictate which strategy is likely to work best at any particular time.

Emotions on the forex exchange rates market

One of the forex trader’s worst enemies is his own emotions. In order to trade effectively one must keep his emotions in check to avoid potential irrational trading. The most common emotions are those of fear and greed. It has been seen that forex exchange rates fluctuations, bad and good, can incite these emotions.

– These rates are able to elicit fear when they move against you. In order to withstand this you must have confidence in your trading plan so you do not make decisions based on fear.

– When forex rates continue to soar this can produce feelings of greed due to potential profitable trade situations. In order to control this emotion one must remain realistic when trading and adhere to the trading plan.




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