Why Trade on the Foreign Currency Exchange
There are a number of reasons why you should trade on the foreign currency exchange instead of any other financial market. It is important that you know what these reasons are before you start your trading journey. When you know these reasons you can determine whether or not the foreign currency exchange is right for you.
Risks Can be Limited
When you trade on the forex market there are a number of risks you will be facing. However, there are also a number of ways that you can limit the impact of the risks and losses. One of the most common ways is to use a stop loss order. There are a number of different stop loss orders which can be implemented depending on the trading strategy and what you need done. These orders stop your trade from exceeding a predetermined amount of loss.
Risk management is another way that you can limit the risks you face. With risk management you will set an amount of risk per trade which protects your trading account balance. You will also be setting a monthly loss limit which stops you from trading once you have lost a certain amount.
Technical and Fundamental Foreign Currency Exchange Analysis
It is possible to analyse the forex market using both technical and fundamental analysis. If you feel more comfortable looking at charts then you can use technical analysis. However, if you feel more comfortable with news releases then you can look at fundamental analysis. It is also very easy to complete both types of analysis because of the open communication forex traders have. There is also a lot of software on the market that allows you to complete technical analysis with ease.
Many Different Trading Strategies
There are a lot of different ways that you can make a profit from the forex market. You can trade long-term, short-term and medium-term depending on your preference. There are also a number of strategies for each trading time length. The forex market also has carry trading which earns you a profit based on the interest rates of the different countries.
There are also a number of different currency pairs that you can trade with. Some strategies do work better with certain currency pairs and you need to know which they are. However, there are 8 major currencies that you can trade and a number of major currency pairs that you should look at.
Better Playing Field
While the forex market does have the heavy hitters who move the markets the overall playing field is more level than other markets. It is possible for the retail traders to get the same information as the professionals, which is harder to do on other markets. News is accessible by anyone because it is released on the internet. Technical analysis can be completed by anyone with the correct software which is often free with the trading platform you use.
Of course, the heavy hitters on the market are able to create price movements, but this does not mean that the individual traders cannot make money. The ways that the traders use the market is different and the ways they make a profit are different.